Most stories of entrepreneurial success focus on the main promoter, and by the end of the narrative, one comes away with the impression that it was done by an individual, with little contribution from others. This is a dangerous delusion, and nothing could be further from the truth. No one person is equipped with all
Most stories of entrepreneurial success focus on the main promoter, and by the end of the narrative, one comes away with the impression that it was done by an individual, with little contribution from others. This is a dangerous delusion, and nothing could be further from the truth.
No one person is equipped with all the skills needed to successfully establish and run a business enterprise
No one person is equipped with all the skills needed to successfully establish and run a business enterprise. Excellence in technical aspects is not enough to assure business success, neither is marketing capability. If these are not supported by good financial management, all efforts can come to naught.
This is often the problem when a group of classmates from an engineering college come together to develop a project idea into a business. They all have similar skill sets, and the gaps in their capabilities are also common ie, commercial and financial expertise. Even a brilliant technical innovation can fail as a business unless it is supported by good financial management.
The essence of what I have written about so far is that it is important that the promoter group does not consist of members having the same skill set. If there are three promoters who are all classmates from the same engineering course, it is important that they come to an understanding early on the roles they will perform in the management team. If they are equal partners, the problem is compounded because all three cannot be the CEO. Giving themselves grand sounding titles like CTO or COO or CFO will not help, unless they actually perform those roles. They must agree to accept that there is a team leader, and the final decision will rest with him. If there is no finance specialist in the team, it is better that they hire a professional as CFO.
I have seen a biotech startup with two promoters run into trouble fairly early because of the inability of the duo to agree on roles and responsibilities. I have also seen an engineering startup led by a brilliant engineer include a finance specialist as partner, and go on to achieve business success.
While it may be easy to understand that various skills and capabilities are required for growing an enterprise from startup to success, what is less easily understood is that these skills are not easy to come by. Part of the reason for this is that people wishing to start businesses are advised about putting together business plans. These require making assumptions and projections, doing market surveys and so on. There are even model business plans and step-by-step ways to approach business plan preparation that make it all sound easy. Smart young technically qualified people can thus be forgiven for getting the impression that all these financial processes and aspects are not that difficult, and can be managed by one of them. This is an irrational oversimplification, and has landed many ventures in trouble. I know, because my venture, which seemed to be on the path to success, had a severe setback because of inadequate cash flow planning and management. I was lucky to identify the problem in time, and put in the necessary correctives. Even then, I had to arrange a substantial infusion of funds to tide over the difficulty.
Therefore, ensure that the promoter team has skills and experience in at least one of the other functional areas needed for success. If this requires inducting another person with the requisite skills, do not hesitate to do it.
To explain further, think of your venture as a partnership, and not as a joint stock company with limited liability. Apart from you, who else is a partner, and what does that person bring to the table? The partners should have more than one capability within the team. All the rest can possibly be hired. If the promoter is a lone hand, and owns the venture 100 per cent, then he may have the impression that all the other needed skills can be hired. But that rarely works, because experienced professionals will rarely join a startup.
Planning and raising funds from right sources and on the best of terms, managing cash flows, negotiating the best commercial terms of payment, dealing with banks etc. all require expertise and experience. My advice to a startup will be to include an experienced finance professional in the core team. Building an enterprise is actually all about building the right team!