Nuts and Bolts of Company Formation

Be frugal
One of the hardest-hitting errors of startups is that when people get overconfident, they spend their capital on luxuries that they could have done without. When your company is young and there is no revenue coming in, the burn rate of your capital can break you. Even seemingly essential expenses like office space and advertising can suck your funds into a black hole. After working hard to raise your capital, don’t blow it on unnecessary stuff.

Keeping your company lean is one of the hardest, but wisest, things you can do. Plan for long-term success. Stay focused on your initial product or service. Almost anyone who has made the mistake of growing a company too fast will tell you that it can be an expensive lesson to learn.

Hire wisely
Running your business frugally also means hiring just the right number (and just the right kind) of people to do the work at hand. Analyze your product or service and where it’s going, and decide who the key people are. You may need engineers, you may need customer service reps, or you may need finance managers.

When hiring anyone who will hold a position of leadership in your company, analyze how well they know the culture of your business, their connections to funding, and whether they have the personal chemistry to attract other employees to work with them. It’s also important to find someone with the entrepreneurial passion that will keep them loyal from a bare-bones startup to a successful company.

Another thing to realize is that, as an entrepreneur, you are essentially a jack of all trades: you take part in every aspect of the business, but are the master of no single aspect of the business. As your company grows, you want to professionalize and enhance company expertise by finding people who are better at certain tasks than you are: a marketing expert, perhaps, or a financial manager, office manager, etc.

Hire higher
Many times, entrepreneurs who bring an idea to life stay on as the company’s president or CEO, and hire to fill in other roles. But there are occasions when the entrepreneur either doesn’t want to or admittedly can’t handle the responsibilities of being an officer. It’s good to know your limits.

Hiring your boss can be a great experience. How often do you get to be responsible for hand-selecting who you’re going to work for? You get to decide what qualities make a great officer, and better yet, who has those qualities. Consider a person’s attitude, their experience in a related field or market, what kind of business philosophy they have, and any other special skills or qualities they can bring to the table.

Frank Hertz, VP of Operations at Massachusetts-based Newmediary, Inc., talks about hiring your own boss:

“First things first, you have to recognize that you do indeed need a boss. Many entrepreneurs think they can be a CEO right away, and, while some can, others need to realize the combination of honed and practiced skill and years of experience in a CEO goes a long way. Whether it’s raising funding, making tough staffing and strategic decisions, or dealing with a Board of Directors, an experienced CEO is an extraordinarily huge factor in a successful business venture. Your product could be best-of-breed, but if you don’t have someone who knows how to grow and run a business, you could fail, and fail quickly.”


“We’re huge believers in $38 folding tables from Wal-Mart. If you’re working on a $38 table, that frugality tends to pervade every decision you make. That’s a lot different from some of the flashier dotcoms that bought billboards on buses. We’re focused on making every dollar count…"

One positive we’ve learned from the dotcom era is the importance of partnerships—and of choosing your partners well. In a small business, the most important decisions you make are the things you decide not to do. So find what you’re good at, and recognize where your weaknesses are. Then bring on an appropriate partner who can fill in the gap.”

Laura Rippy, CEO, Handango. From “Dots Dashed: Unit of One,” by Lucy McCauley and Christine Canabou. Fast Company, February, 2001.


Hiring your boss
Like most entrepreneurs, Bobby John and Aziz Hurzook wore many hats when they launched their venture, Caught in the Web, Inc. John was president, VP of technology and VP of sales at the Toronto-based web design firm, while Hurzook was CEO, CFO and creative director. Although they had grown the firm to seventy employees and sold their services to a who’s who of corporate Canada, they wanted their company to reach the next level—and figured they weren’t the right people to take it there. Solution: they replaced themselves, stepping into smaller roles and hiring their own boss.

Enter Pete Jones, then forty-seven, and who had just spent seven years as president of Apple Canada. A member of Caught’s advisory board knew Jones and suggested him for the job. So began the key step in hiring your boss: ensuring the candidate is right for your company—and for you.

Despite Jones’ track record, the founders had many concerns. “I was very apprehensive,” says John. “I was going to give up my baby to him.” Caught in the Web would soon have 100 staff—could Jones manage a company that size? Could he execute an initial public offering? How would he handle things if business went sour? “I was really trying to figure out if Pete got it,” says John.

To make sure of the fit, John and Jones met every day for a week. It was part interview, part courtship. They discussed each other’s lives, interests, and values. “Because it was a referral at both ends, you started off with a lot of trust,” says John. Hurzook joined in after a few days. In late March 2000, he was appointed Caught in the Web’s president and CEO. As the new heads of marketing and Web creation, respectively, John and Hurzook were reporting to somebody for the first time.

Jones moved quickly. He wandered around, making sure he was visible. “It would be the kiss of death to just stay in your office and send out memos,” he says. He implemented a dedicated space plan that, while better suited to an organization of Caught’s size, clashed with the established disorder that let staff work where they liked. He even tackled layoffs in the deflating Net bubble of 2000. The founders were relieved they could just watch.

From “Hiring Your Boss” by Harvey Schachter, January 2002. http://www.profitguide.com

Last modified: Thursday, September 20, 2018, 8:32 AM