PEOPLE make start ups profitable. Period.


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I’ve worked in 4 start ups and been successful 4 times. I define success in a start up as the company becoming profitable as well as a “going concern” business.

While my ego would like to think I can attribute these successes to my own intellectual superiority, I have become more of a realist. There have, however, been 3 constants to these successes and now consulting for numerous start ups, I’m shocked to find the minimal time and thought that goes into what I consider the initial recipe for success.

A strategic and well thought out human resource initial plan will

1. Hiring on 4 traits

Always list these 4 criteria in order of the ‘traits possessed’ for your potential hire:

Education
Motivation
Experience
Innate Intelligence

The order that will bring you a successful candidate in a start up world;

Motivation
Innate Intelligence
Experience
Education

What does this mean? It means that someone who is tenacious, ambitious, has unparalleled work ethic while also having the ability to make good decisions and think ‘outside the box’ is going to be far more valuable than the “MBA who has worked in corporate America for 5 – 10 years”. Certainly, there are roles for these folks, but not in the core of your start up executive, senior, or middle level management teams.

2. Sacrifice is KEY

Offer a very minimal base salary – regardless of the role. PAY FOR SUCCESS ONLY.

When you have team members that are confident enough in their abilities that they agree to being tied directly into accountability metrics to get paid, you have people who are ‘bought in’. Take the time to develop a monthly accountability plan. It may take you a couple hours to develop the ‘right’ plan and another hour to explain it to a colleague, but it will drive millions in revenue over time; as well as cut costs.

3. CUT THE FAT

Stop hiring people who do not have the ability to act in numerous roles. Oftentimes, I see start ups where executives can play numerous roles; they can develop and drive strategy on the marketing side, but also be an operator if needed – and most times a salesperson as well. Then when it comes to hiring senior and middle management, ‘executives’ seem to think that they should each have a vertical of employees reporting to them. Forget the vertical. Find senior and middle managers who can play multiple roles as well. YOU WANT TO HIRE MINI C.E.O.s.

For example, you don’t want just a ‘director of creative’, you want a creative designer who can design, code, has an e-commerce and technology background, can manage websites, QA the site, and has the operational background to project manage anything in your marketing department. Many start ups hire 1 “director of marketing”, 1 creative designer, another technology person. Find someone with all of these skills.

Another example; do not hire a “director of sales” or “director of marketing”…Hire a “director of revenue driving operations” or a “rain maker”. Find someone who can negotiate deals and don’t only use them on the business development side; use them on the marketing team as well – to work on marketing negotiations. If the individual is “innately intelligent” and “motivated”, they will pro-actively learn about all areas of your business (motivation) and adapt their skill sets quickly based on the knowledge (Innately intelligent). Combined with creative deal making and negotiation skills, you want your ‘revenue driver’ to also have had an operational background – who needs a sales / marketing operations person? Until you’re profitable – it’s a waste.

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  1. August 26, 2010 at 10:03 am

    I absolutely agree that a performance-based compensation model is best for a start-up. While I agree on your argument for minimal pay, this has to be coupled with an equity stake in the start-up. Money is a powerful incentive to succeed and having ownership drives people to have a higher level of commitment, especially as any equity will not be paid unless the start-up reaches it’s exit point.

    • August 26, 2010 at 10:22 am

      Funny you should mention equity as I learned “the hard way” about equity (thankfully I was only 24 yrs old). Here is the question I pose back to you; when there are large companies, huge companies – and they are developing a “start up” within a huge corporation (intra-preneuers, right?), if the “huge” company does not give equity to senior / middle management, how would you compensate? I know from ages 24-28, I had a decent, livable base salary…but then was paid monthly a % of operating income and I was still feeling the “ownership” piece. I think tying people into the bottom line versus revenue is also better because it forces individuals to not just look at one piece of the business (driving revenue), but also to focus on the operational aspect of cutting costs and increasing efficiencies.

  2. September 10, 2010 at 4:40 am

    keep it real, iight

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