6 Ways to Kill Your Startup

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Sometimes the best way to learn to do something is to understand how NOT to do something – to think things upside down. Ben Stein (of Ferris Bueller fame) did it with great effect with his book, How to ruin your life. Buried in the ironic humor of the book and masked by its sardonic tone, there were a few life lessons that I found very useful.

In tribute to Ben, I hope to take a similar approach in my advice to entrepreneurs at the start of their business. Below is a list of seven ways to ruin your startup. I hope that by doing the exact opposite of the points below, you will find valuable lessons on managing and starting a business effectively.

1. Borrow money early.

As an entrepreneur, one thing that you really want to have is structured payments that are due regularly stacked against cash flows that are unpredictable and unreliable. By the way, be sure to borrow money when a bank lends it to you. If a banker is willing to make a loan, you should assume that, by default, you have the option to repay it. Borrow as much as you can and make sure you do it early in the life of the business.

Related: 6 attributes of great entrepreneurs

2. Hire as many people as you can.

The key here is to have a very high overhead rate so that you have to keep making more and more sales. You also want to hire people when your business model is not really proven, so you have fixed salaries to pay with uneven sales.

3. Focus on developing a business plan.

Now, what you really want to do in the first few years of business is think globally. Focus your energy on creating a dynamic MBA-style business plan; revenues and customers can wait. What you need is a fully developed plan of attack that would fit very well in a competition organized by Wharton. The most important thing you can do in a startup is to plan heavily. Business is about planning, not execution. Work on the assumption that a good plan will automatically lead to sales. On that note, make sure you have a nice website and nice office space from day one.

4. Put in place a management team.

Make sure you have a CFO, COO, CTO, CIO and CMO when you start your business. It is important to have a full management team when you start and build a business. A complete management team provides structure in the business and, most importantly, an impressive “Executives” page on your website. The added benefit of having level C executives in a startup is that they are very expensive, so you will ensure that your overhead costs are very high.

Related: A Bad Apple Can Ruin A Barrel

5. Focus on perception.

Spend a lot of resources on an accounting system, HR technology, office furniture, tables and insurance and ping pong games. What you want are the outward signs of success, not tangible things like customers, revenues and profits. The image is important. Look at other companies like Apple and Google and compare yourself to those companies. Use them as references. You have to spend money to make money, so spend as much as you can. Customers and revenue can wait, but you only have one chance to make a first impression.

6. Spend a lot of time looking for venture capital and private equity money.

Venture capitalists fund about one percent of the transactions they review, which is good risk / reward for you. Do not worry about the quality of the product / service you offer. Suppose it will take care of itself. Because the market is efficient and customers tend to make smart choices, you don’t have to worry about the quality of your product or service when you develop your business. Customers should be honored that you want to provide them with your product or service. It is best to devote your time to planning and reflection and to many meetings with your employees. Preferably associate venture capital money with poor product and service, and assume that a lot of capital and a bad product will really boost your bottom line.

This is (hopefully) the worst advice you will ever receive to start and run a business. For tips that you should actually follow, check out The 5 Best Tips I’ve Ever Received.

Related: work-life balance is a myth

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