June 10, 2005

Acting like a big company from the beginning

BusinessWeek has an interesting article on how entrepreneurs should prepare for growth:
Doing it all may be encoded in entrepreneurial DNA, but it's hardly the best way to manage a growing company. Entrepreneurs risk burning out and taking down their businesses and their personal lives with them.

...Managing growth successfully comes down to getting the right help at the right time. At the outset, it's important for entrepreneurs to develop relationships with professionals such as accountants and lawyers, then make sure the right hires come on when they're most needed. As the company grows, it may be wise to explore partnering or outsourcing -- or even stepping back from the helm of your company.

...It's important to keep an eye on the future, even if you're working out of a spare bedroom. "Start out acting like a big company from the beginning," advises Marty Schmidt, president of Solution Metrix, a small business consultancy in Boston. At a minimum, create professional accounting procedures and hire an accountant who specializes in small businesses.

...Getting started on the right foot extends to office space, too. Yes, cost can be an issue. But Humphrey found that several would-be employees who sounded promising on the phone failed to show up for interviews. "I realized later that candidates had been driving up, seeing this ugly building, and driving off," says Humphrey.

...That little epiphany prompted him to stop thinking like the founder of a struggling startup and to start acting like the CEO of the company he hoped DrinkWorks would become. In 2000 he hired a director of operations. The next year, DrinkWorks moved into a 2,000-square-foot space with room to expand. "We created a fun, amazing environment, with a large creative room for brainstorming and a surround-sound system on which we played our favorite music," says Humphrey. "Immediately we found that good people wanted to work for us and we had almost no turnover." By 2003 the $6 million company had 14 employees.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.