Running a real, in-motion startup is not easy. Unlike being an employee, there is no 'normal day' filled with the same predictable tasks and schedules. Rather, each day tends to be dominated by the biggest issue currently going on. Whether it's absorbing new customers, getting a product developed or appeasing investors, there are always plenty of roles to play and fires to put out. With so much going on, it's no surprise that so many founders lose control - whether literally (as in getting replaced by a VC) or more gradually, by simply failing in the marketplace.
Here are the most common culprits for founders losing control:
Poor Leadership
Perhaps the biggest reason founders lose control of their companies (by getting kicked out or steering it into the ground) is poor leadership. In any organization - whether it's a startup or a sports team - there needs to be a person to whom everyone else is accountable. It doesn't mean that you need a formal title. Announcing to your partners that you are their 'leader' may even be overkill.
What it does mean is that everyone knows the buck stops with you. When the company starts losing focus or failing to perform its key tasks, there is someone to call everyone out on it and get the ship headed where it needs to go. Startups are simply too chaotic not to have someone enforcing standards and monitoring performance. It's not an easy job, but as they say, 'somebody's gotta do it.'
Inadequate Systems
Other top business minds, however, put less importance on leadership and more on the strength of your systems. Marketing legend Dan Kennedy, in his book No B.S. Ruthless Management of People & Profits, says he bets on companies with great systems over great leaders any day of the week. That's because while leadership can fail and falter (as can all human tasks), a system - properly designed and maintained - functions all by itself. As surely as the sun rises in the morning and falls at night, your systems for payroll, sales follow-up or anything else just keep on humming.
Without these systems, even the most brilliant and focused leader is powerless to keep the company on track for more than a few days. Many a company has fallen into a downward spiral because its systems weren't enforced, became obsolete or were never built in the first place.
No Organizational Philosophy
Still other founders lose control of their startups because there was never a clear, company-wide agreement on a certain direction or way of operating. This goes beyond leadership. In addition to having a person who enforces day-to-day priorities within the company, everyone needs to be on the same page regarding what the company is 'about' and where it's going. In other words, there should be a universally understood 'way we do things here' regarding things like:
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The company's USP
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Time management
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How customers are spoken to and dealt with
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How the company is described to outsiders
The alternative is for each partner to have a somewhat different vision for the company's future, such that everyone is pulling it in their own direction. When huge oversights or mistakes get made, you can bet this has a lot to do with it.
Ineffective Risk Management
An astonishing amount of keeping control of a company is how effectively you deal with risks. A new startup faces risks from all sides: risk that the servers could crash, risk that your biggest customers could bail out, risk that a bigger competitor clones your service, on and on. In order to even stay alive (nevermind thrive) your company needs to anticipate things like this and develop planned responses to them in advance. For example: in his essay The Hardest Lessons For Startups To Learn, venture capitalist Paul Graham recommends never getting your hopes up about possible deals, because:
'It's for a more practical reason: to prevent them from leaning their company against something that's going to fall over, taking them with it. For example, if someone says they want to invest in you, there's a natural tendency to stop looking for other investors. That's why people proposing deals seem so positive: they want you to stop looking. And you want to stop too, because doing deals is a pain. Raising money, in particular, is a huge time sink. So you have to consciously force yourself to keep looking.'
By always operating with risk in mind, it's much harder to lose control of your company - directly, by getting voted out, or gradually, by failing in the marketplace.
Clinging To An Unrealistic Idea
Determination is certainly important in running a startup. But in a separate essay, Graham explains exactly what kind of determination you should have. Instead of being like an Olympic athlete is (that is, resolving no matter what to stick to a fixed plan), you need to be like an NFL running back, who isĀ 'determined to get downfield, but at any given moment he may need to go sideways or even backwards to get there.'
Sadly, many founders stubbornly resist any and all changes to their original idea or business model - even when it's clear their original plan wont work. Don't do that. Consumer demand is a higher priority than any 'idea', no matter how great it sounds in your head.