This is the third post in a series on developing a good business model for an early stage company.
2. Solid Management Team
I have heard it said that more businesses fail due to cash flow than anything else. I completely disagree. I say that more businesses fail due to management team issues than any other reason. If a company dies because of cash flow, it is usually because the wrong person was at the helm and poorly planning and/or making bad decisions – either market opportunity was not adequately addresses or expenses were not properly managed.
Likewise, unmanageable disagreements and in-fighting amongst a leadership team kill a ton of companies. Developing a solid business model MUST include an organization of the right players on the management team of the business.
Here are some points to consider when structuring a management team (list will continue in next post in series):
See also:
Entrepreneurial Law – Developing a Good Business Model – Part I
Entrepreneurial Law – Developing a Good Business Model – Part II
2. Solid Management Team
I have heard it said that more businesses fail due to cash flow than anything else. I completely disagree. I say that more businesses fail due to management team issues than any other reason. If a company dies because of cash flow, it is usually because the wrong person was at the helm and poorly planning and/or making bad decisions – either market opportunity was not adequately addresses or expenses were not properly managed.
Likewise, unmanageable disagreements and in-fighting amongst a leadership team kill a ton of companies. Developing a solid business model MUST include an organization of the right players on the management team of the business.
Here are some points to consider when structuring a management team (list will continue in next post in series):
a. Only take on partners that you NEED. In April 2007 I realized that I could not further scale my business law practice without taking on a business litigator as a partner. I actually enjoy litigation, but I could no longer balance the work load from business law, funding law and technology legal consulting matters with the schedule of a litigator (“Sorry client, I cannot get to your licensing agreemnt today because I am in depositions all day” = doesn't fly). So, I went out and found the best business litigator I knew – Michael Alerding – and we launched the first version of Alerding Castor Hewitt, LLP. Point is – I NEEDED to partner with Mike in order to further scale the business and create further profit.
b. The key leader (usually a President or CEO) must understand financial models. I cannot stress this one enough. A key leader who does not understand cash flow analysis or good financial practices will sink a company every time. If additional training is needed – great. If the leader must surround himself with others who better understand finances – great - surround the leader with these folks (but make sure the leader is willing to heed advice (a point which will be addressed in the next post).
b. The key leader (usually a President or CEO) must understand financial models. I cannot stress this one enough. A key leader who does not understand cash flow analysis or good financial practices will sink a company every time. If additional training is needed – great. If the leader must surround himself with others who better understand finances – great - surround the leader with these folks (but make sure the leader is willing to heed advice (a point which will be addressed in the next post).
See also:
Entrepreneurial Law – Developing a Good Business Model – Part I
Entrepreneurial Law – Developing a Good Business Model – Part II
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