Some practical tips for the startup CEO

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I’m by no means an expert, but there are a bunch of practical tips I’ve learned about being the CEO of a startup from both being one and advising them. Since I don’t see them being posted to the wider internets I thought I’d share the first few that come most readily to my mind.

These aren’t head in the cloud tips (iterate and iterate, pivot & iterate, send out 50 emails per day, eat lunch with your team, etc.). I’m talking about the actual day to day things that you should do or not do. Learned from painful (or painful for others) experience.

1 – Don’t use direct deposit to pay your staff.

This has come up to many times now, so I decided to put it first. Direct deposit is great for everyone but the founder/CEO of a startup.

Why? In order to make a direct deposit system work you need to give them one to two weeks’ notice of who is going to get paid, changes from each pay period also cost money.

 Every startup will have a cash flow hiccup, its guaranteed. The CEO and founders will man up and skip a paycheck and let their staff be none the wiser on the cash flow issues. Unfortunately its harder to do that if you use direct deposit. The money needs to be there Monday night, Tuesday at the latest to make payroll for Thursday (Friday at midnight). Taking the founders off the payroll can sometimes take a couple of weeks (sometimes less). But if you can’t get all the cash into the account for the payroll – you’ll end up cutting checks come Friday. Your staff will know something’s up. And you’ll have to admit something is.

Direct deposit sucks for startups. Cut checks and pay monthly. 

2 – Sublease space or ‘rent a cube’ and never commit to more than 1 year on realestate.

Matt’s Rule of thumb – how old is your startup? Divide by two, that’s the maximum you should commit to anything like real-estate. This lesson is borne out by numerous examples I’ve been involved in. I’m not saying you won’t stay in a space longer then that number – but you’ll find that you shouldn’t commit to a longer one.

A great example is a fast growing startup here in Ottawa: 6 years old. At 3 years they moved out of their ‘founding space’ and moved into a great loft space with a 4 Year lease. They stayed there 1.5 years before moving into their ‘current’ larger space, it came with a 5 year lease (plus costs of upgrades). They’ve been in that space for 1.5 years and are moving into yet another larger space this fall. The fallout? The COO has become a local landlord and real estate tycoon (I exaggerate – sorta) as he tries to sublease all this space he now has.

People will say that’s an example of poor planning. I call it an example of conservative headcount and growth planning. Even if they had forecasted expected growth to be 30% higher than it ended up being, their real estate conundrum would have pushed it out another quarter or so… in other words try not to commit to anything for too long. Real-estate is the most expensive example.

 3 – Never talk about your ‘real’ job

I hate entrepreneurs who do this. They talk about the company they’re starting or running… then talk about what they ‘actually do.’ Don’t. If you’re not all in on what you actually are doing. No one else is going to be. I’ve written about this before.

Don’t tell people how you pay your bills today. Unless its your startup.

4 – treat potential hires like consultants.

People say not to do this. I’ve had people do this to me and I hate them for it. The world is against people doing this.

But there will come a time when you need to do this. Don’t feel bad, you’re just one of the many people who have done this. 

And its cheaper then actually hiring a consultant who you can’t afford.

5- Never pay your bills on time.

When I see companies paying their bills on time I ask if they’d like a free 3 month loan. They inevitably all say yes. “That’d be a huge help on cash flow”.

You can pay almost 75% of your bills late and get away with no late charges. Get used to that idea, it’ll save you  when you need cash. Pay as much late as possible. 

6 – never list a paid consultant listed as an employee.

Just don’t. Its silly looking. And investors will sincerely think you’re an idiot.

Consultants aren’t employess – if they were they wouldn’t be consultants. 

 

The Author

Hi. My name is Matt Roberts, you can find me at www.mattroberts.com.

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