Successfully raising money is a tremendous feeling and you feel empowered. Running out of money is the exact opposite. Nothing worse can happen to a startup than to run out of cash. Maybe you can raise another round of capital if everything else is running on all cylinders.
None of these are good outcomes for you. Silicon Valley was so flush with capital that some commodities were actually scarce. Even office supplies were hard to find at one point. It has been estimated that up to one fourth of the VC money raised in the period was wasted on frivolous things like latte carts, beer Friday and catered lunches every day. There was a lot of fun followed by serious pain when the money ran out.
So, hoard your cash. After a successful funding everyone on your team will be asking for new people for their teams. Every new position you are asked to open needs to be carefully scrutinized. This is a startup and is supposed to be running lean. Do you really need another Program Manager or another whatever you are being asked for? There is no faster way to ramp up your spending than to add a bunch of people to your team that you might not really need. Going through a layoff when the money starts to run out is one of the least fun things you will ever do.
Over-hiring is a pretty common problem in startups. I have also been the startup CEO that hired too many people or allowed them to be hired just because a seemingly reasonable case was made for the position. Become the CEO that is known for asking a ton of questions about everything brought before you. Before long, your team will learn to only bring you things that will actually move the company forward. This is part of the loudest one wins syndrome.
I have seen numerous situations where someone has the ear of the CEO and does most of the campaigning for their position and view on things in the background in which legitimate debate is eliminated.
I have also seen situations where a leadership team is essentially bullied into making a certain decision, by sheer force of personality, by making legitimate debate painful or uncomfortable to the rest of the team. As CEO, you simply cannot allow these situations to occur. Preceding my series of articles on building a leadership team , I addressed the need for an environment in which legitimate and passionate debate is fostered in a leadership team.
In those articles, I discussed the need for basic trust between the members of a team, the willingness to engage in open debate and completely buy-in to the decision on a topic.
When a member of your team approaches you with an opinion about a decision that needs to be made, it is typically because they would much rather you made the decision outside of the normal process — meaning no debate about the alternatives. The same is true if you have a team member who tries to force a decision in meetings by being louder or more in your face than is comfortable to the rest of the team. Once a decision is made, do not allow the debate to continue.
If facts change and may render the decision debatable, have the debate within the meeting construct, not in the hallways or via email. Keep your company focused on the goals. In an early-stage startup a particular idea or product is determined , and the company starts marching down that particular path. Funding may be obtained based on that particular idea. Then the new ideas start to emerge. You have to take advantage of new ideas that actually improve on what you are doing. What you have to be alert to is something that actually changes the trajectory of the company because it seems like a great idea.
Let me use an example to make my point. Product features are determined based on whatever research the company does into the market and development is underway. Then someone determines that since printers are a part of the home network, the product should determine when ink is needed and alert the user. Next, of course, comes the idea of selling ink to the user. Then, later, since the product is involved in the printer now, why not make recommendations to the user about better printers that might be available.
Then, later, since printer recommendations are being made, how about if the product searches for deals on printers and makes them available to the user. Then, later, since we are making purchasing recommendations about printers, why not…. While the example might seem unrealistic, the point is that over a period of time the company changed their strategy from a home network management tool to a general internet shopping system, representing a significant change in strategic direction.
Now the well-researched business plan you started with is in the trash and you are marching down a completely different path that may or may not make any sense. Above all, do not be the CEO with a new idea every week. Remember what I said earlier about asking questions rather than offering opinions.
It happens. Reasons for firing a CEO range from poor performance or loss of influence over the team to relationship issues with the board or improper conduct. Carrying the weight of the company on their shoulders, the CEO is responsible for devising new strategic plans and policies to bring their visions to reality. By setting out clear aims and objectives, the CEO helps employees and the BoD to better understand upcoming expectations for business growth , both in the short and long-run.
Rather, a yearly budget has to first be set by the CEO to allocate capital in consideration of factors like net income, cash flow, and the valuation they wish to achieve. With the help of the CFO, CEOs then consider variables such as industry fluctuations in calculating potential expenses, revenue, and profitability for the upcoming year. Only then is the burden lifted, with the CFO managing cash flow and performing fiscal and financial analysis throughout the year. The public naturally associates the CEO as being the face of the company, making them an almost obligatory marketing tool.
Just as expectations must be communicated to employees, the board should be kept informed of important — and sometimes difficult — business decisions through regular board meetings. Communication between the board and the CEO is of the utmost importance, with transparency being key. Actionable insights can be derived from revenue growth, gross profit margins, and cumulative sales.
These can then be used to shape further key performance indicators KPI to guide necessary adjustments and help the company meeting its new targets. In addition, monitoring the market — whether that involves potential acquisitions or significant regulatory developments in the industry — is crucial to helping the company withstand outside forces and progress towards its long-term goals. From interns to managers to senior executives, everyone looks up to the CEO to a certain extent.
Creating a healthy working culture means leading by example. By exhibiting the same working attitudes you expect of others, CEOs will gain respect and serve as better motivation for employees to reciprocate and do the same for them.
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