Starting a new company is a thrilling but rocky experience not too many people have the stomach for. Fifty percent of small businesses shutter within the first year due to falling short in distinguishing themselves in the marketplace, faster competitors or plain old failure to profit.
There's another often overlooked reason new companies falter, however: They aren't providing workplaces that the founders themselves would want to work at! When a new company gets started, all sorts of other normal-life things are put on hold, such as paychecks, benefits and regular work hours. While not having these things adds to the romantic notion of a company's being scrappy and lean, it shouldn't remain that way for too long.
Creating basic employer operations can bring a sense of legitimacy to a startup that increases its attractiveness to potential hires. It helps get founders out of bed in the morning when the going gets tough. When the buzz of quitting a job and diving headfirst into building a dream wears off, it's great to be welcomed each morning by arriving at a real-life place of employment.
So what are the basic elements that startups should deal with early on?
Partnership agreements. These documents should cover who's doing what. Worrying about how partners perform and what everyone's job is shouldn't weigh down any single founding partner. Get paperwork in place early to ensure that each person knows his or her role, shares the mission and works hard.
Vacation and decompression. Entrepreneurs run hard. Work and private lives blend together like sugar and water. That means they don't get away enough from email, calls and stress. It's really important to make sure that everyone steals away from work at least quarterly so formalizing time-off policies matters. It's also vital to track time off (a task accomplished by my company's HR management tool). Burnout syndrome strikes early and takes a heavy toll on startups.
Payroll and company bank accounts. Companies that are bootstrapped have the owners pay themselves out of their own pocket. Formalize it by pooling that money into a real company bank account, then get a simple payroll service up and running.
Health and retirement benefits. Not all founders are 22-year-old Stanford dropouts. Many have families and financial obligations, with responsibilities beyond covering rent in a shared apartment. With the the rollout of the Affordable Care Act, there's no reason to not carry health insurance. Small companies can even skip on the complexity and added costs of a group policy and go with individual policies.
Founders should also keep contributing to their retirement plans. Yes, hopefully the business will succeed. But statistics indicate that it might be wise to keep a backup plan.
Bookkeeping. Track expenses. Know what's coming in (maybe it's nothing!) and going out. Keeping tabs on cash is critical for hiring, infrastructure and research and development.
Hiring a bookkeeper isn't expensive. A person comes in for an hour or two a week and gets the job done. This professional can manage expenses, run the payroll and provide detailed reports to the founders each week on financial performance.
Personal, professional and company objectives. Starting a company certainly marks the accomplishment of a huge goal. But this is only the start. What founders really seek is success in selling their product or service in the marketplace. Founders should ensure that the company has objectives and road maps that will lead to the company's ultimate goal.
Plus, each employee (including founders!) should set their own personal and professional goals. Catching conflicting goals and aspirations among various partners early on can mean the difference between the company's life and death in 18 months.
Be in the game for the long haul. The last thing eager, hungry entrepreneurs want to pay attention to is workplace operations. They have their product to worry about, in addition to customer acquisition and inventory. But one big factor in a company's ability to be resilient is to retain the talent not just of employees but also passion and energy of the founders themselves.
Founders should take themselves seriously, and build a company that's well designed in its operations. They'll thank themselves later as the company starts growing and already has the tools in place to be a great place to work.