A Comparison of Operations Modes

Definition: A startup is a company without any revenue and 50 or fewer people, which must deliver a product to the market shortly.

Easy access to capital and not adjusting to the new world after leaving a big company or another industry are some major reasons for "big company disease". This was very common in the bubble, when huge Series A and B venture capital rounds were easy to get without a real business plan or vision that showed how a company would make a profit. Many companies would have survived easily on so much capital if they did not contract this disease.
Unfortunately, it was common to see a large company CEO placed in startups and look like fish out of water. It was also common to see recent college grads acting as CEO. Some investors made quick money this way, flipping the "companies" to IPO that had no real or sustainable revenue stream before anyone realized there was no path to profitability. Some knew this and therefore were acting unethically, others got sucked in...

When The Liabilities Exceed the
Benefits of Being a Director

By Peter Cohen

In the last week, some corporate directors have written checks out of their personal accounts to settle suits against the companies on whose boards they served.  Earlier this week, 10 former WorldCom directors paid a total of $54 million -- $18 million from their own pockets, representing 20% of their net worth.  Today announced that 18 Enron directors agreed to pay $168 million, 10 of them paid $13 million from their own pockets, to settle their portions of securities class action suits.  These events probably mark the beginning of a trend that will cost directors of other bankrupt companies more money.

While these directors no doubt made these payments to avert the risk of even higher ones, their decisions alter the cost/benefit analysis for current and potential corporate directors.  It is no longer enough to show up at quarterly meetings, enjoy the CEO’s hospitality, and collect...

Advice From A Nobel Prize Winner On Human Capital Management

An Interview From The Line Zine e-Newsletter

Gary S. Becker, the winner of the Nobel Memorial Prize for Economic Science in 1992, is a Professor of Economics and Sociology at the University of Chicago and a Senior Fellow at the Hoover Institution and University. He is recognized for his expertise in human capital, the economics of the family, and economic analysis of crime, discrimination, and population.

Becker: I would start out with some obvious things that are still sometimes forgotten: the basic resource in any company is the people. Remember Bill Gates’ famous comment that if you took away the top thirty employees at Microsoft, it would be a pretty ordinary company. And what’s true for companies is true for nations as well. In the New Economy, the reliance on people hasn’t fallen, but has increased. We are much more a human capital-based economy than the economy was even thirty years ago.

The...

 Reprinted from the Red Herring: https://www.redherring.com

Although this is by no means a comprehensive list there are many classics here....

Start-up and emerging companies should be prepared for the significant amount of due diligence that a venture capital investor and its counsel may require before consummating a venture capital financing. Even angels are requiring many of these things to be under control today at earlier development stages. The following is a sample Due Diligence Checklist, which acts as a compliance request to the Company of all relevant documents and information. In appropriate circumstances, some listed items can be scaled back.

Corporate Documents of the Company and Subsidiaries

Articles of Incorporation and all amendments thereto.
Bylaws and all amendments thereto.
Minutes of all Board of Directors, committee, and shareholders meetings and all consents to actions without meeting.
List of states and jurisdictions in which qualified to do business and in which the Company has offices, holds property or conducts business.
Material information or documents furnished to shareholders and to directors...

I have always been an admirer of Disney's customer service and their systems to ensure "customer delight", as opposed to just customer service. This means going far beyond the customer's expectations to deliver something extra, or above and beyond the call of duty every time. It means training, understanding by employees, and empowerment that goes straight through the organization to back all this up with consistent management rewards and signals. This means praise and reward for employees who actually execute these principles and values, setting examples, and sending a consistent message to employees and customers about your brand and values. Some companies talk about "quality" customer service but then punish people when their "minutes per customer" allocation or other measures are exceeded, or when asked for something that is not standard just say "no" with no effort to handle exceptions. This is not a consistent message to employees and negates the training they received,...

A Method For Evaluating And Managing the Risks of A Business

Too often, managers focus solely on the probability of a risk or problem happening and ignore far more important factors such as the cost of failure and the ability to actively manage each risk as more is learned. To properly manage, business risks must be evaluated and monitored constantly. Steps can usually be taken to adjust the three main risk factors before and during any project.

The three main factors that should be evaluated and tracked are

1) The cost of a failure,

2) The probability of a failure, and most importantly

3) The controllability, or ability to manage, the risk.

Each of these factors must be taken into account to properly manage any risk at the beginning of any project and each time major new pieces of information become available that impact those risks. Because human beings tend to be able to think in only three physical dimensions in addition to time, it is significant to clearly communicate to...

Adjusting Your Management Style To Your Company's Stage, A miniseries on practical leadership focus for start-ups and emerging growth company senior executives.

This series will explore how leadership focus and skills must evolve as a company grows from a raw startup to an expansion stage, successful enterprise.  Most seminars, texts, and articles talk about leadership generically as if it had the same requirements in all situations. It does not, and in fact, the key elements of success at each stage of a company's development are always very different.

Leadership is a skill that is hard to develop, but usually easy to recognize.  It is an ability some are born with, but it also is one that anyone can develop with some guidance and practice. Usually, you need the outside perspective of someone without any agenda or bias to improve. We all are unaware of things about ourselves that everyone else is aware of. These things must be identified and improved to be a successful...

Jay Abrams, an excellent marketing guru, and the speaker says there are only three ways to grow your business:
1) More customers,
2) Higher average sales/revenue per customer and
3) A higher purchase frequency from your customers.
Although this is a great model to divide and attack the problem, it is more classified into categories of ways than actual ways to grow your company.  Luckily, we can come up with hundreds of ways to grow a business, and the tough part is deciding where to put your efforts.  One theory is that with ever-growing sales and marketing costs, it is usually easier to get more revenue from existing customers than to find new customers. Yet, most businesses put more time and effort into customer acquisition than retention and upselling (#2 and #3).  This varies greatly from business to business and is a function of the actual acquisition costs of a customer, what else they might need when they need your product, and many other factors. 

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