Are You Ready to Expand Your Startup of One?
One person can handle only so much. Even the hardest working, most dedicated solo entrepreneurs will some day hit that wall. There aren’t enough hours in the day to take on more work, but the startup stands to grow substantially. At that point entrepreneurs are faced with a fork in the road, though not everyone sees it as a choice.
At that critical juncture, there is one question every entrepreneur has to ask herself: am I ready? Not everyone will answer yes. Others will answer yes even though the answer is no. The plain truth is that not every entrepreneur is cut out for expanding enterprises. Some of us are best left to our own devices.
1. Can I stop being a technician?
In his book The E-Myth Revisited, Michael L. Gerber breaks down the three roles of every entrepreneur: the technician, the manager, and the entrepreneur. The most successful entrepreneurs balance all three aspects. Failing to cultivate any of these three puts you on a more certain road to failure. One of the big problems, one he describes at length towards the beginning of the book, is that of the technician’s dominance.
Most entrepreneurs are technicians in their fields. An entrepreneur who starts a plumbing business is likely a skilled plumber. An entrepreneur who starts a software company is likely a coder. Because the entrepreneur possesses these technical skills, he can run the business, soup to nuts, by himself. But when it comes time to expand, the entrepreneur must back off the technical end and start playing the role of manager and entrepreneur (read: visionary).
Yet so many people are loath to give up that technical aspect. It’s why they struck out on their own, anyway. Before you decide to expand your startup, ask yourself if you’re comfortable in a less technical role. If you can’t handle anyone else doing the coding, or even if you feel you need to have your hand in the code at all times, chances are you’re not ready to expand. Only those who can shed the lion’s share of the technical work can thrive in a multi-employee company.
2. Is new business really in abundance?
Why do solo startups require expansion? Because they have, or have the ability to take on, more work than one person can handle. The question every entrepreneur needs to ask her self before expanding is, does that additional business really exist? All too often entrepreneurs dream of new opportunities that never come to fruition. Expansion is only worthwhile if those new opportunities is real.
When my partners and I met a few years ago to discuss expansion of our publishing business, the first item on our agenda was hiring an ad sales team. We were making far less than we thought we could with advertising, since we were using basic ad networks. Finding a channel for direct sales, we thought, was the easiest way to grow our revenue. But at that meeting we came to an important realization: we had no real leads on potential media buyers.
After taking on some of the work ourselves, we realized that there just wasn’t a large enough market for advertising on sites our size (and we were and continue to be a relatively large sports publication). There were opportunities to grow beyond our ad networks, but they weren’t abundant enough to justify hiring staff. We saved ourselves plenty of money by backing off and realizing that the new business just wasn’t there.
3. Can I handle associated costs?
Allow me to preface this by saying that I have worked for startups as a remote employee, and it has worked out exceedingly well in some cases. Still, as a general rule, staffing your company with remote workers is inefficient. Without the discipline of an office many employees, even typically reliable ones, will flake. If you plan to expand your startup, you should plan to do so in an office setting. That, of course, brings in additional expenses.
If you’ve never signed a lease for office space, you’ll find it quite an expensive process. You have to find space, which might require a broker’s fee, and then you have a hefty lease. The first office lease I signed was much more expensive than I’d imagined. Then there are the costs of keeping the place up. Do you know how much it costs to run central air conditioning all day? If you don’t, you’re in for some serious bill shock. Heating, electricity, and even seemingly small costs such as water coolers, add up quickly. Do you have confidence that your expansion will cover your overhead costs?
Then there are employee costs. They make not just salary, but also benefits. There are taxes on your payroll as well. Yes, maybe you can get a steal on a good employee and pay them a slightly below-market salary. But have you factored in all those other costs? How about training costs? Even more so: the cost to recruit new employees. There is plenty of overhead when expanding. Make sure you’re ready for everything before you give the go-ahead.
If you’re not ready…
If you’re not ready to handle any of the three realities above, perhaps you’re not in a position to expand your startup of one. There’s nothing wrong with that, either. Some entrepreneurs aren’t cut out for big operations. They work best by themselves.
These employees are probably better off selling when that time comes. It might sound difficult, since many entrepreneurs think of their startups as children. You wouldn’t sell your child, would you? Unfortunately, that sometimes presents the best option. The true entrepreneur, though, can retain a stake in that company, and then start a new one. There is nothing wrong with serial entrepreneurship.
Before you make a decision on whether to expand your own startup, make sure you’ve explored all aspects of the decision. It might seem as though you have to either expand or fail, but oftentimes that’s not the case. If you’re not ready to give up the technical side of business, if you’re not sure about where new business will come from, and if you’re not ready to bear the added costs of adding employees, perhaps it’s best to stay put. If expansion is a requirement, there is always the option to sell and start over. Just don’t expand for expansion’s sake. It’s a quicker path to failure for those who aren’t truly prepared.
About the Author: Joe Pawlikowski owns and has worked for a number of startups in the last six years. His publishing company, RAB Baseball, puts together a popular baseball website. He keeps his thoughts on marketing and blogging at JoePawl.com.