Making mistakes is part of the process of building a company; quickly recovering from them is what’s most important. It’s all part of the adventure of entrepreneurship, which will require all of your stamina, drive and determination.
But your way forward is not entirely uncharted: when you notice an opportunity that has never occurred to anyone else, there are certain steps to turning your vision into reality. Let’s take a look at these steps, and also at ways to avoid some of the most common mistakes new entrepreneurs make.
Step 1: Stay on target. A mistake often associated with the first step is signalled by an entrepreneur’s inability to clearly and concisely convey his idea. You have to be able to generate buy-in from investors, partners and potential employees, so nail down your “elevator speech”—what you would say if you ran into an important potential investor in an elevator. Try using a Twitter-like template to refine the essence of your concept into just 140 characters. Once you’ve done that, expand your message to a maximum of 500 characters. Remember, the shorter your pitch is, the clearer it will be.
An associated error is lack of focus. If your startup has been tagged as “the next big thing,” the adrenalin rush that comes with building buzz can lead to impetuous decisions and a loss of a sense of purpose. Many entrepreneurs end up sprinting in many directions instead of taking assertive steps toward their target. Clearly define your goals and strategies, then establish a timeline. Don’t let the other possibilities or hazy dreams distract you from achieving your goal.
Getting too far ahead of yourself is also dangerous. If your product or service is still on the drawing board, don’t get sidetracked by plans for future versions. Looking two or three years ahead is best, but the nature of your business, and feedback from your investors, will help you determine just how far ahead you should plan.
Be flexible, because just as lack of planning can be a problem, adhering blindly to your plan is a surefire way to steer your company off a cliff. A successful entrepreneur will constantly adjust course without losing sight of the final destination.
Step 2: Be Realistic about costs. Don’t shortchange your startup when estimating the funds you will require—you’ll just diminish your chances of success. Keeping your expenses under control is vital, but don’t confuse capitalization with costs. The playing field is littered with undercapitalized startups that were doomed from the outset.
In the late ’90s, David Neeleman told me he needed $160 million in startup capital for JetBlue—a huge sum, far more than most entrants to the industry manage to raise. Most of the so-called experts scoffed at the notion that he would be able to find the money and launch a low-cost airline when established companies were failing one after the other, but he stuck to his guns and raised the money. As a result, JetBlue had one of the most successful airline launches of all time, and turned a profit only six months after its launch.
Step 3: Hire the people you need, not the people you like. As tempting as it may be to staff your new business with friends and relatives, this is likely to be a serious mistake. If they don’t work out, asking them to leave will be very tough.
When Virgin starts any new business, we always hire a core team of smart people who already know the industry and its inherent risks. Take full advantage of the knowledge pool you’ve created; when a problem comes up, remember that nobody has all the answers, including you.
One of your goals should be to find a manager who truly shares your vision, and to whom you can someday confidently hand the reins so that you can carry out the next step.
Step 4: Know when to say goodbye. A great entrepreneur knows when the time has come to leave the CEO role. It’s seldom easy, but it has to be done: few entrepreneurs make great managers.
Stepping back doesn’t mean turning your back on your business. At Virgin, I’m always involved in the launch of a new business, and then I gradually hand over control to the new management team as it starts to jell. But no matter how long it has been since I was at the helm, if I see something that I don’t like, I’m not at all shy about making my thoughts known and asking some very pointed questions.
Founders shouldn’t hesitate to reinsert themselves into their businesses when necessary—look at Larry Page, who temporarily returned to the CEO role at Google in April. That said, I had to laugh when I heard this news, wondering how many managers at Virgin businesses had thought, “Wow, I hope this doesn’t give Richard any ideas.”