Would you flip a coin to determine the success or failure of your business?
It sounds ridiculous, but this is essentially what countless startups are doing. Studies show that 50% of new businesses fail before their five-year mark, and even 75% of VC-backed startups will eventually fail. Given these stats, it’s natural to wonder how you can ensure a higher likelihood of success for your organization.
While we are known for our work with Fortune 500 companies, we’ve also worked with a number of exciting startups. Throughout all our years partnering with these businesses, we’ve identified a number of startup best practices in hiring, culture, funding, and data.
Hiring for a Startup
It’s natural that the strategy for a startup is very different from one of an established business. However, 17% of startups do not have a business model in place. Without a clearly defined structure, it’s difficult to know the type of professionals to hire and even tougher to recruit them. Even though a business model can (and should) change over time, it’s essential to put one in place before starting your first big hiring push. After all, it’s hard for a startup to absorb the cost of even one bad hire.
Once ready to hire, who are successful startups looking for? They seek potential visionaries who are hungry for a chance to prove themselves. These professionals have great amounts of ambition and take calculated risks. They often have entrepreneurial qualities, which is why those with early involvement in a successful startup often go on to create their own companies later on. Reliable people who aren’t afraid to work overtime fit the bill. Those who can keep a positive attitude despite rocky periods are crucial. Finally, while experience is important, hiring for potential can make a huge impact on your startup’s growth.
As a startup, your business may find it challenging to locate and recruit these individuals due to a lack of brand awareness. That’s why leveraging your network is key. Take meetings with anyone you can, whether they are a fellow business owner or even someone not interested in a new job. The more you talk to people like this, the greater the likelihood they will refer someone to you.
Once you have great candidates in your recruiting process, offer unique benefits that large corporate companies don’t. While remote working options, greater flexibility, or a fun office space are a good start, consider asking candidates what they want out of their job. Early on, you can tailor a benefits package to whatever an exceptional candidate wants (within reason). When it comes to compensation, consider profit-sharing or long-term incentives. Not only will they provide motivation to work hard, but these benefits can secure talent for an affordable salary, with additional compensation contingent on company success. As new talent signs on and you’ve grown to 10 or more employees, Forbes recommends hiring a recruiter. It’s the best way to continue aggressive recruiting and proper onboarding while allowing you to focus on running the business.
Shaping Your Startup Culture
Ideally, you will have your company values in place before hiring your first employee, but it’s important to understand that your startup’s culture will evolve faster than the culture of larger companies. When you’re small and growing, you could be doubling in employee size every few months. Going from three employees to six is a big difference as each individual has a significant impact on the overall culture and how it’s shaped.
Entrepreneur recommends building a learning culture. It’s great if you can hire an expert who is amazing at one thing, but if all your early employees fit that mold then your company may not grow as quickly. Hire experts, but make sure they still have a hunger to learn. Your employees’ desire for personal growth with create a growth mindset in your company. In other words, be deliberate about hiring for cultural fit in your startup.
Furthermore, disagreements will arise in any business, but it’s how those arguments are handled that determines how much negative effect they will have. Internal team conflicts are the cause of 13% of startup failures, and these are avoidable situations. Naturally, you want your employees to have strong professional opinions and feel comfortable expressing them, but those sentiments aren’t always communicated properly. Set aside time for discussion and problem solving so everyone feels heard and agrees with decisions. Build trust in this way and the morale in your culture will remain high.
Funding Your Startup
Nearly half of entrepreneurs began a company with less than $5,000 in cash reserves, so it’s natural for money to be top of mind in a startup. However, many startups are able to secure large windfalls during successful rounds of funding. How do they do it?
It all comes down to the purpose of a startup. What problem is a business trying to solve? A lack of market need is why 42% of startups fail. That means even with a stellar team and culture, there just isn’t enough interest in the company’s product or service. Obtaining startup funding requires showing proof of a viable business model that has potential to make money in the real world, not just on paper.
Securing a first round of funding is a huge win, but successful startups rely on multiple boosts of cash. We’ve seen a trend in startups where they make an effort to spend all their funds with the idea that it will prove they need to be granted more money in a future round of funding. This mentality can work, but only when that spending is strategic and tied to a return.
When considering startup funding, it’s difficult to ignore the fact that women entrepreneurs experience more difficulty raising money than their male counterparts. Rather than be discouraged, female professionals should view this as an opportunity to set an example for others. The act of starting a business is daring in itself. If you believe in your idea and can prove why it’s a viable business, then others will believe in you too. Be the most confident version of yourself and good things will happen.
Startup Best Practices
Many startups will fail, but if you’re focused on avoiding failure, then you’re not focused on growth and success. Hiring, culture, and funding may be the three most important factors to consider in the early life of a startup, but they aren’t the only ones. Entrepreneurs like you will have a lot more on their mind, whether that includes forming a data security plan, making legal filings, or remodeling an office. Throughout these and other initiatives, use startup best practices and others’ success stories to help you trailblaze your path. Otherwise, the fate of your business will be up in the air like a coin waiting to land on heads or tails.
Looking for the right talent for your startup? We know just the people who can help your business thrive.