Rules for Entrepreneurs: 5 Ways to Avoid Founderitis

What is Founderitis? It is been called “Founders Syndrome” and it is not some type of medical disease but rather a disease that can infect your business if you are not careful.

The Wikipedia definition of “Founderitis” is stated as follows:

The term “founderitis” or “founder’s syndrome” refers to the unhealthy condition that afflicts many companies whose founders maintain a stranglehold on organizational leadership. While many companies owe their success “” and in fact their very existence “” to their founders, those same individuals can create chaos that ultimately leads to the organization’s collapse. The challenge to founding CEOs and boards of directors is to take steps to change conflict and chaos into opportunities for growth.

Diagnosing Founderitis

I came across this funny diagnosis from Infoshackle.com and it comes complete with a 12 step program.

“When Founderitis strikes, the Founder’s drive, energy and vision, characteristics crucial to the startup’s initial success, become a hindrance to the company’s maturation into a self-sustaining entity. To assess yourself or a loved one for Founderitis, determine if any of the following symptoms are present:

  • Inability to delegate
  • Anger when not included in every decision
  • Paranoia derived from a sense that the venture is “œslipping out of their control”
  • Ignoring input from subject-matter experts
  • Expressing prescient knowledge, even when lacking subject-matter expertise
  • Lack of respect for formalized planning
  • Subterfuge of efforts to institute procedures, processes and controls

Founderitis is akin to an active, engaged parent who is a wonderful caregiver until the child reaches adolescence. As the child enters its teens and requires an increasing level of independence to properly mature and prosper, the Founderitis parent futilely attempts to restrict the influence of outside factors and limit the child’s ability to act autonomously. The result is usually a fractured parent / child relationship or an “adult child” that never develops the life-skills necessary to succeed on their own.

One of the most insidious aspects of Founderitis is that the more profound the case, the deeper the denial on the part of the carrier. The afflicted Founder will honestly believe that all of his actions are in the company’s best interest, though their definition of “best interest” is actually whatever is in their own “self-interest”.

Like any startup executive, the Founder must honestly separate his self-interest from the company’s interest. For instance, it might be in his self-interest to lead the sales efforts, as well as a great learning experience and a heck of a lot of fun. However, it may not be in the company’s best interest to lose precious time to market while an inexperienced sales novice attempts to learn on the job.”

5 Ways to Avoid Founderitis

I have personally experience this running my own business. I have found some ways to avoid it:

  1. Respect the need for planning activities, staff meetings, and administrative policies;
  2. Realize that as the company grows circumstances may dictate new approaches;
  3. Institute new systems with approval of your board;
  4. Seek and accept input from others in making decisions;
  5. Delegate, Delegate, Delegate

Don’t worry if you can’t over come this there is a simple solution. The route many take is to get your board to hire a professional CEO and take a long vacation.

So how many of you have had problems with founderitis? What is your story? Have a great example to share? Let the comments be the conversation.

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Rules for Entrepreneurs: Pay yourself first

Over the last 9 years and two startups I have learned many things and screwed up royally in some cases. This ongoing series is about providing you best practices of lessons learned and avoiding the mistakes I have already made.

In the past, I have had good years and bad years. When you have employees, they expect to be paid and when you mess with payroll (and payroll taxes, but that is a post for another time) you create such a negative culture that nothing will get done.

With that said, when you are starting your business regardless if it is a service or product company, you will have startup costs and probably forgo paying yourself for 6-12 months to keep growing the business. That is fine and to be expected. What you should not do (and what I did) is keep adding staff and sacrifice your own salary in the name of growth. If you keep going like that and have a bad quarter you will have nothing saved for a rainy day and if the business fails you will probably be in immense debt and got nothing out of the business.

Granted, the balance between growth and cash flow is a tenuous one but it is one thing you should never defer to someone else in beginning. Plus, there is a difference between creating a lifestyle business and an enterprise. A lifestyle business is really making enough money for yourself and having some contractors or 1-2 people that gives you a good salary but is more about freedom. An enterprise is a business that scales and gets big over time but you will be working intense amounts in the beginning but will need to hire those smarter than you with the intention that you are looking for an exit and will have time for freedom when you cash out.

So when you are growing the business you should work the first 6-12 months paying off the initial capital expenses and getting about 6 months of cashflow for yourself before you hire anyone else. Once you have that done, start paying yourself something, even if it is small and will ramp up over six months, pay yourself first. This will get you in the habit of being committed to making the business pay for itself and you so you are not worrying about living month to month and let you find some resources to help you deliver while you continue to sell and grow the business.

Once you are looking at hiring someone use these two rules as a starting basis:

- Have six months of payroll for that person in the bank on top of your salary

- Have 90 days of projects or sales committed for that person to deliver so they not only have something to do but are earning their keep.

So I hope I got my point across on this one. You might have to be conservative at first in your growth but in the end you will scale better and create a business that is focused on delivery and customer service without putting you and your employees on a cash flow roller coaster.

What have been your experiences in starting up? When did you start paying yourself? Do you agree with my conservative approach? Did you do something different?

I look forward to hearing from you.

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