WisBusiness: Start-ups advised to decide quickly on cutting ties

By Kay Nolan

For WisBusiness

MILWAUKEE — Entrepreneurs and would-be entrepreneurs are nothing if not brave, so they packed a workshop on “killer mistakes” at Tuesday’s Wisconsin Entrepreneurs Conference – bracing to hear how things can go wrong.

Apparently, a lot can, and does, go wrong. But the four speakers, all local entrepreneurs, some of whom work with start-up businesses as clients, encouraged attendees to cut their losses and move on when mistakes are realized.

It quickly became clear that “losses” referred to people: employees, vendors and subcontractors, and even business partners who don’t measure up or fit your business’ needs. Entrepreneurship is not, it would appear, for the soft-hearted.

“Name a time when you felt you cut a person too soon versus too late. It’s better to do it sooner rather than later,” said Joe Boucher, an attorney with Neider and Boucher, a Madison law firm that specializes in advising business clients.

Boucher said his tough stance comes from experience.

“If we’ve made a mistake, it’s hiring lawyers who’ve had experience in government – it’s a different culture that’s ingrained in their mentality,” he said. While employees like this may be very talented, he said, “Every company has a profile” and should not hold on to staff who don’t match, he said. “Tell them to move on.”

The same goes for non-employees.

“You want to associate with the right people, you want to pick the right people — a lawyer or an accountant, insurance, colleagues,” said Boucher. “That’s all true, but here’s what’s also true: you have to know when to cut your losses. You make a mistake once in a while.”

“If you hire two or more service providers, one is going to fail your expectations – cut your losses,” said Paul Nowak of Lansare Corp, a Wauwatosa firm that performs complex data analysis to help financial institutions evaluate brokers and dealers of financial products for regulatory compliance as well as for sales effectiveness.

Although the same concept applies when it comes to investors, the speakers acknowledged that it’s a bit trickier for cash-strapped entrepreneurs to cut ties with an investor, even if he or she turns out to be a “bad angel” who tries to usurp control of the business or is otherwise difficult to work with.

One preventive strategy came from panelist Dan Steininger of Successful Entrepreneur Investors, a Wisconsin networking group that offers coaching and resources for promising start-ups and helps link them with “angel” investors.

“Hire an independent board of directors, and make sure that investor is one of 10 or 15 men and women on the board,” said Steininger. The group will be unlikely to allow one individual “to control the conversation,” he said.

Other “killer mistakes” made by new entrepreneurs have to do with failing to match vendors with a company’s fledgling size.

Kent Chase, owner of Madison-based Intense Engineering, which helps start-up companies commercialize complex technologies, said it’s important to thoroughly research service providers in advance. “You want a firm that ultimately has the scope you’ll need, but can still work with you now when you’re three people, not 15 people,” he said. “Failure mode is a company that starts out working with you as if you’re 15 people already.”

“Make sure you’re asking the right person the right questions,” Chase said. “We spent two months interviewing graphic design firms, and ultimately found one similar in makeup to our own business. Our business model was essentially the same as their business model. They ‘got’ us right away.”

Similarly, Nowak said his start-up company made a mistake early on of hiring a high-end, expensive marketing professional better suited to a large company. “Now, we’re taking those resources and putting them into a call center focused on generating leads,” he said.

And yes, he’s hired a firm to make actual calls on compliance professionals at financial institutions, instead of pursuing business through social media.

Those in the financial services industry are “very leery of social media,” Nowak explained, because of the need to maintain professional neutrality and avoid bad or improper sales practices.

Chase also finds social media impractical. “It’s overrated,” he said. “Ultimately, it’s not a substitute for personal contact. For our business, there’s no purpose to having a Twitter or Facebook page.”

Boucher said he understands the necessity of exploring social media as a marketing tool, but said companies must realize that they will need to give up something else. “The Internet is a wonderful resource, but you have to take the time to meet people,” in order to accurately evaluate clients and potential vendors, he added. “All this stuff takes time.”

Don’t be afraid to learn from mistakes, the panelists said. “I don’t know a single entrepreneur who hasn’t changed their business plans,” said Boucher.