While the functions in the “back office” of an organization are core to its success, these crucial activities are often given a back seat. In the early stampede to get a company up and running, with attention on getting products or services out to customers, back office functions such as finance, accounting, human resources and IT frequently do not get the necessary focus. In my experience, company founders make several common mistakes.
Mistake #1: Trying to do it all
Entrepreneurs are a special breed; not just anyone can start a company. Founders, especially in the technology industry, tend to be brilliant, creative and very hard working. As a result, they also tend to think they can do it all, and what’s more, they think they should do it all. If success is their goal, nothing could be farther from the truth.
Common refrains I’ve heard from my clients include: “I’ve worked in finance before” and “I had an accounting course in college” and even “I don’t need sleep.” They figure they have the knowledge—and if not, they can figure it out. And they figure they have the bandwidth—even if it means sleeping under their desk at night. However, smart founders know that early on they have to give up doing it all in order to run the company. If they are mired in the details of bookkeeping, IT and the hiring of employees, they will lose sight of the business goals, customer needs and product development. By trying to do it all, company founders limit the speed at which the company can grow.
Mistake #2: Hire weak, cheap and/or late
To their credit, entrepreneurs are typically very frugal, often even after they have secured funding. But the old saying is true here: you have to spend money to make money. More specifically, company founders need to understand that they must hit key milestones to secure funding, or to secure follow-on funding. Critical to achieving key milestones is hiring a good team.
What I commonly see is early-stage CEOs who try to save money by hiring people without the right experience, or delay hiring even when a role needs to be filled. I have seen my clients:
– Hire someone with little or no experience
– Hire a relative or a friend
– Rely only on Facebook friends to find staff
– Hire all by themselves with no technical review
– Hire only when current staff threaten to quit
Here is my advice to those entrepreneurs: if you don’t run fast and hard–and even run scared–you’ll never make it. You have to make expenditures in the areas that matter most toward company growth, and that’s people.
Mistake #3: Defer maintenance of the financials and IT systems
Sadly, this is one of the most common mistakes I see company founders make. In the crush of getting a business up and running, it’s easy to ignore the back office, but extremely dangerous to the health of the business. I’ve seen a profitable company be denied a bank loan because its tax returns were wrong. Even worse, I watched a company with a successful product be driven out of business because it lacked the back office systems to manage its inventory and distribution. In both cases the CEOs ignored advice from GCG to get their back offices in order.
Like it or not, the back office is mission critical to the well being of the company. Too often company founders only address it once they are forced to, which can be too late. It seems inconsequential until a crisis occurs. The greater the number of employees, customers and revenue, the more critical it becomes.
It’s not just prudent, it’s essential to get the back office in order—from the start, not under pressure when the costs as well as the risks can be three to five times higher. Get started early, hire smart, and consider bringing in outside expertise and a flexible staff to help. It just might make all the difference in the front office.