Warning signs: is your company in danger of a False Start?

I have been privileged to be able to help many entrepreneurs work steadily and surely to great success. Along the way however, I have also seen many instances of what I call “the False Start”.

We’ve all seen them – companies that seem to be getting off the ground and taking their competitors by storm. They land a great contract but, instead of using it as a launching pad, they lose direction, and the company owners start making poor judgement calls because they think that their hard work is done. The company that a short while ago looked so promising ends up in the dustheap instead.

After someone lands a big contract, it’s completely normal for them to want to celebrate their success or use the extra cash generated to spruce the company up a bit. Having extra cash flowing into the business is something that doesn’t happen often in the start-up phases of a company!

The problem, however, is that some entrepreneurs lose sight of the strategies they need to implement to ensure that these big contracts come rolling in regularly, rather than just being once-off deals. The decisions that False Start entrepreneurs make become based on ego, rather than being driven by sound business objectives.

I’ve identified ten warning signs to check whether an entrepreneur is experiencing a False Start rather than the beginnings of sustainable growth. In my experience, the danger of falling victim to a False Start is greatest when a company lands a deal that gets it noticed – a deal normally worth more than three months’ average turnover. So when a new company is brought to my attention, and people are saying that the company is ready to take off, I check to see if three or more of the following apply:

  1. The entrepreneur has recently bought a new car.
  2. The entrepreneur is doing what I call victory laps, telling everyone, “Look how great I am!”
  3. Thinking that their old clients are “too small” now, the entrepreneur has taken his/her foot off the sales pedal.
  4. The entrepreneur has started to spend more time on self-image and grooming, or is buying expensive new clothes.
  5. The company is looking for bigger, better, more expensive business premises.
  6. New employees are being hired too quickly, resulting in more capacity than there is demand for work.
  7. The entrepreneur has received a big bonus or a salary raise prematurely.
  8. Decisions have been made to expand too quickly (which I like to call ‘planning world domination!’).
  9. The entrepreneur has started to spend a lot more time on the image of their company: repainting the offices or buying new furniture.
  10. It seems that the entrepreneur is starting to think that they’ve made it, and will never have to struggle again, leading them to stop planning diligently.

If the entrepreneur is undertaking three or more of these activities, it’s more than likely that the company will become another sad False Start victim. While it’s completely natural to want to make a big deal out of a big deal, the decisions that lead to the actions listed above are all ego-based, rather than focused on finding ways to capitalise on the success already achieved.

Entrepreneurs must always beware of making rash decisions based on a false sense of security. They need to be able to scrutinise their actions and be able to tell the difference between actions they take for the benefit of the company and those they take to satisfy their egos.

If you’ve recently landed an unusually big contract and are feeling untouchable, now’s the time to re-evaluate any decisions you may have made recently. Are they solidly based in a carefully developed growth strategy for your company? Or are they simply a form of instant gratification that won’t contribute meaningfully to your company’s long-term growth – a warning sign of a False Start?