Today I’d like to explore how an entrepreneur’s management style can begin as a strength and turn into a weakness.
DIY: First an asset, then a liability
With no money to spare or people to delegate to, a successful startup owner gets things done on his or her own. Many grow to like the control of doing things their own way and fear screw-ups if they hand them off to others.
Since they can do every job in their company, they often keep doing some things long after they should hand them over to someone else.
To illustrate the point, let’s imagine your startup generates $10,000 in pre-tax profit and you spend 2,000 hours a year at your company. That means that, for every hour you have invested in your new business, you generated $5.
You could argue that, instead of hiring an assistant to manage your calendar and handle the details of your business, it makes financial sense to do the work yourself . You couldn’t hire someone for less than $5 an hour.
Now imagine your business has grown and you’re earning $200,000 in pre-tax profit on the same 2,000 hours at work. Your time has become worth $100 an hour.
Your entrepreneurial upbringing would tell you to keep managing your own calendar – but the math says it would make more sense to hire an assistant for $40,000 a year, or about $20 an hour.
If you’re not self-reliant in the early days, you won’t even get a business off the ground. But at some point, your inclination to roll up your sleeves and do it all yourself can be what stops you from growing.
Special to The Globe and Mail
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a valuable – sellable – company.