8 Start Up Myths Every Staffing Entrepreneur Should Avoid

I’ve been an entrepreneur running businesses in the staffing industry for over a decade now. And I have the haircut to show for it. Staffing Robot is my second company, having started my first – ShiftWise, in 2002. During this time I’ve been fortunate to learn an incredible amount about running and growing successful businesses. One thing I’ve learned for sure is that the initial ‘start up’ years are critical to your future success.

While I’ve never started or run a staffing firm, at some level, business is business. In addition, I’ve worked directly with CEOs of 100’s of staffing companies (and companies providing services in the staffing industry) over the last ten years. During this time, I’ve had some great conversations with other entrepreneurs in the staffing industry. In a lot of these discussion I discovered some consistent thinking that I would categorize as misunderstandings, stereotypes, cliches, preconceived notions and an overall general lack of commonsense knowledge about what it takes to start a successful business. I’ve offered my advice and some tips to these people and I thought I’d share a few of them here.

Here are 8 start up myths every staffing entrepreneur should avoid.

Myth 1: You need a business plan.
You only need a business plan to give investors, and you only need to be talking to investors if you’re raising outside capital (see Myth 2). Creating a business plan is the single biggest waste of time you can go through in the beginning. Worse, it creates a false sense that you’re actually accomplishing something. I don’t know any business that ever goes according to plan. So, writing out a long, detailed plan full of guesses and ideas is a complete waste of time. The worst is the financials. Getting real financials done is costly and time consuming and I assure you, every number in them will still be wrong, because it’s all just theory.

Don’t get me wrong. Write out your ideas, research a target market, study your competition, and do some price modeling. But you don’t need a full blown business plan. Just get to work.

Myth 2: You need to raise outside capital.
If you’re manufacturing a product or going after a broad consumer (non-niche) base then yes, you need to raise capital, and there’s no way around it. If that’s not the case though, you should avoid raising money at all cost for several reasons:

  • Once you take money you’ve already begun to sell your company and you’re doing it at the lowest possible valuation. I’ve seen people give up double digit percentages of ownership for less than $100,000 because they were so desperate to raise cash. This is a tragedy. Keep in mind that most often you’re selling your company to people with money trying to make more money, not people who understand your vision or have your best interest in mind. If you wouldn’t consider running a business with these people, or being friends with them, then don’t take their money.
  • Once you take money you’ll most likely need to take more. Why? Because the financials you put together in your business plan, in order to get these people to invest, will be wrong. When your bad financial guesses come to fruition you can either fold your company or take another round of investment. Guess what you’re going to choose and guess what the terms of that second round are going to look like? That’s right, like a Quentin Tarantino movie staring you. The second round is when you’ll really give up equity. Soon, you’ll realize you just bought yourself a job working for your investors. Congratulations.
  • Starting off with money that doesn’t come from revenue causes you to make bad decisions. Next thing you know you’re having kick off parties, buying expensive business cards, signing leases for expensive office space, flying first class, and hiring too many, expensive people. Instead, if you don’t have any money, or even better – only the money you’ve earned from customers, your decisions are much more focused and sensible.
  • Raising money doesn’t buy you time, it puts you on a clock. If your business lives and dies with what you have, your timeline is yours. You decide to keep going or not. If you’re living off of outside capital then you only have until that money runs out to produce a profit, or else other people start making decisions for you.

Even if you have to float payroll for a while – take a loan or use a payroll funding company. Just avoid raising money if at all possible.

Myth 3: You can figure out process later.
Building a scalable business is all about creating and automating great processes that can be repeated. Although it might take you awhile to need a scalable process (most likely when you get above 10 internal employees) it’s important to start implementing good processes as soon as possible. Creating one off deals, customizations and non scalable, repeatable processes is a great way to build a messy, complicated business that will seem like it’s working for awhile, but it won’t scale in the long term. You’ll get stuck in your ways and it will become very difficult to adjust later.

Myth 4: You need to give away your product/service for free until you get traction.
This tip is probably more relevant to tech companies and service providers within the staffing industry, but still relevant regardless.

The freemium model is a risky game that should only be played by companies delivering products/services to an incredibly broad consumer base, looking to raise capital and get acquired quickly. For everyone else, this is a death trap. Once you give a product away it’s almost impossible to get people to pay you for the service later. If you have something truly valuable people will want to pay for it from day one. If they don’t, then you need to reconsider its value. Finding this out sooner, as opposed to when you have 100 free customers that won’t pay you when you try to convert them, is much better.

Offering discounts (instead of free) is a great incentive to get people to try out your product or service. Or, if you do have a freemium option, just make it more of an optional trial basis and limit the time offered or service they receive on this plan.

Myth 5: You need everyone in the same office – and – It’s ok if people work remotely.
Yes, I’ve listed both opinions on this topic as a single myth. After Marissa Mayer the new CEO of Yahoo announced she was canceling their remote worker policy, this topic has been a hot debate. The truth is there are pluses and minuses to both of these models. It really comes down to what works for your company.

I’ve worked in both models and believe either option can work. They both have their pluses and minuses. However, personally, I’m with Marissa – I prefer my team to all be in the same location. When I’ve worked with staff remotely it was fine. We still got everything done and had plenty of tools to manage everything properly. However, there was one thing I didn’t like about having remote employees – a lack of cohesive culture.

When your team is all in one location you can truly bond and create a culture that is fun, productive and inspiring. When we had remote employees they always felt a bit outside of the culture. Never in a real detrimental way, but enough that it was noticeable. Culture is critical to any business, especially in the early years. So, anything that takes away from that is a negative in my opinion.

Myth 6: Say goodbye to your friends and family because you have to work all day, everyday.
I probably know this myth the best because in my first start up I worked 14 – 18 hours a day, 7 days a week, for years. I was on a plane almost every week and had Platinum frequent flyer status on three airlines. You know what it got me? Added years to my life, high stress, strained relationships with my friends, and a divorce. Sure, it helped move our business forward, but the cost was too high.

After a four year run like this I was about near collapse. I was actually ‘forced’ to take a month long vacation. I was a week in before I stopped checking my emails. By the end of the month I realized how crazy my life had become and that I actually needed more time off. So I took a few more weeks off to regain my sanity. I came back feeling rested and with a new outlook. I never went back to that life.

I still work hard, and perhaps a little too much, but not to the point most people think is necessary in order to start a successful business. I’m not having all night Red Bull binges or any nonsense like that. I know lots of companies that take advantage of their employees – judging them by the 60+ hour weeks they work and expecting them to be available on weekends or vacations. This is a recipe for burnout and dramatically hurts your culture.

At Staffing Robot, we don’t drive our employees to the brink or promote that kind of work style internally. We expect people to come in, work hard and get things done when they’re here. However, we encourage days off, putting your family matters first, cutting out early once in awhile when it’s sunny (like 3x a year in Portland), ending early on Friday’s and working from home now and then when you need a change of scenery. When you hire good people, you hire people that work hard when they’re on and even harder after having a break.

Myth 7: You’re late and must go faster!
It’s not a race. In some cases, time to market can be valuable. However, in most cases, coming in later gives you the opportunity to learn from the mistakes of the trail blazers, or at least craft a better competitive advantage.

With my last company, we created Vendor Management Software (VMS). When we started it, VMS was not a new or novel idea. But no one was doing it in healthcare. We identified the failings of other VMS models that ‘got there first’ and we improved on them. So in our case, being ‘late’ was advantageous.

Myth 8: We need to hire senior level, A players
Senior level, ‘A players’ are expensive. Worse though, it’s been my experience that people who have worked at this level for large companies don’t perform well in start ups or smaller, more agile environments. I’ve found a lot of these people to be very set in their ways. Often they are dependent upon rules, guidelines, and processes for getting anything done. In other words, rigid. That’s the opposite of what a start up is all about.

When you start a new company you need people that are eager to learn, flexible and don’t need a policy manual to follow in order to get things done. Further, it’s been my experience that finding talented people, new to the game or not as experienced, are easier to shape into your own company processes and ways of getting things done. This makes them a much better overall fit for your company now and in the long term. We’d much rather hire someone that is new with their skill, but eager to learn, and help grow and fit in with our culture.

Bonus tip: Choose your partners carefully.
This isn’t really a myth so we’ll just call it a bonus tip. Choose your partners and co-founders wisely. I’ve talked to several people that went into business with a friend or someone they recently met and had good conversations with. Partnering with someone is like getting married. So, if you’re not into being ‘married’ to this person, you certainly shouldn’t partner with them.

I’ve been fortunate enough to have the same business partner for my last company and this one. Over the last 12 years I’ve spent more time with him than anyone else I know. And now I hate him. Just kidding. We actually make for great business partners because we compliment each others skills and challenge each others thinking in a positive, constructive way. That’s what you want. Complimentary skills and the ability to challenge each others thinking, without blowing up your partnership is the key to finding a good partner and co-founder.

Of course, in the end, these are just things I’ve learned from my experiences and certainly, every start up experience is unique. If you’ve started a company in the staffing industry I’d love to have you share any thoughts and experiences you might have on the subject in the comments below.

 

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24 thoughts on “8 Start Up Myths Every Staffing Entrepreneur Should Avoid

  1. Well said, Jason. I completely agree with all of these points. It’s good to see them in writing, however, as it can be easy to talk yourself out of, or into one or more of these when entering into a new venture. Strangely, I learned more of these lessons in my second, much less successful (ok, failed) startup than from my first, which went pretty well.

  2. I like this piece- it’s a nice mix of acceptance and rejection of different bits of conventional wisdom. After 15 years at a great little tech business, I think Myth #3 is the most important advice you offer. What you need to get paid to accept increased complexity is totally underestimated. The saying “more companies die of indigestion than starvation” is so true. Once we wrapped our minds around that, it helped really transform our business. As to “A” players, I think you do need some in the mix.

    The other key item I did not see but I have learned over the years is this: every team needs one and only one Negative Nellie. You can’t succeed if everyone blows sunshine out their asses all day, but only a small bit of negativism goes a very long way. Two or three negative people can poison a whole company if you let them., even if they are A players. Life is full of challenges and things that ain’t ideal. The key is a healthy attitude toward acknowledging and fixing, but also moving forward with a smile.

    • Hi Mark,

      That’s definitely a good one to add. Having someone that’s good at challenging prevailing thought or at least questioning things is a good addition to any team. However irritating. :-)

  3. I disagree to some extent with point one. A business plan isn’t very valuable in and of itself, and even investors aren’t that likely to actually read it (at least not until after you’ve persuaded them with a pitch deck). However, the *process* of creating a business plan is invaluable in terms of developing a true understanding of your company, your market, and your prospects. Consequently, I think developing a plan can actually be pretty important, especially at the beginning, and especially in terms of how you’re going to execute on the plan. This goes along with myth #3–you can figure out these processes as part of the business plan. You shouldn’t spend all your time on the business plan at the expense of developing relationships and product (i.e., actually getting stuff done), but make sure that your learnings inform a continually improving plan. Doing a lot of scattershot work without a clear plan can be more costly than the process of creating a plan from the start.

    • Hi Kerry,

      I hear what you’re saying. To me, it depends on how in depth a business plan gets I guess, and of course every one has their own preference. Again, I agree you should have some kind of guide/plan whether it’s written or not. I just think the standard format of a business plan is too overblown and time consuming. I’ve seen many entrepreneurs waste weeks, even months on making a business plan, only to change everything they’re doing six months in. My first business plan for ShiftWise is hilariously useless and was less than a year in the business. I guess I’ve just learned to find success in action, not in planning.

  4. Jason,

    Thanks for the great tips! I agree with Kerry that a business plan is important, investors or not, because it slows you down and makes you think of things that might have otherwise been lost in the shuffle. I am with you though that the long, drawn out (I am thinking my MBA capstone here) business plans are overkill. While I think a plan is good, trying to plan everything down to the last detail is crazy- and futile. How often do our plans go exactly as we hope? NEVER! A short, succinct plan is more useful in my opinion.

    Thanks again!

    • Just my opinion but yes, I don’t use business plans. It’s good to make plans and guides – but not to the extent of a formal business plan. Not from my perspective anyway. If you have another view though we’d love to hear it!

  5. Jason, many great points. Good write up. I’ve ran my own business for over a decade myself and I can clarify the last “bonus” point you had. To take it a step further, just DON’T have a business partner. As the saying goes….”The only ship that won’t sail is a partner ship…” Its best to just avoid having partners. If someone else wants to join you in your business then you just need to hire them on as an employee and in no way make them a partner. Keeps things a LOT simpler and less messy. Most partnerships end in a nasty “divorce” anyway since one person is always thinking the other is not pulling their own weight.

  6. I’m just staring up my business. I started it because I was the girl who is always willing to learn and had little experience in my area of work. It was difficult to walk into a place you see yourself working and get rejected, ‘not enough experience.’ My education wasn’t informal and mostly learned by volunteer experience. I really like how you said for hiring someone new or just starting out. Thank you for the advice. I’m still trying to get by business off the ground and a great relief about now knowing about business plan. I’d like to hear more.

  7. i agree with most of what you said, but not every Senior player is rigid? Why are we adopting this mindset? More experienced or Older doesn’t always mean rigid.

    • Thanks for commenting Damita. I’m not saying every senior player is rigid. Simply highlighting something I’ve seen in my experience. That being – many companies think in the beginning they need senior, experienced people to do well. I’m stating that’s not always true. It’s not that these people are a problem, it’s just that I don’t think it to be necessary. Finding good, motivated, junior people is a good option.

  8. Hi Jason,
    do you recommend any specific database system to use for starting up a staffing company? My friend just got out of recruiting for a company (worked her day and night) and she is looking into starting up her own company but is not so tech savvy. Seems like a trend to work to the death, if you work for others who have their own goals.
    I want to help her but she reached out to me about this and I found your brilliantly helpful article I want to share with her.
    Thank you.

    • Hi Toni,

      Yes, there are a lot of good ATS systems out there. It just depends on your needs and the type of staffing you’re in. For start ups, I’d recommend taking a look at Bullhorn.

  9. Jason, stumbled upon this piece — all great points, and I think you for sharing. Would value connecting.

  10. Hi Jason after building a few successful businesses and one that failed. I think I might be able add a few points to your blog.

    1. Keep your overhead low low low. Many times I see start ups with lots of ego involved and added expense that goes with that ego. This is true more in the corporate types who take a package from corporate America and decide to open a business. Bottom line, even if you have the cash protect it and save it ; cash to a start up is like oxygen to a body. Without it you die.

    2. You need a niche to get rich. It seems counter intuitive but focusing in on one industry segment or industry vertical helps position you as an expert. Even if your not an expert your viewed as one, focus in on one area and don’t try to be everything to everyone.

    3. I don’t care who you have working for you. People will be people. If you don’t monitor employee results your employee will not produce as much . In other words when the cat is away the mice will play. Enough said.

    Hope this added to your great blog . Thank you .!

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