Sweat the Small Stuff

When running a business, it can be overwhelming with all the different aspects that go into making a business successful. Some might consider letting one aspect of the business slide a little bit to focus on something they consider to be more important. Little does the business owner know that the aspect of the business that is being pushed to the side is the aspect that customers can really relate to and appreciate.

Attention to detail is very important when it comes to running a business, the big and little things. Steven Schussler in his book “It’s A Jungle In There” states that if you don’t sweat the small stuff you can lose the big stuff. The big stuff refers to big money. A business owner may not think that some little detail will make a difference, in their eyes its small and will go unnoticed because its so minor to them in the grand scheme of everything they have going on, but little does the owner know that these little details have a big impact on how the customer perceives the business. Whatever kind of business your in, the details matter, whether its cleanliness, ease of use, organization, speed, lighting, noise and so on. For example, in the restaurant industry, if the music is too loud that you can’t have a good conversation at the table, the lighting is too dark or light and doesn’t set the correct ambiance of what the restaurant is trying to achieve, or in order to save money you have fewer wait staff working in order to save money but really are impacting the wait time in which customers are served. Customers will remember these things. If the little details are taken care of, it will be reflective in the customers experience and determine whether or not they return.

Having attention to detail also shows that you care about the customer’s needs and wants. In an article in Bloomberg Business titled “Be Obsessive About The Details” it states that it is a good indication on how a business attends to your big concerns by how they attend to your little ones. They give the example of a car dealership not having service hours at night and during weekends show how they don’t put an emphasis on customer service. The little things impact the big the ones and most of the time the negative aspects will outweigh the positive aspects, not matter the size of importance of these aspects.

The details of any business make a difference in the mind of the consumer. You need to do everything in your power to make sure their perception of your business is positive. Remember that when a customer uses a dirty bathroom they might start to think that the kitchen is in the same, or worse condition. So when it comes to running a successful business, sweat everything, especially the small things.

Sources:

Bloomberg Business. Be Obsessive About The Details. October 11th, 2005.          http://www.bloomberg.com/bw/stories/2005-10-11/be-obsessive-about-       details

Schussler, Steven. It’s A Jungle In There. New York. Sterling Publishing Co. 2010.  Print

Leadership

In everyday society we are faced with multiple forms of leadership. It is something that from birth we experience, the leadership of the parent figure, teacher, and many more. According to the book “Strengths Based Leadership” by Tom Rath and Barry Conchie, they state that effective leadership will forever alter the course of lives. When you think about the most respected leaders, whether their leading organizations, countries, communities, or families, they have all changed lives in some way. When it comes to business, you want to be able to effectively lead so that you can positively alter the life of the business.

Leadership is one of the most crucial aspects to any successful business. A business needs to be lead in order to grow and succeed.  According to dictionary.com the verb to lead is defined as “to go before or with to show the way”. No matter the size of the company, it is going to need to be lead in some fashion in order to grow.  According to the book “Leadership: Theory and Practice” by Peter Northhouse, many consider management and leadership to be the same thing. They both involve working with people, goal oriented, and influential. But there is a difference when it comes to leadership compared to management. The book states the difference between the two is management’s primary goal is stability and order; leadership the primary goal is adaptive and constructive change.  So when it comes to business, it is important to both effectively manage and lead; there is a difference.

Leadership is the main component for growth of any business. Going back to the book “Strengths Based Leadership”, the authors assembled a team of experts to analyze decades of Gallop data and also engage in a study of over 10,000 followers as to why they follow the most influential leader in their life. The studies revealed three key components to being an effective leader.

  1.     Effective Leaders are always investing in strengths.

When a leader focuses on the strengths of their employees it will result in a substantial increase in the employee’s engagement. Higher employee engagement will have a significant impact on both the business and the employee overall happiness.

  1.     Effective Leaders surround themselves with the right people and then maximize their team.

The most effective teams are the teams that are well rounded. The individual leader doesn’t have to know everything, but the team as a whole should know or find out everything needed to succeed.

  1.     Effective Leaders understand their followers’ needs.

The study revealed that there were four basic needs that a follower had. Those four needs are Trust, Compassion, Stability, and Hope.

How a business rewards its companies all tie into the four needs of an employee or follower. When you reward your employees you’re creating Trust, Compassion, Stability, and Hope. Rewarding an employee, whether it is monetary or nonmonetary shows that you trust your employee to continue to be a productive contributor to the business. Rewards show and create compassionate relationships between leader and an employee. The leader could be uncompassionate by keeping all the money that could be distributed as bonuses for themselves, instead rewarding employees with bonuses shows that they care about them and are compassionate towards their needs. Rewarding employees also shows Stability and Hope within the company. Providing a reward shows that the company is doing well enough that employees shouldn’t be concerned about the company not succeeding and provide hope for the future.

The reward systems for any company can vary. The article “Compensation and Rewards” states that people are motivated by money, at least for a certain amount of time. As long as people feel they’re being paid competitively, money is not the main component in job selections or performance. For any reward to be effective you need to accomplish two things, make sure the reward is perceived as a positive event and encourages desired behaviors. Monetary rewards can go a long way, but not all companies have the necessary cash flow to provide this. Nonmonetary rewards can be very effective. Celebrating a large milestone in the company with the whole team, and vacation time can be very appreciated, even though it ultimately does have a monetary impact on the company. The little things like showing appreciation, avoiding micromanagement, and asking for input can all be very rewarding for an employee. How a business rewards its company all ties into the culture of the organization.

Sources:

Dictionary.com. http://dictionary.reference.com/browse/lead?s=t. October 14th,      2015

Entrepreneurship.org. Compensation and Rewards. Ewing Marion Kauffman             Foundation. 2006. October 15th, 2015.   http://www.entrepreneurship.org/resource-center/compensation-and-        rewards.aspx

Northhouse, Peter. Leadership: Theory and Practice. Thousand Oaks: SAGE       Publications. Print.

Rath, Tom. Conchie, Barry. Strengths Based Leadership. New York: Gallop Press.           Print.

Conquer the Jungle by taking risks.

There comes a point in someone’s life where they need to decide what they want to pursue to make a living for themselves, the key word being WANT. There are so many different career paths that can be taken, some people opt into the easy or secure path, others may roll the dice and pursue a path that is some might consider risky. The risky path is more than likely the most rewarding path in the end and leads to what people want the most.

It is not uncommon for some people to regularly complain about their profession. These same people are often not willing to take the risk to find other opportunities that may increase their overall happiness. What these people don’t realize is that taking this risk, no matter how crazy they or others may perceive it, could make a substantial difference in their lives. Steven Schussler gives an example in his book “It’s A Jungle In There” where he put himself inside a barrel and had two friends, who happened to be cops, deliver the barrel to the head boss of a radio company that Steven desired to work for, after being unable to get a solid commitment for them to hire him. As Steven was being delivered in the barrel, he realized he made multiple mistakes in his plan. He was given a sandwich and a can of soda for the barrel trip so that he would not get hungry, he would soon realize the terrible odor that the sandwich would cause while being in a barrel with the Miami heat. The heat also caused the soda can to explode. His biggest mistake was not placing sufficient holes in the barrel to allow for enough oxygen to last the trip in the barrel. As the two police officers deliver the barrel to the radio station, stating that in the barrel is furniture from Mexico that the boss had ordered, Steven over hears that the boss is in a board meeting with everyone from the company. The boss being angered and confused by the secretary telling him furniture he ordered from Mexico was here, left the meeting bringing several of the board members with him. Steven, wearing a superman costume, deprived of oxygen, smelling like rotting deli meat and covered in soda jumps out of the barrel to surprise everyone and make an impression on the company. This risk paid off and Steven was hired on the spot for how crazy and motivated he was to get their attention.

Sometimes the more you’re willing to risk the more success you’ll be able to obtain in the end. In the article “3 reasons taking risks equals success” by Vanessa Stoykov, she states the 3 reasons taking risks equal success are:

  1. The fastest way to learn
  2. Embracing risk can help avoid the fear of failure
  3. It can help you stand out

Whether you’re pursuing a new job position or looking into starting your own business these are just three of the reasons to take risks.

People often associate risks with being negative and not worth it. Taking a risk may not always work out, but if you don’t try you’ll never know what could’ve been, and all the positive that could’ve come from that one risk. Whether it’s putting yourself in a barrel, quitting your job to start a business, or just doing something you love, that risk can make a huge difference in the success and happiness experienced in life.

Sources:

Schussler, Steven. It’s A Jungle In There. New York. Sterling Publishing Co. 2010.        Print

Stoykov, Vanessa. 3 reasons taking risks equals success. Evolutionmediagroup.com.     http://www.evolutionmediagroup.com.au/3-reasons-taking-risks-equals-  success/

Scaling Issues

As a founder of a startup there are many obstacles you will encounter. There will be highs and lows of any business and tough decisions to be made. Hopefully along the path you will reach success. A lot of the times one of the founding members makes themselves the CEO of the company and is the head person in charge of the succession of the company. As the company transitions into the large or potentially large company you set out for it to be, the question comes into play, are you the right person to remain in the CEO position? This can be a very emotional question for a founder-CEO, and often someone else can make this decision.

The CEO role can be very challenging, demanding position to be in. It takes a lot of different strong skill sets to be the CEO of a top tier company. Often when the founder names themselves the CEO, they may not have all the attributes to be the CEO of a company they have helped get to a certain point, even if they were the right fit when the company was in the startup phase. Once a company gets to a certain point, the CEO may learn that there may be a better fit at the CEO position to help maximize the wealth of the company. Sometimes its not the founder-CEO who realizes this, it may be the Board of Directors or investors that have been brought in as the company has evolved.

When the founder-CEO volunteers to step down from their position on their own accord, it can help make for a much smoother transition. The founder-CEO may not have the skill set to run a business they hope to scale to a much larger point. The founder-CEO may also be too close to other employees that were there from the very beginning. For example, if a family member were hired for a certain position in the very beginning stages of the company (which tends to be very common), this person may not be qualified for the position, given the amount the company has scaled over time. The founder-CEO may know this family member is not qualified to be in this position at this point of the company, but is unable to get rid of them due to family ties. This is when it may be time to bring in a new CEO who will be able to do what is best for the business as a whole.

What can be one of the most difficult situations is when the Board of Directors think its time for the founder-CEO to step down from their current role when the founder-CEO does not feel the same way. The founder-CEO, most of the time has great emotional attachment to their company and do not want someone else to be the main person in charge of it. The founder-CEO may look at their business as their child they raised from birth, and they are not going to bring in someone else to be the parent. The founder-CEO needs to be able to realize what is best for the overall wealth of the company and realize that when Angel Investors and Venture capitalists are brought into the picture that this is a possibility, even though so much has been done create a successful company from nothing. In the article “Replacing CEOs in VC-backed Companies” they state that it is never taken lightly when replacing a CEO, especially when the CEO is the founder. It is often that a founder has never had any experience being a CEO; they gave the example of Mark Zuckerberg being CEO of Facebook, who never had any experience being a CEO prior to Facebook. You never know who will thrive in the leadership role. Below are the 4 top reasons the article lists for replacing a CEO.

  • Either the CEO is nearing retirement or their interests are starting to shift towards different venues.
  • Lack of Growth. Venture Capitalists are often looking for a high growth rate. It may not be acceptable if the company is profitable but not growing at the desired rate.
  • Employee Turnover. Successful companies typically don’t have a lot of turnover and if a lot of turnover is occurring something usually isn’t being handled correctly.
  • Burn rate of the cash that has been invested is a good determinate of whether the company is being run correctly.

It is important to realize what you want out of your company and the potential consequences of giving up too much equity. This relates back to week 2, deciding on whether you want to be King, or if you want to be rich. Once the business starts, and is scaling, it is important to know what you want and what can happen. The overall success and wealth of the company will be more enticing to investors than to keep the founder King of his or her empire.

Sources:

Ham, Ho. Replacing CEOs in VC-backed Companies. Scalefinance.com.                                           http://www.scalefinance.com/replacing-ceos-in-vc-backed-companies/

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Investor Dilemmas

There are many different approaches when it comes to funding a startup. The approaches used can depend on the nature of the business, the business owner’s preferences and vision for the future, and how quickly they want to expand. Each approach needs to be carefully analyzed before choosing which path to go down. The path chosen can have a drastic outcome on the business, positive or negative.

When it comes to the initial start up of a company, the first place some founders tend to look is towards friends and family for financial assistance. Same as when some go to make the initial hire, an easier place to go for funding may be from those closest to you. There can be many positives and negatives to this approach, and it is important to understand this before any money is taken from this social group.

A lot of the time when going to friends and family for funding the amount being asked for is not as substantial money wise, compared to Angel Investors or Venture Capitalists. This isn’t always the case depending on the financial status of this social group. If the business can be successful with a limited amount of funds being invested into it, than this may be a good option. When taking this option make sure that you know as much as possible about your business, the industry, the market, etc.… Never ask for money when you don’t fully understand what you’re asking for and how to make it successful, it would not be fair to the friend or family member. When and if the business reaches the point of success, the friend or family member who invested should be able to hopefully enjoy the success and profits of the business, making it that much more rewarding for the business on a personal level. Having a friend or family member invest into a business can also fuel the desire for success because they don’t want to let that person down who is close to them.

Often when friends and family are approached for money they use sources such as retirement funds, investments for the future, or money that can be used towards fun, rewarding activities. If the business that they’re investing in fails, you could not only be losing your business, but the hard earned money that was invested that can be devastating towards their life. This devastation can be blamed on you, the person who took the investment. It is often recommended that when taking money from friends and family, the money is taken as a gift, not an investment. This way there aren’t the same expectations. According to the article “The Major Reason Startups – And How You Can Avoid Them” states that it is estimated that 80-90% startups will fail. Listed below are some of the reasons why failure occurs according to this article.

  • Unfixed “bugs” before launching
  • Under or over funding
  • Not listening to the customers
  • Not learning from others

It is important to go into business with as much knowledge as possible to ensure the best possibility for success.

There are other approaches to acquiring investments, other than friends and family. Angel Investors can often be a good resource for seeking funding. An Angel investor may require more equity in the company compared to friends or family, but it is sufficient way to acquire funding, and more than likely more funding will be available than would be possible from friends and family. It is a good idea to seek Angel Investors who have some familiarity in your business concept and may be able to provide expertise or social capital to further assist. There are also Venture Capitalists who tend to make the largest investment amount, and often make multiple rounds of funding as the business grows. Venture Capitalists often provide great resources for the business asides from the funding. Especially when the business is related to technology or life sciences, VC’s can make very substantial investments into a company.

When choosing which path to go down make sure that the proper research is done before seeking funding. A good way to know which approach is right for you is to research similar companies, with similar philosophies as yourself. Serial entrepreneurs often change the type of investment they seek from business to business depending on their experience on other ventures and the way they wish to conduct the new business. An investment can mean the birth of a business venture, but also can lead to its death, as well leaving you with other complications, so choose wisely.

Sources:

Revzin, Yan. The Major Reason Startups – And How You Can Avoid Them. 5 March        2015. Forbes.com. http://www.forbes.com/sites/theyec/2015/03/05/the-           major-reasons-startups-fail-and-how-you-can-avoid-them/

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Hiring Dilemmas

When starting a business it is important to understand who and when to hire someone. The people you hire will play a very vital role in the success or failure of your company. You need to know whom you are hiring, and realize the relationship you have to this person. At the same time, you need to realize when to hire someone. Hiring someone can have financial impact on your payroll, but also the original role someone is hired for can change as the company changes. The original hire may not be able to adapt to changes to the company or the changes that will evolve with their position.

The relationship that a founder has with their employees can be very impactful on the business. Hiring family and friends that are close in your social network can cause a very pleasant work environment. Having this type of environment can cause more productivity and a more enjoyable workplace. Hiring someone simply based on their credentials qualifying them for the desired position may be a way to find someone to fit into that specific role, but may not fit into the culture of the company causing dilemmas in the work environment.

Hiring friends and family can also back fire on your personal relationships and business. The overall success of your business needs to come first, and this can create significant turmoil when friends and family are involved in the business. According to the article “Why You Shouldn’t Hire Family to Work at Your Startup,” running a startup is a very rewarding experience, and the business becomes like your second home. The article gives the below reasons for being cautious about hiring family.

  • Family members may not always be the most qualified for the position. You may have the best intentions at heart, but when hiring a family member you may be over looking some of the qualifications really needed to help scale the business.
  • With family involved it is inevitable to have favoritism involved in the work place. It is important to have a well-defined business where favoritism will not deter from this.
  • In entrepreneurship, failure is common. To overcome adversity and continue on your entrepreneurial journey’s it may be beneficial to keep family separate. It is always important to have family’s support, but not necessarily their involvement.
  • It is important to eliminate variables that could cloud your judgment or expertise. Often times with family, there can be side baggage that could prevent you from using your best judgment or expertise.

It is important to know the role you are hiring for and how that can change as the company changes. Noam Wasserman describes in his book “The Founder’s Dilemmas” how a certain role can go from being a “player to a coach.” For example, in the initial phases of a company, the sales director may be the one making all the phones calls, attempting to make all the sales themselves, this being the “player.” As the company grows, its sales “player” may start to have more and more people under him, whom he must manage and “coach.” The founder must understand the roles they’re hiring for, and what the role may become in the future. It is important the person hired for the job is the best fit for the initial position and will be the best fit for the position as the company evolves.

Once you find the best possible candidate, at the best possible time, it is important to keep them at the company to ensure the most growth possible. The best of the best want to work for the best, so it is important to make sure that as the founder, you are running the best possible business, only keeping the best on board with the company. It is important to keep a close eye on your organizational structure and be aware of any changes that can have an impact on the overall success of the business.

Sources:

Herrenkohl, Eric. How to Hire A-Players. Hoboken. John Wiley & Sons, Inc. 2010. Print

Under30CEO. Why You Shouldn’t Hire Family to Work at Your Startup. 9 September 2013. http://under30ceo.com/why-you-shouldnt-hire-family-to-work-at-     your-start-up/

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Role Predicaments

There comes a time when roles are going to need to be assigned within a company to determine who handles what aspects of a business. Businesses have these roles so that things can run as effectively and efficiently as possible. How these roles are decided on can vary immensely, but have a drastic outcome on the ultimate success of the business.

In a lot of cases the “idea guy” or founder of the business takes on the role of the CEO/President, the role that has the ultimate say on how the business is run. This occurs a lot because the “idea guy” treats the business as if it were his/her own child. Putting all the effort into making the idea into a business, most feel that it is their right to be in the top leadership position because they will put in the most to make sure it is successful. It can sometimes be extremely difficult for a founder to let someone else take on the leadership role, but can often lead to the most success for the business itself due to someone’s experiences actually running a business.

In the book “The Founders Dilemma, Noam Wasserman states there are three things that should be considered when analyzing who should take on the leadership role. The amount of commitment the founders have towards the business; the business will need someone who is fully committed to the success of the business with minimal external distractions or interests that could take away from the ultimate success. The person who came up with the original idea may feel that they have majority interests and stake in the business. The amount of financial, social, and human capital each founder possesses should help determine which role they take.

The founders of a business are typically most successful when they go into starting the business with its best interest in mind. In the article “What if You’re Not CEO Material?” by David Cohen, David gives an example of a business named SendGrid where he invested into the company that was having success through his own Techstars company that offers star-ups accelerator programs. When David and another venture capitalist made their investment and became board members, they had a talk with the original founder that in the future they may need to bring on an outside CEO. The original founder agreed to this due his lack of experience operating a business of this caliber at the executive level. The original founder, on his own terms, quickly started to realize that he was still learning on the job and this was slowing down the company. David gives the below words of advise when it comes to deciding on whether or not to become the CEO of your own start-up.

  • Just because you make a mistake you shouldn’t step down
  • Talk to advisors you trust, then trust them
  • Surround yourself with experienced CEO’s
  • Visualize the future

The people who take on the roles within an organization are the people who can be the deciding factors on whether or not the business succeeds. It is important early on to recognize these people and hire the top A-players. There are specific roles where the employee will have the set skills needed in order for them to be successful in that position. Besides the specific training or education someone may have had, there are other attributes of a potential employee that can make them an A-Player or a C-Player. These attributes may not be obvious from the start, but can be attributed to a certain upbringing, or certain experiences in life that have developed the person into what they are today. These attributes may not always be obvious, but they are often attributes that can’t be taught.

It is important to realize the strengths and weaknesses that you as a founder posses, and the strengths and weaknesses of the people that are brought on to fill the designated roles to make the business successful. The ultimate outcome of any business are the people involved in making it run successfully. Never underestimate the difference that one person can make.

Sources:

Cohen, David. What if You’re Not CEO Material. Inc.com. 15 February 2012.     http://www.inc.com/david-cohen/what-if-youre-not-ceo-material.html

Herrenkohl, Eric. How to Hire A-Players. Hoboken. John Wiley & Sons, Inc. 2010. Print

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Building the team.

The formation of a team can be one of the most important steps in business when it comes to building a successful company. A team can be defined as a group of people who have one common purpose. As it relates to business, the cofounders of a business have one common purpose and that it is to create a successful business. Every member of the team should play a vital role in this common purpose of success, just as in the case of sports; each team member will play a role in the win or loss of the game. Each team member involved in a start-up will play a role in the success or failure of the business.

Frequently, when forming a business, entrepreneurs will form a team with people they’re familiar with or close to. The people we are familiar with are often the people who have similar skill sets, same contacts, same personality, and same interests. It is much easier and quicker to locate potential cofounders within ones immediate social group. Creating homogenous teams will often allow for cohesiveness amongst all members in the beginning stages of the business. The homogeneity and cohesiveness will allow for effective communication and boundaries as the business is in the beginning stage of starting up.

When starting a business it can seem tempting to bring on people you’re familiar with, but there are many downfalls to doing this. To have a successful team or business you need to have a variety of team members with different skill sets and social networks that all contribute to the ultimate success. If an entrepreneur brings on people they’re close to, with similar skill sets and social circles as them, it is likely that there will be skill sets and contacts needed, but not apart of the team. Noam Wasserman in the book “The Founders Dilemma” gives an example of Pandora founder Tim Westergren bringing on a CEO and CTO to help form Pandora Radio. Tim knew that his and his personal friends musical background would not be sufficient in starting up his idea that involved music but needed a lot of technical and business experience in order to make it successful. Tim brought on a CEO who had experience in similar database start-ups as Pandora and experience in dealing with venture capitalists. This CEO also had social capital through his experiences starting businesses and was able to recruit an engineer that brought expertise to the technical side of things. The process of forming the Pandora team may have taken more time to set up, but the 3 cofounders all bring something different to the table that lead to the success of the business.

In today’s business world, companies are constantly innovating to keep up with the ever-changing markets. Having a diverse team can better help problem solve the constant changes that will occur in any business. In an article by Ekaterina Walter “Reaping the Benefits of Diversity For Modern Business Innovation” she states that diversity in perspectives, cultures, experiences, age, and gender are all essential for growth and prosperity for any company because diversity breeds innovation.

It is imperative that the founder of any company brings on the right team members at the right time. Building a team to develop a successful business is a very important process. Founders must do what is best for the business in the short and long term. Bringing in a diverse group of top talented individuals that will be able to contribute the business will be crucial in the starting phases of the business, but also crucial for the long-term success of the company further down the road.

Sources:

Herrenkohl, Eric. How to Hire A-Players. Hoboken. John Wiley & Sons, Inc. 2010. Print

Walter, Ekaterina. Reaping the Benefits of Diversity for Modern Business Innovation.     Forbes.com. 14 January 2014.             http://www.forbes.com/sites/ekaterinawalter/2014/01/14/reaping-the-    benefits-of-diversity-for-modern-business-innovation/

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Accumulating Capital

When starting a business there are so many events that occur in our daily lives that can have a major impact on the success of a future business endeavor. Events that we never realize could have a significant impact until later on down the road. The college professor who knew everything humanly possible about financing a business, the super techy friend who could solve anything when it came to technology, or the internship where you met some of the most skilled sales people can all greatly impact the knowledge/expertise that can be brought to the table when beginning your startup. This knowledge and expertise can also be referred to as social capital.

Social capital is something that accumulates over time. It can be acquired through friends, family, coworkers, teachers, bosses, and even strangers. Building strong social networks, especially as it relates to business and the industry you wish to operate in, can be extremely vital to success of your future business. Books, podcasts, and lectures are other forms of social capital. Just as we can learn from the people in our social networks, the knowledge and information gained from books and similar avenues can add to our social capital.

In addition to the people we meet, having sufficient money, or available financial capital, can make all the difference when it comes time to starting a business. Typically, individuals who start businesses need surplus capital in order to initiate a new business venture. There are the essentials that people need in order to survive, like shelter and food, and then there are the aspects of life that people become accustomed to that may be more of a luxury. In order to have additional capital on reserve, luxuries include going out to eat, or driving a fancy car, may need to be removed out of the lifestyle in order to start and maintain a business, especially in the beginning stages of business.

As stated in the book “The Founder’s Dilemmas” by Noam Wasserman, “the accumulation of one type of capital can be a virtuous cycle.” Research has proven that people who collect more social and financial capital are able to start their business venture much quicker. In the article “Four Steps to Building Social Capital” by Ivan Misner, the author suggests looking at relationships as currency. He states that it does not do you any good to network and meet knowledgeable people and never talk to them again. He states that its not important how many contacts you make but about the lasting relationships that are generated that can be beneficial to both parties.

Capital plays a major role in the success of any business. Social capital can provide years of knowledge that can prevent mistakes from occurring, and it can be the difference between success and failure. Financial capital can be the limiting factor that allows someone to go out and pursue their dream of starting their own business. According to Noam Wasserman, a study showed that 51.3% of people who had seriously considered becoming an entrepreneur did not pursue this path because they lacked the financial capital necessary to get started. In all the forms of capital, it is important to capitalize on it before, during, and after starting a business.

Sources:

Misner, Ivan. Four Steps to Building Social Capital. Entrepreneur.com. 8 May 2011.    http://www.entrepreneur.com/article/219590

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

To be King, or to be Rich.

There are many different motivations that compel a person to start their own business. According to Noam Wasserman in the book “The Founder’s Dilemmas” the main two motivators are control and making money. Starting a business takes a great amount of sacrifice in order to be successful. Making all of these sacrifices would make a business owner less inclined to part ways with any control of their company. They put in the blood, sweat, and tears into building the company and want to be the “King” or “Queen” of their domain.

At the same time, the business owners other main motivator is to make money. Any business needs to make money in order to survive, but most business owners want the business to generate as much profit as possible. One might consider that giving up equity in their company will cause them to lose money because they don’t own as much, but having the best possible team working for the business, or getting an investment at a crucial time, can make all the difference when it comes to the business seeing significant profit.

The best of both worlds would be to be the Rich King or Queen. This is not always obtainable. There are great/famous entrepreneurs that have been able to accomplish being the rich King/Queen of their empire, but there are far more entrepreneurs that have made tremendous amounts of money by giving up a certain amount of their company in order to help it grow. There are also the entrepreneurs who would not part ways with any portion, or too little of their company and have failed, being the King/Queen of nothing in the end.

In an interview with fashion brand’s Jimmy Choo founder, Tamara Mellen, by Kimberly Weisul, Tamara gives the analogy that you would rather have a smaller slice of a bigger pie, comparing your business and the potential market it can reach. Tamara states that the magic number should be controlling 51% of the business. As a founder you want to have that final say on the decisions that can have a major impact on your business, but you also want to be able to grow the business to a point where it is sustainable and profitable. Bringing in additional investors or expertise can be vital to the success of the business.

There are so many different motivations for starting a business and it is important for the owner not to forget the main purposes for starting their business. It can be easy for someone to get caught up in all the different happenings that go on with business and lose track of why they started the business in the first place. There are so many reasons for starting a business, including the two Noam Wasserman states most common, the money and the power, and it is important to know the difference between them. In an ideal world the entrepreneur is the Rich King or Queen that is dominating the business field in which they’re operating, but this is normally not the case and the entrepreneur needs to be aware what their end game goal is.

Sources:

Wasserman, Noam. The Founder’s Dilemmas. Princeton. Princeton University Press.   2012. Print

Weisul, Kimberly. Jimmy Choo’s Founder on Always Keeping Control of Your Company.            www.Inc.com. 26 November 2014. http://www.inc.com/kimberly-       weisul/why-your-magic-number-jimmy-choo-founder.html. 8 August 2015.