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Start-ups

© Herb Wexler

The United States is founded on the rule of law. England at the time was governed by the rule of kings. The difference is the king makes the final decision in important matters. The Rule of Law protected citizens from a monarch's individual passion and self-dealing. Under the rule of law, everybody plays by the same rules. The rule of law allows the citizens to know the consequences of their actions. This takes some of the risk out of decision-making.

Plato was convinced that the best form of government is rule by a benevolent dictator but he acknowledged that persons with the necessary leadership qualities are rare. Some companies can prosper with a dynamic CEO who is involved in every aspect of the company and can approve or reject all important decisions. Organizations can be efficient and effective if the leader has all the necessary information and if he is fair in his decisions. But in a complex business or society this will not work. At best decisions will not be made, at worst wrong judgments will harm the company or society.

In most businesses, there are checks and balances. No one individual has complete control. The staff are responsible to the managers, the managers to the CEO, the CEO to the Board of Directors, the Board of Directors to the stockholders. This structure helps the company stay focused on its core business.

A startup company needs a structure. Startups tend to ignore the structure and back office procedures. It is much more exciting to work on product development and marketing plans, but you won't be in business long if you can't send bills to your clients. Without a structure in place, you will be reacting to situations as they arise instead of controlling your company.

The worst thing that can happen to a company, young or old, is to lose its focus. Anticipate products your customers may need but you don't want to supply - have sources you can direct these customers to. Look for complex sections of your business that are common to many businesses, such as payroll. These functions should be outsourced so that you can concentrate your resources on your core business. It is impossible to be excellent at everything. Let somebody else be excellent at the things that are not central to your business goals.

Each major product you sell should generate the income needed to supply that product. You may sell a product at a loss in order to sell an additional product at a profit. Be very careful! In order to pull this off you need exceptionally detailed accounting. You can't guess.

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