How to Stare Down the 4 Toughest Decisions You'll Face as an Entrepreneur
There is no straight path to entrepreneurial success. The journey is almost always full of ups and downs, in which you’ll be faced with decisions that test your emotional strength. Making the wrong choices can kill your company before it gets off the ground.
You will quickly discover your best friend isn’t the best business partner. Even though you started the company, you might not be the right person to lead it. Entrepreneurs face complex problems. Being aware of these beforehand can help prevent the loss of friendships and the implosion of a potentially great organization.
1. Who should be on the founding team?
With long nights of work, tough deadlines and limited resources, it can be easy for founding teams to get frustrated with each other. To prevent you and your cofounder from ending up in divorce court, you need to choose wisely and early on.
There is a scientific principle called the IKEA effect, which states that the more time and effort people invest into something, the greater their attachment to it. Be clear on your company’s vision and the role that each person will play. Deciding who will be the CEO later on is a formula for disaster.
Select a business partner based on complementary skills sets, experience and work habits. Test out your relationship by tackling small projects together and working your way up.
2. When you shouldn’t be the one leading.
Foursquare founder Dennis Crowley stepped down from his role as CEO when he realized he might not be the right person to take the company where it needed to go in its next stage. Then, he shifted his focus where it would have the most value and now serves as an Executive Chairman.
We all have a leadership capacity based on our experience and training. Different stages of company growth may require different leaders and skillsets. You may be the person to go to for ideation and product design, but not the person who will take the company through funding or IPO. With the responsibility of investor capital and employees, you need to be able to let go if necessary.
3. When it’s time to pivot.
Don’t be stubborn. You may have a brilliant idea but entered the market too early. Your idea may be terrible, but you think it is going to be the next big thing. As an entrepreneur, it’s important to question if the path you’re on is the right one or if you need to pivot. The responsibility of a successful business is providing value and making money, that may mean modifying or scrapping your original product altogether.
After assembling a strong founding team, the willingness to pivot might be the largest influence on company success. This is a big struggle for several reasons.
Unfortunately, many people suffer from what is called an illusion of superiority. It causes people to overestimate their abilities and their value. One research study on drivers asked participants how well they drove. The majority of people rated themselves as above average or exceptional, despite that the rating was based on their own standards. Furthermore, they thought others would rate them as excellent, solely because it is how they saw themselves. Changing your mind or admitting when you’re wrong becomes even more difficult because of confirmation bias. Instead of accepting that there could be a better alternative, some will search for anything that agrees with their own opinion.
Being unwilling to change is fatal to startups. You have to be open and willing to pivot when the time comes. This doesn’t mean switch business models every three weeks. It means take an objective, critical view that allows you see when it’s time to change.
4. When to quit.
Entrepreneurs often fall prey to the sunk cost fallacy. When people invest so much energy into something, they start to feel like it would be a waste not to take it the rest of the way. Time is precious. Don’t waste it or your talent by captaining a sinking ship. Set a deadline -- a point in which you will judge whether a project has been successful and if it is worth pursuing. Otherwise, you’ll miss out on other opportunities to work on new and exciting projects that inspire you.
Building a company means making dozens of decisions every day. Many will be easy to decide, but there will be really hard decisions like these. The hardest ones will have the greatest effect on company success, so it is critical to be aware of them and choose wisely.