Most company-specific challenges can be avoided with a business plan that clearly forecasts goals and defines milestones, but Hugh Shields, a principal with Shields Meneley, cautions in this episode of FoodNavigator-USA’s Investing in the Future of Food there are a few common snags that can catch executives off-guard – especially if they come from the corporate world and are new to startups.
These include failing to sufficiently focus on the balance sheet, holding on too long to employees who are out of sync with the company’s direction, becoming isolated at the top and forgetting to network.
“Everyone always feels that there’s going to be this nice, steady, upward trajectory … but we all know the reality is not that. There are going to be bumps in the road,” Shields said.
The first major one that executives from the corporate world often face when they join a startup or scaling business is managing the balance sheet, Shields said. He explained that many executives from large companies are more accustomed to tracking a profit & loss sheet without fear of running out of money because their corporation acts like a bank.
“But when you get into this world of entrepreneurship, you are very focused on your balance sheet and you better understand your balance sheet and understand where your cash is coming from, or not,” he said.
Is everyone a team player?
Another common – and early challenge – that Shields says new executives at scaling companies must tackle is evaluating whether everyone on the existing team is where they should be, and if they are not, reorganizing and potentially letting some go.
“I’ve talked to many, many successful founders over the years, and I’ve asked them if they had something to do over again, where would it be that you would have made changes. And usually its about people,” and keeping people on staff out of loyalty even if they were not the best fit, he said.
When letting someone go, Shields recommends companies do it with as much grace and dignity as possible, because he says no matter how many non-disclosure agreements are signed, if the situation is handled poorly it will reflect badly on the company and could cost it future partnerships.
Remember to network
At the same time that new executives and leaders evaluate the existing team, they should keep their eyes open for talent outside the company by continuing to aggressively network – something that Shields says many new executives let slide to the detriment of the company.
“I see some new CEOs of startups that get into the business itself to the exclusion of the external market and that is a huge mistake. You have to really push to develop you network,” so that you can “know who’s out there from a talent selection standpoint” and who could be potential vendors, Shields said.
Create a career board
In addition to networking, new executives can protect themselves from becoming isolated at the top by creating what Shields calls a “career board.”
He explains that even if a company can’t afford to create an official advisory board, yet, leaders should cultivate a group of trusted colleagues who they can bounce ideas off and turn to for advice.
Unfortunately, this is only a sampling of the challenges that new executives at startups and scaling companies can expect. But Shields reminds leaders that while the small size of startups can leave them exposed to more challenges, it also allows them to regroup and pivot quickly when necessary.