Entries RSS · 2 entrepreneurial worst practices
Today, I had (very) early breakfast with a long time friend of mine who has been an entrepreneur for about a year now. I happen to own 5% of the (non tech-related) venture, which he kindly granted me for having provided the actual business idea about one and a half year ago. So after updating me, my friend quite naturally asked for feedback. On the one hand, I believe entrepreneurs are heroes (that I’m jealous of) & that I don’t have the experience it takes to challenge them. But on the other hand, I couldn’t help get angry at some point: I couldn’t believe my friend would wonder why the company didn’t pick up as fast as planned since he seemed to be complying by 2 rules that, as far as my eyes can see, can only be entrepreneurial worse practices. For the record, he accepted that I published a note relating our meeting. Here it is:
- Do your bookkeeping and legal work on your own
He does it all: accounting, tax, legal self advisory using resources available on the web, contract management, etc. to save money. FYI, it’s still a small business (3 employees), but come on, being an entrepreneur doesn’t mean enough work to do probably? It takes many years of studies to become a lawyer or a chartered accountant. These people are experts in their fields (in France, we even call certified public accountants ‘experts comptables‘), and providing financial statements that are accountable with the economic reality of the business + making legal decisions is absolutely strategic in order to build structures enticing growth. So why not focus on being an entrepreneur ie managing the development of one’s new venture, and leave expertise fields to the adequate experts? Frankly, keeping one’s own books and writing contracts on one’s own is the last thing to do when you’re an entrepreneur: these are structuring moves that don’t cost so much after all – if it can help you prepare for the battle best. It’s the old ‘outsource non-core stuff’ thing, what you’re aren’t prepared to do best yourself. I would even go further: go, find and pay for the very best lawyers. They’re expensive, true, but at least you know you don’t have to worry about the contract side of your deals.
- Don’t commit full time
My friend still has a job on top of being an entrepreneur. It’s a sort of part-time job, that pays extremely well, but still, what message does he send to his full-time employees? to his clients? to his wife & children? to his investors? I acknowledge the reasons he doesn’t quit his job are understandable (he’s got 2 babies at home), however the signal sent to the market is extremely negative. Although his company is already profitable and grows at a reasonable rate (2-digit figure vs. 3 digits planned), he basically sends the following message to his different stakeholders: “you have to believe in my company, but look, I’m hedging my positions just in case“. In other words, why would he want someone to believe in his venture more than he does himself? Frankly, one can’t be a part-time entrepreneur: it’s either full-time, night & day, or not. To be fully & intensively or not to be, that is the question.
I deeply hope some people will find inspiration in this post. And if you disagree with me, please let me know. For your information, my friend (that I just talked to over the phone) just started taking corrective action!
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Excellent article Jeremy. In fact after our discussion about my company creation, I wrote an article about my 5 biggest mistakes and yours are 2 of them. You can read the remaining 3 on my blog: http://www.fidjissimo.com/2007/06/07/5-best-practices-to-fail-your-company-creation/
That is SOOO funny, we published 2 similar articles on the same day. At what time did you publish yours?
I gotta go, my second-to-last HEC Paris party awaits me. See you there!
A few minutes ago, I went back home late! I checked Tech IT Easy just after and I found it also really funny! You know what they say “big spirits meeting…” (don’t know if the English translation is right
)
Enjoy your party!!
Big (or small?) spirits meet indeed: I had checked your blog right after posting and it wasn’t there. It really must have come in the following seconds! I can’t help keeping laughing.
So you published it tonight also? Didn’t check your blog this afernoon, and as you mention your breakfast I thought you published it earlier! Perhaps it is only funny for us 2 so we will stop talking about coincidences and start discussing this post!
You are really raising two interesting points, and on the second one I would add just one thing: I understand the position of your friend, but avoiding personal risk is impossible in SUCCESSFUL ventures. If his two babies really prevent him from putting his financial situation at risk (which is completely understandable), then he should really reconsider his position. It is the basic financial statement: higher risk = higher reward.
I agree that trying to do everything is a real mistake. If he does not love doing the numbers he should not be doing them! Entrepreneurs are smart enough to do what they love to do – and surround themselves with people who love to do the things that they hate.
Now the second I am not certain about. Many entrepreneurs start the businesses while holding down another job. It is a good way of test trading. Is the business gonna work? Do I love it enough to do it full time (a much more important question). It is possible to start a business while holding down a job – and for some people it reduces risk. The key is to dedicate time to the new business. Ring-fence as many hours a week as it needs.
Remember many entrepreneurs are serial cases. They run lots of business through good management teams. And then there si the mompreneur phenomenon. They run the house, look after the kids and run a business (or two). A business need not be a full time endeavour.
If the business fails to take off it is more likely that either it is a poor business – or your friend does not have the passion and energy to do the work outside of their office hours.
Hey Mike, v. interesting contribution, thx.
So, lemme try to answer this.
On your first point, I don’t think my friend enjoys keeping the books and doing the legal work on his own. He has actually already talked to a public certified accountant and has also found a commercial lawyer. He just thought he would avoid value destruction but the hours he spends doing such things could be used in a much better way in his business.
Your second point Mike is extremely relevant and interesting. I respect your opinion on the compatibility of many different jobs. From my own experience, I just noticed that doing one job well already makes your life busy. So doing many jobs well can only be worse. But that’s just my opinion and I like your arguments a lot – although I find these not convincing. If you believe in yourself and in your business, and want to push yourself to your limits, then you must know that the only way to achieve your goals is to put all your energy in your endeavors.
I’m wondering if VC would invest in a company run by a part-time CEO ? OK, I’m already offline
You’re totally right Laurent: there’s no way anybody would invest in someone committing part-time.
However, he’s already got investors, but since his business is profitable, I guess they don’t want to take the risk to play the hardliners.
> “he’s already got investor”
BA but not VC, I suppose?
BA + bank loans if I remember well
Jeremy, amazing reactivity, lol We should use msn, it would be more convenient to discuss.
Hope to see you soon !
Some good points, Jeremy, but I can also understand why it’s hard to follow them.
In order to fully to commit to the venture you have to be behind it 100%, which requires a certain mentality. And you need to have the funding to do so, which can be hard to find and also requires a certain mentality. And trying to do everything is a fault you see amongst many new entrepreneurs, who still have to learn to delegate, but also need to find the funding to sponsor those experts.
So once again, I completely agree, but it’s easier on paper than in real life (at least for some).
You’re probably correct Vince, Mike Chitty (see above) brought to light similar arguments.
Indeed he did, sorry Mike!
Don’t be sorry Vince, it just means Mike and you agree. I’m sure he would be happy to see his excellent points backed by your remarks.
Great observation. I think in general, the biggest mistake made by entrepreneurs is handling everything alone and multitasking. It is much bettet to delegate and attain increased productivity. An interesting article on it at http://outsorcerer.com/blog/?p=9