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Authors: Kevin Ready
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not need your explicit direction to perform them.
The staff knows how to respond to most situations, and it is empowered to make the day-to-day decisions required to keep all of the wheels turning and the customers happy. It will probably take years of work to develop a self-regulating team (see Figure 2-3 again), and it should be one of the primary intermediate goals you set for yourself. You should begin thinking about it as soon as you get out of business infancy and prove that your business model is workable, and begin to carve out an economic niche in which you can prosper.
The Self-Determining Business
Getting your business to the self-determining level is the ultimate delegation accomplishment, because it means you have found, hired, and trained a staff that knows the daily operations, and you have also installed managers whoknow the big picture—and are prepared to make the long-term strategic decisions that you have been making all this time. In terms of what this means to you, it means you can come into the office and work, or go to Fiji (again), or, most importantly, sell the company if you want to. If you plan to sell your business at some future point (having an exit strategy ), you being obsolete will make the business more attractive to potential buyers. Why would anybody buy a business that will end up having a required component (the previous owner) missing after the purchase?
_________________
You Will Need More Money Than You Think
How much capital you have when you start out is a critical piece of your survivability. Make sure you have enough to get started, and to survive a few mistakes after your business is open. Know ahead of time the following things. Problems will arise that you did not anticipate—problems that will cost money to solve. Things will generally take longer than you thought to get going. Expenses will likely be higher than you estimated. If you plan with this bias, you will have more survivability built into your plan. So don’t embark on your venture until you have some reserve cash available to help in a disaster. Identify sources of credit that you can tap if needed as a last-ditch, break-glass-in-case-of-emergency backup plan. Here are some examples:
Series B (or C or D) financing (more rounds of financing means less value left for you) 2
Line of credit at the bank (potentially dangerous)
A rich uncle (also potentially dangerous!)
Credit cards (even more dangerous)
__________
2 Series B indicates the second round of formal investor funding in a company. The sequential naming traditionally follows the alphabet: Series A, Series B, Series C, and so on.
Use suppliers as a source of credit whenever possible. In an online retail business where I was a partner, this was a boon; wholesale companies would extend credit to cover cost of goods on 30- or 60-day terms. That meant being able sell and generate revenue and pay later. Magic.
Design your business to start making money quickly if possible, and don’t start spending money like you are a big business until you are a big business. Get something out the door and generating cash as fast as possible so that revenue can cover many of your expenses early on.
_________________
Active Iteration
In a meeting of the engineers and creative folk, I was recently reviewing the fantastic success we had in growing our product portfolio and reaching nearly 5 million users per month. I dangerously mixed metaphors and summed up our accomplishment by saying “our secret sauce is that we know how to dance.”
What I meant was that we execute idea after idea for communicating our value and getting more customers. In so doing, we rapidly iterate over each concept with minimal up-front effort, while tweaking for performance. Some of these ideas are winners, which we invest more time in. Some are not clear winners, but don’t take a lot of time, so we let them be. Some other mechanisms that we try just perform badly, so we withdraw them.
The staff knows how to respond to most situations, and it is empowered to make the day-to-day decisions required to keep all of the wheels turning and the customers happy. It will probably take years of work to develop a self-regulating team (see Figure 2-3 again), and it should be one of the primary intermediate goals you set for yourself. You should begin thinking about it as soon as you get out of business infancy and prove that your business model is workable, and begin to carve out an economic niche in which you can prosper.
The Self-Determining Business
Getting your business to the self-determining level is the ultimate delegation accomplishment, because it means you have found, hired, and trained a staff that knows the daily operations, and you have also installed managers whoknow the big picture—and are prepared to make the long-term strategic decisions that you have been making all this time. In terms of what this means to you, it means you can come into the office and work, or go to Fiji (again), or, most importantly, sell the company if you want to. If you plan to sell your business at some future point (having an exit strategy ), you being obsolete will make the business more attractive to potential buyers. Why would anybody buy a business that will end up having a required component (the previous owner) missing after the purchase?
_________________
You Will Need More Money Than You Think
How much capital you have when you start out is a critical piece of your survivability. Make sure you have enough to get started, and to survive a few mistakes after your business is open. Know ahead of time the following things. Problems will arise that you did not anticipate—problems that will cost money to solve. Things will generally take longer than you thought to get going. Expenses will likely be higher than you estimated. If you plan with this bias, you will have more survivability built into your plan. So don’t embark on your venture until you have some reserve cash available to help in a disaster. Identify sources of credit that you can tap if needed as a last-ditch, break-glass-in-case-of-emergency backup plan. Here are some examples:
Series B (or C or D) financing (more rounds of financing means less value left for you) 2
Line of credit at the bank (potentially dangerous)
A rich uncle (also potentially dangerous!)
Credit cards (even more dangerous)
__________
2 Series B indicates the second round of formal investor funding in a company. The sequential naming traditionally follows the alphabet: Series A, Series B, Series C, and so on.
Use suppliers as a source of credit whenever possible. In an online retail business where I was a partner, this was a boon; wholesale companies would extend credit to cover cost of goods on 30- or 60-day terms. That meant being able sell and generate revenue and pay later. Magic.
Design your business to start making money quickly if possible, and don’t start spending money like you are a big business until you are a big business. Get something out the door and generating cash as fast as possible so that revenue can cover many of your expenses early on.
_________________
Active Iteration
In a meeting of the engineers and creative folk, I was recently reviewing the fantastic success we had in growing our product portfolio and reaching nearly 5 million users per month. I dangerously mixed metaphors and summed up our accomplishment by saying “our secret sauce is that we know how to dance.”
What I meant was that we execute idea after idea for communicating our value and getting more customers. In so doing, we rapidly iterate over each concept with minimal up-front effort, while tweaking for performance. Some of these ideas are winners, which we invest more time in. Some are not clear winners, but don’t take a lot of time, so we let them be. Some other mechanisms that we try just perform badly, so we withdraw them.
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