Archive for category Leadership
Salary Requirements from Investors
Posted by Steve in Leadership, Plan on May 7, 2009
Whenever I did a proforma for a company seeking investment or a bank loan, the principles salary was always an interesting stopping point. Some people did do the research or identified the value proposition but most treated it as they were entitled to the money regardless of performance. This was a recipe for failure: getting turned down for investment.
Investors do not need to hear how you, the entrepreneur, need $150,000 per year because you have four children in college. What the investor needs to hear is that you will create value that earns the $150,000. The best approach is to identify the basic salary you need to get by and focus on the business, and anything above that is based purely on performance. If you do not perform and show success, then you do not make that money.
On the other hand, investors should not expect you to starve your family. If any investor tells you that, then you should walk.
A challenge comes when the entrepreneur needs $150,000 base because of certain required needs but does not create the value to match that base (or have the track record). Unfortunately, most investors do not care and will insist that either the entrepreneur cuts back expenses, uses savings, or has their spouse work. Note, I did not write have a second job. The investor expects the entrepreneur to work in the invested company and not moonlight.
Finally, the investors know that you need a competitive salary for your job. When you research the position, do not pick the CEO’s salary that is in the millions when your last salary was $60,000. Instead, figure out what the typical lead supervisor gets paid, and then match that with a package of base and performance. Typically, if you earned a salary at your previous job and lived well enough off it, it is a good idea to start with that as a base. Anything over that can be paid on performance.
Recently unemployed: Start a business or Look for a Job?
Posted by Steve in For Job Seekers, Leadership on April 7, 2009
When layoffs happen, people consider starting a business. The outplacement firm, Challenger, Gray and Christmas once told me that about one-third of all these people stop looking for work and start their own business. As a person rises in the management ladder that percentage increases. The reasons are many but usually stem from a need to take more control over their destiny, support their family, tiredness of corporate mediocrity, and the belief that they can do it better.
The reality is that a lot of hiring managers feel they are too experienced and expect too much money so will not stick around. The executive feels “unhirable” and sees no other solution but start a company.
There are many similarities in the preparation of looking for a new job and looking for a new business to start. You are looking for an industry and people to convince to take a risk on you. You will have to repeatedly sell yourself and experience failure.
There are obviously many differences; most notably, that starting a business will require sales that will include multiple episodes of many fails with a success.
Some people do both: look for a job and at the same time look to start a business. They see the similarities and in their own words, “hedging their bets”.
An investor, however, wants to see a commitment. They do not want the entrepreneur to take a job and quit the startup. They do not want the entrepreneur to even take a part-time job, or make the business the part-time job. Investors expect the commitment.
As someone is looking for a job they can try to start a business. At some point, most people are going to have to take that leap of faith and focus entirely on the business to make it work. The challenge is to find that jumping off point to make the commitment to the business. The entrepreneur needs to say, “I’m not going to look anymore, but I am going to make my business work.”
Over the last two months, several of my good friends contacted me looking for a position. I gave them a lot of advice, and I realized there are many similarities between preparations for looking for a job and for seeking investment. The process points to consider are: research (what books to read), resume, cover letter, pitch, online search sites, social networking, and marketing collateral (cards and a website). There are also the Do Nots.
A person looking for both a job and a startup idea can also seek a job at a startup.
The next series of posts will look at the tasks needed to find a job and how they can also be used for a startup.