Don't overlook these pitfalls
’ve had more than a few discussions, debates and coaching calls with candidates who think that they need to leave their Fortune 500 director level position to jump onto the startup bandwagon. After all, startups are new and trendy, right?
Okay, first I need to clear the air here. Startups are not new or trendy. Every business in the U.S. — um, in the world — was a startup at one time. They have been around for a while. The reason that startups are in the news is that some really smart folks looked at the numbers sometime after Obama coined “Wall Street to Main Street” and the capital markets crashed.
It turns out (shockingly) that 80 percent of the population works for companies with less than 100 employees. But, that means 20 percent of you work for the public sector or larger organizations.
This article is for those of you who are in those large corporations or entities and wonder if you are missing something. I’ve attempted to assemble traits and realities to help you think through this dilemma.
- 1. Cash flow. The first deal-breaker for most people is compensation. The reality is that your salary in a startup is going to be 25-40 percent less than your current Fortune 500 job. Benefits and bonuses are barely there or non-existent. No, I’m not kidding. So if you have a family, kids in private school, are trying to save for college and a lifestyle that requires cash, then stay where you are.
- 2. Risk tolerance. This is a family-level discussion. I often talk with candidates who have an appetite for risk – oh, no sweat! Then I send them home to talk it over with their spouses, who say something like, “Are you OUT OF YOUR MIND?” The discussion is over. For every success that hits the news there are hundreds of failures. First year companies fail at a high rate. But even those who have been in business for a decade can melt down if they are not adequately capitalized, lack the vision to execute a sound business strategy or fail to respond to changing market conditions. Remember Ultimate Electronics?
- 3. Chaos. Yes, I know that you think your extensive experience with business process mapping, lean methods and awards for driving efficiency are what startups need. Here is the reality: they don’t have any money to spend on process. If they need something done, they either do it or yell across the room to someone who can. Heavy process orientation will collapse a startup in most cases. Process comes later, when the founder can no longer hire everyone, talk with everyone daily or monitor every activity personally.
- 4. Pivots. Emerging businesses must pivot. What you thought you had when you launched will absolutely change once you start talking with potential customers. How many freshmen enter college with one declared major and then graduate with a completely different degree? If you are the kind of person who likes to map your plan and then follow it through to the end without stopping to look around you, then you will be very frustrated in a startup.
- 5.Attitude. Entrepreneurs are unbelievably optimistic. It goes with the territory. You can’t be a pessimist and launch a company. Think about it. Startups are filled with can-do people. There is no room for can’t-dorers. If you are naturally a conservative thinker, or if your glass is naturally half empty, then the startup vibe will make your blood boil.
- 6.Ambiguity. A large part of the population needs stability and predictability in order to survive. My daughter is one of them – this is how I know. Change is bad. Trying a new dish at a traditional holiday dinner is bad. Not being sure if you are getting paid next week is bad. Not knowing what you will be doing tomorrow or what desk you will sit at is bad. If more than one of these describes you, then think twice about a startup.
- 7.Long hours. If you have the sort of lifestyle that requires you to keep your work week to somewhere around 40 hours, then you may not be right for a startup. Some weeks will be 35 hours, and some weeks for months on end will be 60 hours. Keep in mind that you are building something. There aren’t enough people to spread the work around. Everyone has to wear a bunch of hats and when you need to ship product or deliver results, it’s all hands on deck – in the office!
Please don’t get me wrong. Startups, emerging growth companies and small businesses are amazing. I’ve been an entrepreneur for 10 years now and have never looked back. I’m also married to an entrepreneur, so it’s our normal. But we have parents and siblings who work for, and have retired from Fortune 500 corporations. They would not be happy in our world, nor would I be happy in theirs.