Lesson #196: The CEO’s Role Must Evolve Between Early Stage and Growth Stage Companies

I have previously written about The Role of a Startup CEO. This article is going to detail how that role changes over time, between a company’s early days and when it starts to scale. For simplicity sake,  I am going to compare the role of a CEO in businesses between zero to $10MM in revenues (early stage), versus CEOs in businesses between $10MM to $50MM in revenues (growth stage).

EARLY STAGE CEOs

For early stage startups to be successful, it really needs a hand-on leader that is involved in the details.  That person is making sure all team members are clearly aligned with the vision. They are in the weeds of launching the products, to get it just right. They are helping to craft the early marketing messaging to properly tell the story. They are assisting their sales team in helping close initial clients.  They are designing operational processes from scratch. And, so on. This inward facing, hands-on role is what is required to successfully get a business off the ground in the early stage.

GROWTH STAGE CEOs

In comparison, for growth stage companies to be successful, the focus needs to move from inside the company to outside the company. This includes things like hiring the best talent, building a strong outside board of directors, romancing investors, working the speaker circuit and looking for interesting M&A opportunities, to name a few examples. Therefore, the CEO’s role is to hire the best senior management team possible, and let them run the day-to-day of the business. So, this is much less of a hands-on role bogged down in the minutia of the business.

THE CHALLENGE

The problem here is very few entrepreneurs of early stage businesses, can successfully make the pivot into a growth stage CEO. Either because they are not aware their role needs to materially change in order to effectively manage the next phase of their growth.  Or, because they simply cannot change their behavior (as most people cannot)—they simply love working in the details, having to be involved in every decision. 

And, that simply is not a scalable solution. You can’t have a CEO of a growth stage business acting as a bottleneck on all major decisions. And, you certainly cannot attract and retain the right senior level management team that is required to scale a growth stage business, if the CEO is constantly micro-managing them on every business decision. Growth stage companies need to be built on the shoulders of a strong team empowered to make their own decisions, as it relates to the day-to-day operations.

CONCLUSION

So, what does this all mean? Either the founding CEO needs to embrace the above shift in their role over time, and successfully execute upon such. Or, they need to acknowledge they are the wrong person to lead the next phase of the company’s growth, and they should hand off the reins to a more qualified growth stage CEO. This is not about “pride of authorship” and keeping your job. This is about maximizing the value of your equity, to give your business the highest odds of success at maximizing its valuation over time. So, take a candid look at yourself in the mirror, and make sure you are the right person for the job, in relation to the revenue stage of your business.

For future posts, please follow me on Twitter at: @georgedeeb.

The Importance of Mentors & Where to Find Them

Mentors or business coaches are one of the most valuable resources an entrepreneur should tap into. The idea of launching a business should no longer be a scary or daunting experience, riddled with unknowns. It should be a collaborative experience accumulating the learnings of the hundreds of local entrepreneurs who have already built successful businesses, and can help you move faster and avoid known pitfalls based on their years of experience, as entrepreneurs themselves.

Read the rest of this post, which I guest authored in Forbes this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #195: Entrepreneurs Speak Out on What They Would Have Done Differently

Back in Lesson #120, I wrote about the importance of planning ahead for proof-of-concept marketing based on my first-hand experience seeing the same consistent mistakes being made by the hundreds of startups calling Red Rocket for help:  too much focus on product, and not enough focus on planning for a proof-of-concept around that product (which is what most venture capital firms are looking for before they make an investment in a company).  And, to achieve such proof-of-concept, it requires inexperienced entrepreneurs to seek out experienced coaches or mentors to help create smart customer acquisition strategies and to budget for them accordingly.

Now, there is a 2015 survey conducted by The Alternative Board (TAB) which backs up that claim with hard data. They polled over 500 entrepreneurs about what they would do differently, if they had the chance to start all over again. Over 86% of the entrepreneurs responded that they would invest their time and money differently, with more focus on sales, strategic planning and marketing. Which is exactly what I would have guessed: 80% of respondents concluded customer development strategies were more important to success than product development strategies for long term success.  And, 54% would have created a better plan to increase leads out of the gate.

Other predictable datapoints from the survey:

• 60% would have raised more money:  72% for sales/marketing, 35% for hiring.
• 40% would have invested more time:  78% into sales/marketing, 47% into planning.
• And they could have used a lot more help:  42% around finding better mentors or coaches, 33% around business modeling and 32% around finding and delegating to better employees.

So, lots of juicy tidbits in this survey that I thought were worth sharing with you.  Make sure you digest what this data actually means for your business, and make the appropriate changes.  We are happy to help you think through all your options here, so don't hesitate to reach out to us.

If interested in reading the full results of the survey, along with a detailed analysis and infographic, it can be found on the TAB website.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] George Deeb of @RedRocketVC Teaches "Branding & Marketing for Startups"

I recently had the pleasure of mentoring the 2014 class of entrepreneurs at Founder Institute Chicago. Here is the presentation I delivered on "Branding & Marketing for Startups". The lesson provides high level guidance on: (i) the key problems startups face; (ii) considerations for naming and trademarking your business; (iii) the differences between B2C and B2B tactics; (iv) the key metrics to track (e.g., COA, LTV); and (v) how to become a thought leader in your space (with a case study on the Red Rocket Blog).  This is a must watch for any entrepreneur, to learn how best to drive customers to your business, in a way that will most attract new investors.


George Deeb Teaches "Branding & Marketing for Startups" to Founder Institute Chicago from Red Rocket Ventures on Vimeo.


The matching slide show on SlideShare can be found here:



I apologize for the low lighting of the video, but the substance of the speech is what I wanted you to focus on.  I hope you pick up some good learnings here, to help your business.


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The Top 20 Digital Trends of 2015

As a Partner at Red Rocket, I am exposed to hundreds of startup ideas each year.  Below is sampling of the key digital trends that are getting the most investor attention in 2015 (in no particular order):

1. Big Data Now Big Insights–Predictive & Prescriptive Analytics
2. Cloud-Based Everything–SaaS, PaaS, IaaS, etc.
3. CMO’s Evolving Into CTO’s–Data-Driven Decision Making

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

The Right CEO When You Launch, Might Be the Wrong CEO When the Company is Growing

Not all startup CEOs are created equal. And, the skill sets a startup needs during its formative days are very different than the skill sets needed when the company starts to scale. Let's compare the role of a CEO in businesses between zero to $10MM in revenues (early stage), versus the role of CEOs in businesses between $10MM to $50MM in revenues (growth stage) to make sure you are hiring the right one for your business.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #194: Operations & Sales Must Be Tied at the Hip (Break Down Silos Part 1)

A common mistake I see with clients is with their organizational structure, often running their businesses with separated departmental silos.  As an example, which I will focus on this post, they think it is the sales department's job to sell accounts, and the operations department's job to service accounts, with a clear hand-off once the sale is closed, and very little collaboration between the two.  That is a big mistake which I will address below.

HOW SALES FEEDS OPERATIONS

A.  Obviously, without sales, there are no operations!

B.  What is less obvious is sales can actually help operations resolve issues.  Your salesperson typically has a very tight relationship with the client, and can help operations in delivering bad news or guiding a client in operations' desired direction.

C.  Sales typically has their finger on the pulse on what is going right, and more importantly, what is going wrong with a client execution, from the client's perspective.  Operations needs to leverage those learnings to nip potential issues in the bud.

HOW OPERATIONS FEEDS SALES

A.  The operating team typically has a "closer ear to the ground", at what is going on internally at a company.  They pick up on interesting client learnings, that can lead into new "land and expand" opportunities for the sales team.  Things like learning about new budgets, new related projects, new needs of clients, etc.  That information needs to be shared with the sales team.

B.  Operations' expertise often helps the sales team to close sales.  So, bringing those real life past-client learnings and experiences of the operations team, into a sales call with clients, is often just the thing a prospective client is looking for, to prove your company has the credible team and experience for what they need.

WHAT NOT TO DO

A.  Operations should never try to make financial decisions or implement renewals, change orders or upsells in a vacuum.  Make sure the sales team is always kept abreast of the client needs, so they can help you best price it and get the most of the opportunity.  From this perspective, salespeople are trained to sell, and operating people are trained to fulfill, so don't step on each other's toes.

B.  Operations should never give valuable services away for free.  Clients are notorious for trying to ask for "more and more" out of a current agreed upon contract, so they don't have to pay for more.  But, your sales team should be the "gatekeeper" to make sure any services that are being asked for by the client, beyond the original contract, is being properly paid for.

C.  Departments should never point fingers at each other, when things go wrong.  Whether a sales person screws up adding the right details in a contract, or the operations teams screws up a deliverable, always remember:  you are both on the same team, trying to resolve the situation together.

DOUBLE ACCOUNT COVERAGE

So, given all of the above, it is hopefully clear you need double account coverage on all clients, one person from sales and one person from operations, that are tied to the hip, and in constant discussions with each other, sharing learnings both ways.  The additional benefit of this structure is the company is protected with at least one client relationship manager in place, in the event either of the client team members leaves the employment of the company.

So, take out a sledgehammer, break down internal walls, and make sure your departments are collaborating with each other for optimal success.

Be sure to read the companion piece Lesson #197: R&D and Sales Must Be Tied at the Hip (Break Down Silos Part 2).

For future posts, please follow me on Twitter at: @georgedeeb.