Already I have posted about knowing whether or not you are starting your own gig for the right reasons, and knowing whether or not what you have is a product or a business.  Both of these items are critical to the success of any venture, but there is one factor that is at the top of my list of importance.  Talk to any other venture capitalist and they will tell you that the very first thing that they want to know about the investment opportunity is the management team.  I want to extend the axiom beyond simply those who are directly involved in the day to day operations of the business to the notion of the right team.

The right team is inclusive of your starters, your bench and your assistant coaches.  It’s important to understand that, from the first whistle, your starting team can get the points on the board, but the right team is what is going to get the points on the board during the fourth quarter.

Your management team (the starters) has to include folks that are also doing it for the right reason.  If they don’t share your passion for the product or service that you want to build your business around, then you have a problem.  In the early days of getting your company off the ground, you are no doubt going to be spending large amounts of time focused on the business, and without being surrounded by folks who can make decisions, and have the passion and drive to do the hours, you are going to hit a wall.  You simply can’t scale your available time.  Each of these folks should have complimentary skill sets to solve all of the problems that face a young company, but stack this team in favor of solving the problem of the actual product or service.

The worker bees (the bench) must also share your passion, but to a lesser extent.  You are going to need to surround yourself with people who can execute against your plan.  My experience has shown me that when you have too many people who are super passionate about a particular problem, you have a lot of “solutions” but not a lot of actual execution.  Worker bees tend to be a bit more steady and less volatile than passionate management.

The advisers (the assistant coaches) are some of the most important people that you probably didn’t think about asking to join your team.  My father once taught me one of the most important things I have ever learned.  He said, “son, you don’t need to always know the answer.  You just need to know where to look for the answer.”  Having industry veterans (where applicable and available) can certainly help shed some light on potential problems you may have with your business.  You should always think about how to approach people who might have relevant experience as potential advisers to your company.  Further, seeking individuals who have specific domain experience (lawyers, accountants, etc) will allow you to get your quick questions answered, most times for free, and save you a ton of time and frustration with issues that require professionals.

Key to hiring anyone who works with or for you is to seek those out who are smarter than you.  I have had the good fortune to have worked at Microsoft in its hay day, and was indoctrinated into their way of thinking as it pertained to hiring.  Always, ALWAYS, hire people smarter than you.  If you hire B team players, they will hire C team players, and you are in trouble.  In my experience as a board member and as senior management with startups, I have crossed paths with CEOs and managers who were more than happy to hire sycophantic workers who would yield to them.  It’s healthy to have employees push back on vision.  You, as the leader are there to provide it, but you must also know that you don’t know everything.  It’s OK to be the guy driving the bus, but don’t be afraid to accept directions.  That is why it is so important to hire people smarter than you.  You might actually learn something. 

The management team is very important.  Of that there is no doubt, but as an entrepreneur who is building a company, you cannot stop at just hiring the management team.  You have to think about the entire team that is going to get you through the fourth quarter, victorious.  The energy of your starters will electrify the crowds.  The rock solid play of your bench will keep you in the game when your starters get tired.  And the experience and training your assistant coaches bring to bear will provide the discipline to keep from making key fatal mistakes, especially at critical junctures.  Build the right team, and build it smart.

One of the more interesting conversations I have with entrepreneurs is whether or not what they have is a product or a business.  It’s a tough conversation because most entrepreneurs are very passionate about what it is they want to pursue, and believe that they are on the cusp of building a multi-million dollar business.  Sadly, many would be entrepreneurs cannot make the subtle distinction between a product and a business.

Here’s a great example.  I had one entrepreneur approach me in the last few weeks because what he wanted was guidance on building a business plan around a new idea he had for a blog program.  His program was essentially a blog editing tool.  Sounds great, right?  Blogs are hot, there is a clear market, what could be the issue?  The challenge is that this is a product idea, not a business.  The reason?  Well, most potential customers who would buy this tool would either already have a blog set up, meaning they have a blog business that is either hosting the solution for them, or has provided them with the software to manage their blog (which has fine blog editing tools built in), or this is a new blogger, and they are most in the need of a web hosting solution or the server side code to manage their blog.  Either way, how would this entrepreneur build a business when they are missing so many pieces of the value chain, especially when customers have an expectation of what should be provided from a blog business?  It’s a tough sell.  The entrepreneur got it though, and is retooling his thinking.  I can’t wait to see what he comes back with.

I really like to make things simple when I talk about topics like this.  I really want to feel like I could have the discussion with my mother or father and they would get it.  Put simply, a product is something you can sell to a customer once and you never see that customer again.  A business builds a long term relationship with that customer and sells them many things over the lifetime of that relationship.  If that seems too simplistic, then I have done my job.  It’s important for would be entrepreneurs, before they jump off the deep end and commit to their passion and pursue their new idea, to consider and understand whether what they have is a product or a business.

While it is possible to transform from selling just a product into a full fledged business, it’s a tough road and not easy.  You have to know who your customer is, and what experience you are selling them, and whether or not you can provide enough of that experience.  There are times where it would appear that what a new business has is just a product (great example: Baby Einstein), but they really do have a business with only one product in their portfolio.  The key differentiators is the ability to grow that product portfolio, leveraging the skills and experience from creating and selling the first product, which is the definition of a successful business.

I wanted to start a little series for entrepreneurs and entrepreneurs-to-be that I am calling “Success Factors.”  This series will build on itself, and I will release a new factors from time to time.  When entrepreneurs find out that I invest in start ups, and have run my own successful start ups, they often ask, “what made you successful?”  More often than not, my first answer is “luck.”  Being lucky over being good is often a preferred state of being.  However, there are certain factors on which an entrepreneur can focus in an effort to maximize their probability of success.  When I say “luck” I am saying it glibly, and what happens is that I often then go into a diatribe about the most important factor.

My personal opinion is that in order to be a successful entrepreneur, you have to have the right reason to be doing it.  A hallmark of a successful entrepreneur is that they have a passion for what it is they are doing.  You will hear things like “I want to change the world” and “I want to make things better than they are.”  You hear these things because these people are starting their own gig and following their passions for the right reasons.  Having the passion for what you do means that you will be really engaged in the work.  You will be living the life you are trying to sell, and you will be all the more successful for it.  The reason?  Your passion will shine through, and you will be eminently more believable.  You’re not a phony because you are living what you are selling.

People looking for a new lifestyle are also doing it for the right reasons.  Looking for something better than what you currently have is a fantastic motivational tool.   Beware, however, as many entrepreneurs believe that starting their own venture is the key to a better life, and that simply starting your own venture is enough to get there.  Being an entrepreneur is hard work, and it will cause many stresses.  Which brings me back to having the passion for your work.  Wanting to have a different lifestyle is a great motivational tool, but without a passion for what it is your are doing could ultimately land you in a situation where you have way more stress associated with getting your business off the ground, the lack of steady income, and the piling expenses.

If you were to ask any person off the street, the most likely response to the question “what’s the primary reason people start their own business,” you would most likely hear “money.”  Strangely, it is not the money that drives the successful entrepreneur.  In fact, more often than not, most entrepreneurs are taking significant pay cuts when they venture off on their own.  I actually have a more heavy handed view on this topic.  It is my personal belief that if you are setting off on your own thing primarily for the money, you are in it for the wrong reasons.  Money is a source of stress.  Just ask any young married couple.  If you use money as the primary metric of your success or failure, you will find that even though it is an easily measurable thing, determining how much is enough in order to call oneself successful is often a Quixotic effort.

Does luck factor into a successful entrepreneur?  Absolutely.  However, you can’t rely on luck to get the job done.  In most cases, you are going to have to create your own luck.  Unfortunately, luck in entrepreneurship is a lot like luck with the ladies.  Some guys have it, some guys don’t.  Worse still, you really can’t figure out what the contributing factors are to luck.  So don’t rely on it.  Just hope for it.  As far as money, well, it’s real simple.  Do what you love, and the money will eventually follow.  Passion is contagious, and you will be successful because people want to buy into your story.  Your story is authentic because of your passion.  It’s not to say that passion will make the money flow in immediately, but it will make the money flow.  To be successful, you have to ensure that you are doing it for the right reasons.