Hiring a CEO, Part 1: What to Look For

Some entrepreneurs, investors, or board members may think that it is necessary, in the earlier stages of a company, to hire a person with a "marquee resume" to handle the CEO duties for the company.

As an entrepreneur, you need to be sure that you, your investors and your board are fully informed of what to look for when hiring a CEO for a startup. Very often I have found that there is little understanding of this. This is evidenced by the fact that many times young companies are willing to make such a hiring decision based mostly, when it comes right down to it, on a resume.

It is important to realize that previous success as a member of a large organization does not indicate future success as the CEO of a startup. A startup CEO must be high-functioning in a wide variety of business disciplines, especially in implementing effective sales processes. (more on this last point later) Large organizations hire for specialized skills and tend to cultivate those skills. It is very rare to find someone from a large organization with deep experience in finance, sales, marketing, engineering, manufacturing, human resources, and especially in raising investment capital as a startup.

All of these functions are extrememly critical for a startup CEO, as is the ability to multitask, be highly observant, be able to make accurate predictions based on trends and instincts, be highly driven to success, and to be goal oriented. A startup CEO must be willing to handle intense situations and stress, take risks, work for years at reduced salary, jump on a plane across the country at a moment's notice, and spend long stretches on the road with little sleep. He or she must be a consumate networker, motivator, and "people person." On top of all of this is honesty, integrity, rational decision-making (as opposed to emotional), and lack of hubris.

When your young company interviews for a CEO, ensure that you ask the candidate what qualities are necessary for the position. If the candidate does not respond with the above, or something very similar, it is probably best to let that candidate learn on someone else's dime.

What a Difference a Day Makes

Let's face it, in the entrepreneurial experience, there are plenty of bad days to go around. In fact, sometimes it seems as if nothing can go right. Often, the discouraging things occur little by little and accumulate slowly over time, though occasionally building to a seemingly intolerable level.

This is where persistence and a positive outlook come in handy.

The good news is that things can turn around and the turnaround is often abrubt. It could be a beta trial that goes well and clears the path to commercialization, a key strategic partner that finally signs that contract, the large purchase order that comes in after months of delay, or a vendor who finally gets that nagging quality problem corrected. These positive developments are often the opening of a floodgate... a floodgate to your future.

Keep this in mind as you face discouragement. One day can make a big difference. I have seen it happen many times!

Sell, Sell, Sell

If you want to be an effective entrepreneur, you must be an effective salesperson.

Almost everything that you do will entail a sales effort: getting people to invest in your idea or company; getting a shop to produce your prototypes; recruiting employees; recruiting mentors; getting a loan; securing strategic partnerships; working out advantageous payment terms with your vendors, and obviously-- selling your product or service.

Nobody is born with sales process knowledge and the skills to apply that knowledge. The sales process is not taught in school. Knowledge of how to sell, how to recruit and manage a sales force and how to properly incent others to sell for you is usually acquired in the workplace.

The key is to understand that if you have not done it before, you don't know how to do it and must go get that knowledge. It is unwise to assume that you automatically understand this complex and important process just because you started a business. It is also unwise to assume that the ability to create a couple of initial sales means that you know how to extend this out to many prospects and to ramp it up "big time."

You must also have or assume an outgoing personality to be an effective salesperson.

Fortunately, you can gain a lot of knowledge by reading books on the subject, attending sales training seminars, working with mentors, etc. Please, please take the time out of your busy schedule to learn about sales if you have not previously been a salesperson and sales manager in a capacity similar to what you are attempting to do and build to.

Simplify and Save

I often get clients who have attempted to write a business plan using one of the several business-plan-writing software programs that are available, some of them costing upwards of $400.

However, I have not once had a client that was able to write a comprehensible business plan using such programs. In fact, the reason I am writing this post is because I have had two clients in this situation within the past couple of weeks.

My advice is to save your money and not purchase one of these programs.

In general, the problem seems to be that the software is overly complex and tries to make you "slice and dice" your plans too many different ways. You end up repeating yourself unnecessarily, causing confusion for the reader and frustration for yourself as the writer.

I suspect that the publishers of these programs make them long and complex in order to make the purchaser feel like he got something for his money. Many entrepreneurs write business plans in order to solicit money from investors, or in order to get a bank loan. However, potential investors and lenders want a clear, concise business plan.

I have developed a business plan template and instructions that will guide you to solidify your plans and put them down on paper. If you are interested in receiving it, simply post a comment with your request.

Remember the K.I.S.S. principle!

Tweak It!

If you are not getting the response that you want from your advertising, tweak it!

Many entrepreneurs readily accept that they must continually improve their product or service, but I have found that few of them understand that the same is true of their marketing message.

The easy ability to revise marketing materials is the most powerful aspect of electronic marketing. This power allows you to continually improve the response rates from your electronic advertising. This includes faxes, e-newsletters, Websites, email advertising, Google AdWords, AdSense, and more. It even includes printed matter that you develop yourself and print on your own printer.

The chances that you hit upon the most effective message the first time you try are just about nil. Therefore, you must segment your list and run A/B test ads with two different headers, messages, designs, or combinations of these. You will typically find that you get a better response from one than the other. Then you take that concept and further develop it by doing another A/B split to test variations on that theme. As you continue to do this over the period of months and even years, you will usually see a dramatic improvement in response rate vs. the original piece.

The best part of all is that this process is FUN!! Most entrepreneur/inventors are both creative and analytical. This will tickle both of those sides of your brain!

Do you have a good story about how you revised your advertising message and saw an improvement (or even a drop-off) in response? If so, please share it with other readers via a comment.

Angel Capital Association Conference

I just returned from the very informative and well-run Angel Capital Association Summit in Atlanta last week. While there is still quite a bit of investing activity, the "take-away" message that I got was this: The reduction in M & A activity and the near-halt (until last week, that is) in IPO activity has put quite a damper on investment activity. In particular, valuations have been cut substantially.

Interestingly, one speaker, Basil Peters, presented evidence showing that all parties involved make more money upon exit when either angels or VCs are involved as investors, but not both. In other words, the involvment of angels lowers returns for VCs and the involvment of VCs lowers returns for angels. The same reductions follow through to the entrepreneur.

Three Heads Are Better Than Two

Hey, you know the old saying about the relative merits of two heads as compared to a single such appendage. Well, that concept of course does not stop at two. With that in mind, I would like to add a third head to your arsenal (yours, mine, and this other guy that I am about to tell you about). I know, I know... you already have more than just my head as a reference, but please humor me for a moment.

I would like to introduce you to an interesting blog for entrepreneurs that I recently discovered. The writer is knowledgeable, which is great; has a direct style of writing, which is better, and adds humor and wit to his posts, which is best. Please check it out: http://blog.therisetothetop.com/category/build-your-business/ Simply click on the title of this post on my blog to go to the other blog. Let me know what you think. I feel that the best material on the blog starts at March 16, 2009 and prior.

Subscribe Via Email

As promised, I have added a new feature to this blog. You may now sign up to receive my new postings (and rantings) via email. To do so, follow these steps: Enter your email address in the form in the panel at the right; click Subscribe; complete the CAPTCHA form that appears; then verify your choice by clicking the link in the verification email that will be sent to you. Then presto! You will automatically receive my new postings (and rantings) in your email. I hope that you find this to be convenient way to stay in touch.

Where Was I?

A reader posed a question on my Q & A form inquiring where I was during the CIC meeting on the morning of Feb. 25. Well... working like a dog, actually. Preparing to go out of town for three days. I will get back to posting to my blog next week and expect to add a new feature or two then as well.

Business Plan Basics

I have had a number of inquiries about overall strategies in writing a business plan. Below is a concise, high-level view of how to go about it.

A business plan must be constructed as an action plan. It must not be a general discussion of your business, your products, or various potential marketing efforts. It also must not contain dismissive comments regarding the competition.

A business plan must be based on detailed research, especially research gathered by talking to numerous people in the industry. Research via Internet or government statistics is insufficient. Market potential must be clearly documented. Refrain from vague language such as “work with,” “align with,” etc.

The most important concepts regarding a business plan are: “How?” and How much?” How will you accomplish your goals; how much will that cost; how much profit will that provide?

Throughout the business plan you must define achievable goals, lay out sound strategies based on a real working knowledge of the business and market, and then show the path to success via conduct of fine-tuned, well-orchestrated operational and marketing campaigns.

OODA Loop

A recent commenter on my blog asked me if I subscribed to Colonel Boyd's OODA Loop Theory. I must admit that I had to look up that term to see if I subscribed to it or not, but what I found was that there is a name for how I view the world around me: OODA Loop!

For an interesting read, see the article at Wikipedia