I am often asked: “What are the characteristics of successful entrepreneurs?”
In response I reel off a list of attributes such as optimism, persistence, and high energy. An equally important question, but much less often asked, is: “What are the characteristics of unsuccessful entrepreneurs?” So as a minor public service, here are some traits of those who are likely to lose you money — so you can avoid them.
• They always have an excuse: these bosses never take responsibility for their own mistakes, but instead are masters at finding someone else, or something else, to blame. Occasional excuses are forgivable, but serial offenders are in denial. Able management will confess shortcomings, and try to learn from errors and improve on them. That can be hard if it is apparently never their fault.
• They talk and write gobbledegook: I have met quite a few founders who try to blind backers and staff with technical nonsense — mainly because they don’t know what they’re doing. If they do not understand their customers, market, products and the economics of their business, then in all likelihood they will fail. And if they cannot explain it in plain English, expect the worst.
• It is always about them: while entrepreneurs are by nature selfish, their egos should not be so overwhelming that they alienate everyone. If that is the case, good people will not work for them and the new business will probably hit the rocks.
• All talk, no action: founders are men and women of action. Ideas are wonderful, but just dreams unless someone executes them.
• Too nice: anyone running an enterprise is obliged to make tough decisions occasionally. A leader who wants to be liked too much, and avoids conflict at all costs, will end up in trouble.
• Obsessed about salary and perks: founders should be working to build a business and create shareholder value. If they are in it for the money, they should become an employee in a big organisation.
• Fixated over status: being the proprietor of a company is a privilege; however, the reason to work hard is not the kudos but the satisfaction of creating something, and proving the detractors wrong.
• Financially illiterate: anyone at the head of a serious business must be able to comfortably interpret financial statements, and know the finances of their company. Even if they have a capable finance director, they must be familiar with the margins and cashflow.
• Secretive backgrounds: I have unknowingly backed a rapist, an alcoholic and a fraudster. On each occasion I did not do enough referencing — but I could have discovered their dark secrets if I had dug deep enough. Do your homework.
•Fantasists: you need optimism in your business partner, but it must be leavened with pragmatism. I sit and listen to pitches for amazingly ambitious companies — but if they are wholly impractical, I’m not interested. They are likely to turn into money pits.
• No team: entrepreneurs are often loners, but companies are collaborative affairs. If someone cannot recruit, retain and motivate a management cohort, the odds are they will go broke. The best founders bring a squad of sound followers with them.
• Unhealthy: two companies I part-owned went wrong because the chief executives became ill, due to pre-existing conditions. I sympathise when banks insist on check-ups before offering loans.
• Chaotic personal lives: entrepreneurs with messy domestic arrangements are likely to be distracted, and hence unable to give a joint undertaking the necessary devotion. This is not so much a moral observation, as a commercial one.
• Unwilling to stake money: if they are not prepared to put a decent amount on the line — relative to their net worth — then why should you? You must obtain absolute commitment from them, financial and otherwise, or they are unlikely to persevere when the inevitable challenges arise.
• Political: the sort of businesses I back have no time for office politics. It seems that many who rise to the top in big companies do so principally owing to their skills at networking and advancing their careers. Those games don’t deliver performance, only institutional decay.
• Inability to delegate: micro-managers never build great companies because their desperation for control overrides the true needs of the business. So they inhibit its growth, and end up with stunted dictatorships.
• Humourless: life is short and the need to laugh is paramount. Those who take themselves too seriously are no fun to be around. Even if they are moneymakers, it isn’t worth enduring the boredom and conceit.
No doubt readers will have their own horror stories of disastrous entrepreneurs. Sadly, I fear there are many more bad leaders than good ones.