5 Rules to Follow for Achieving Success in your Startup

Going from that great, unique business idea to actually opening your company is in itself the biggest step an entrepreneur takes. Depending on the country, this can be a very short and easy process, or in some cases quite a difficult and bureaucratic step. Beyond that I will give five pieces of advice that, based on my experiences, are crucial to ensuring you don’t become just one of many startups that doesn’t realize it’s full potential.

1. Strong financial control: too many startups don’t have control over their income, expenses and profit/loss numbers. Meaning they don’t really know the risk and vulnerability of their company before it’s too late.

The financial control from day 1 is the single most important task for a new startup company. It can be over before it starts if you don’t have control of the investment it takes to actually start up, and after the initial short phase, to run and grow the business. If the owners don’t have these skills, it’s important to add it to the company. The monthly statement will be the king of the business. It will state when cash is short, and setup the needed initiatives to be able to pay the bills. It’s a fact that most startups have a long incubation period, and it requires hard work before it can actually start to generate revenue. Therefore the money that is initially invested must be controlled carefully and with the highest urgency. New potential investors will demand hard financial control of their money so: rule number one is to have strong financial control from day 1.

2. Good sales people: too often the sales people are too weak and have no experience selling internationally.

Really good salespeople are a must, because even the best product and idea will never sell itself. There needs to be someone going out into the field to clients and present this new product/service, as well as getting the initial, very important, feedback from the clients so as to adjust the product/services to the real world. As founder of a new idea, we often believe that we know what the client needs, but I have seen many examples of the need to radically change the product/services to meet customer demands, that was not as originally expected from the startup. Good sales people can listen and bring this information back to the development team, and thereby enable the company to quickly adapt to the needs of the market. Sales people can also get information about price sensitivity, information about competitors, as well as other valuable information in the initial phase of the startup.

After the initial phase, or sometimes from the very beginning, these sales people need to have international experience. The target market should not be narrowed to a local market if the startup really wishes to be rapidly successful: it needs to think internationally from the beginning. So good salespeople with international experience is needed – even though these are more expensive.

3. Establish a professional Board: often the board does not really contribute, because they lack industry expertise, international experience or simply are not professional enough. Family seldom belongs in your startup’s board, unless they have previous experience and acumen.

It is important to establish a professional board that can help with ensuring that the right steps are taken at the beginning of the startup process. At the very latest a professional board should be created one year after company establishment, and doing it right away will often pay dividends. The board itself doesn’t really make the difference – it’s about the people sitting on the board, and contributing to the startup’s success and growth. Many boards have local people only, and often with very little industry experience and/or international growth-strategic knowledge. Sometimes even family is invited to be on the board because there needs to be members and these don’t ask for payment; and this should be avoided. The board can be potentially more valuable for the growth of the company than the employees themselves, but you need to have the right mix of skills and professionalism on the board from day 1; and this needs to be achieved, at the latest, when the first revenue arrives. Bigger investors will normally demand board positions and the startup has to demand the right skillset and complementary skills from the investors. Lastly, the chairman of the board has to be selected very carefully, because he will be the driver of the future processes for the company.

4. Step down as owner: too often the founder/owner doesn’t want to step down when the company is ready for the second phase (15 plus employees). Meaning that they try to run and grow the business without any management experience.

After the initial phase and the growth starts, one of the classical dilemmas is that the founder believes he has to be involved in managing the company on a daily basis, or as CEO/President of his company. Therefore, rule number four is to, as founder, be ready to step down as daily leader if this would block the continued growth of the company. The founders often come from the technical side and/or the product/services side, and therefore may have no experience in internationalization and growth-strategy or a lack of leadership and management experience. The founder should stick to his/her strengths, and be ready to hand the reins over, if this could benefit the startup. So founder: be ready to step down at the right time to not block the growth of the startup.

5. Act like an “enterprise” from the beginning: Startups have their own charm, but this doesn’t mean not being professional in all we do. 

Behave like an “enterprise” from the start: make a solid business plan, formulate a five-years strategy, document everything in English, and act like you are much bigger than you are. New investors and/or eventual later exit candidates or buyers will demand this, while also being important at the start of the company where more investment and seed capital often is needed. Angel investors might not demand the same level, but my experience says that’s it’s much easier to start with doing the right things, and then changing things after the company gets it’s routines set.

Jan Lomholdt has a background as a Captain in the Danish Army for 15 years, followed by leading both large enterprises, like Merkantildata, Eterra and Ementor, and medium business, like Superoffice, CLC Bio and M&O Partners. Today he lives in Rio de Janeiro and holds several positions in business and business related organizations. He has been a global advisor for Microsoft and IBM and has several honors from Cities and Governments.