Successful business start-ups tend to need a lot of different kinds of expertise. One of the important content areas is finance. This is a matter of understanding what independent elements cost, and how one gets the money to cover those costs in order to create a product or service. One of the big challenges that we face with start-ups is, of course, cash flow. An ongoing business normally has a steady cash flow, so there is cash coming in and cash going out. People are paying bills, but they’re selling products. In a start-up technology commercialization, normally that is not the case. Cash goes out but doesn’t come in, at least until the new product or service is up and established in the marketplace. So you have to work out the sequence of how that’s going to happen, and what kind of money needs to be spent at what stage. A big part of this – and I think a much overlooked part – is the management, which is deciding what tasks have to be done and in what sequence in order to reach the marketplace. Then, the process needs to be optimized, so that you’re minimizing the number of dollars you have to spend before dollars start coming in the door. Matching up those cash flows is, of course, important in any kind of start-up – reaching that break-even point where the dollars going out start matching up to those coming in. You are by no means out of the woods when that happens, but you’re way down the road.

Large and successful organizations run on standardized systems and procedures, and what the entrepreneur needs to do is to build good standardized operating procedures. That’s absolutely critical because it will build reliability and replicability into the products and services that are provided, and that’s really going to be key. Once those standard operating procedures are created and implemented, then it takes a lot less management time and intervention and effort to get work done. I think very often entrepreneurs don’t think in terms of those standard operating procedures. This is fundamentally a management challenge and doesn’t require brilliant thinking as much as plain old hard work and analysis.

Goals and planning are very, very important, but they’re often not used effectively. In my mind, the best thing about planning is that it clarifies in the minds of entrepreneurs and their teams what they are trying to do and how they are going to accomplish it. In fact, as you start to implement those plans, many things can (and will) go wrong, and they are liable to worsen significantly if the plan is blindly implemented. At the same time, the act of developing the plan is critical. The plan is extremely important in helping both the entrepreneur and the team find unity of purpose and a clear focus on what they’re trying to do and the things they have to nail down in order to make that work. But you can’t kill yourself trying to stay with the original business plan. You learn an awful lot the first few months, and it can make you deviate quite a bit from the original plan.

One of the things I mentioned earlier was standardized operating procedures, and while these can accomplish wonders, when change comes suddenly, they can also bite you. There are a couple of things that have to be recognized here. One is that there is a fundamental rate of change in the environment that any ongoing business has to deal with. That’s one rate of change on the outside. But there is a second thing that entrepreneurs have to deal with, and that is the deviation between their plan and reality. That’s quite different. In other words, the entrepreneur sets up a plan and makes some projections about the nature of the world and how it’s going to be; however, it may turn out to be very different from those projections, and that person has to have some flexibility to adjust. That’s really important for the survival of that start-up. Once the company gets up and running, then it has to adjust as times change. Again, these are qualitatively different kinds of changes. One is a miscalculation – a planning error. The other is just a changing state of the world, if you will. What I emphasize to people is that it’s important not to get too married to any one product or service or customer or procedure – just try to be open and flexible. But there is a tension that you have to manage there, and I think it’s wrong to believe that every organization needs to be extremely flexible. I don’t think that’s correct at all. Organizations need to be flexible when they have to, but they don’t need to be flexible all the time; flexibility costs money, and it costs time and effort and frustration. So I think it’s really important to have it, but you don’t want more of it than you need.

A lot of people think entrepreneurs are a breed apart. As I noted earlier, I don’t think that’s true in general. I think entrepreneurs are pretty much like everybody else. They’re willing to take some risk, but in many cases, they don’t perceive the risk. They believe in something pretty deeply, and they want to make it happen. So in many cases I think it’s a matter of a person in a particular situation who really feels like they can do something and be successful with it, and once that decision is made, they move ahead and do it. But serial entrepreneurs often aren’t that successful on their second and third attempts, and often those who are successful are successful on their third but not their first, second, and fourth – so I just don’t feel that there’s a set of characteristics that separates entrepreneurs from everybody else. I think they’re a lot like other people, but they find themselves in a situation where they feel like they can make a big difference, and they go for it.

To be a successful entrepreneur, you normally have to work very hard, but you also have to think carefully. You have to balance this business of bowling through things – just working your way through things – with reflection. There’s a lot of hard work, but you also have to think about where you’re going and what you’re doing. Balancing that out is really quite important. We encourage people to believe and be dedicated and so forth, but at the same time, you need to recognize when you’re pushing a cause that’s not going anywhere, and before you ruin yourself, pull out of it and find something else or make adjustments. So you certainly have to pay attention to this business of balancing working very hard with thinking very carefully. Henry Mintzberg calls this balancing thought and action.

Also, entrepreneurs tend to be optimistic people. If there is a personality characteristic that would separate entrepreneurs from other people, I’d say optimism might do it. Of course, optimism is pretty widespread in the non-entrepreneurial population too. Also, I wouldn’t try to predict who would be and who would not be an entrepreneur based solely on knowledge of their optimism.

Many good entrepreneurs, especially in technology commercialization, are good at the technical side and are good salespeople. If they really believe in what they’re doing, they can relate to other people on an emotional level about that product or service. In my view, a big part of successful entrepreneurship is really believing in the product or service and being able to relate to others and reach others on an emotional level about the product or service, because normally it’s a product or service that has not existed previously. Now, if you’re doing a start-up of a more standardized business – let’s say a consulting business – then I think your key is, in a sense, similar. It’s trying to convince the buyer that you’re legitimate, that you can do this, and that you can actually deliver the goods. But in that case, it’s more belief in you, I think, than in the service per se, because people are already familiar with the service. The buyer has to have confidence in the product, and, normally, in the seller as well.