An Entrepreneur's Top Leadership Challenges -- and How to Meet Them

For first-time entrepreneurs, expanding the businessand hiring those first employees is an exciting adventure. But it can also be rife with challenges and sometimes mistakes. The reason: The skills needed to successfully lead a growing enterprise are markedly different than what it takes to run a one-person business.

We spoke with three business leaders about challenges they faced as their companies grew, and how they dealt with them.

Challenge No. 1: Hiring the right people -- and keeping them
Many first-time leaders make regretful hiring decisions early on. They choose people too much like themselves when what they really need are employees with complementary skills. They also sometimes recruit people who may have the right skills but lack solid values.

Tom Sullivan, founder and chairman of Lumber Liquidators

Courtesy of the company

Tom Sullivan, founder and chairman of Lumber Liquidators, a Toano, Va.-based hardwood floor retailer, learned his lesson the hard way. When expanding operations beyond his first store in the Boston area, he needed store managers and truck drivers in other cities, but some of his earliest hires didn't pan out.

Related: What Entrepreneurs Can Learn from Costco's CEO

One store manager admitted to stealing money from the cash register, which he later repaid. Then there was the truck driver who disappeared on his first delivery, taking both the truck and the cash he had collected. "The biggest thing was getting people you could trust," says Sullivan, 52, now chairman of the 2,000-employee public company. He didn't do enough due diligence at first, but after those experiences, he quickly began conducting background checks on all new employees.

He also realized he needed to do more to motivate workers and build a more entrepreneurial culture. Instead of paying drivers by the hour, he gave them 60 percent of all delivery fees. He also began paying store managers 0.5 percent to 2 percent commissions on their sales. The new compensation policies led to higher retention rates. "Some of our sales managers made over $150,000, even $300,000, based on their sales," Sullivan says.

Challenge No. 2: Expanding prudently, not prematurely
When a company starts expanding, it's tempting to keep growing based on promising newbusiness opportunities. But it's far better to be cautious, as Jon Black painfully found out.

Jon Black

Courtesy of the company

In 2001, when Black reacquired GetProof, a physician credentialing company that he'd founded, it had about 10 to 15 employees. About five years later, a Fortune 500 health company signed a contract with the firm, and GetProof's operations manager suggested hiring 20 people to scale up before the contract took effect. Black agreed, but the contract never came to fruition.

Black says he ultimately had to lay off the people he'd hired, along with his operations manager. "The problem was I kind of abdicated my responsibility as CEO," says Black, 50. "We were so caught up in being lured by a very large company that was wielding a lot of power."

Related: 10 Secrets of Successful Leaders

Today, Black is far more careful about hiring at his new firm Terillion, an Alpine, Utah, company that has developed technology to help companies weed out fake online reviews. He waits longer after contracts are signed to increase headcount so he's sure the work will really come in. He also typically hires people on a part-time basis or as independent contractors before making them full time. That way, he can be sure they're a good fit for the position.

Challenge No. 3: Managing through big changes
Many first-time leaders struggle with maintaining the culture of their firms as they grow. That's particularly challenging in times of turmoil.

Nancy Kramer

Courtesy of the company

Nancy Kramer, for instance, wasn't prepared when her company's fortunes changed. She founded Resource Interactive, a Columbus, Ohio, marketing firm, in the early 1980s, scoring Apple Inc. as her first big client. The company grew quickly throughout the 1980s and 1990s, reaching about 150 employees by 2000.

But when the dot-com bust hit, business dropped by 90% "almost overnight," says Kramer, 56, now chairman. The company had to retrench and lay off about 50 employees.

Kramer felt terrible, giving the departing employees generous severance packages and condolences. But in hindsight, she realized she didn't do enough to console her remaining workforce. Morale in the office tanked. "The office got really bad for a while," she says. "The people who stayed were probably worried about their own futures with the company."

Kramer says she wishes she'd given less generous packages to the people she terminated and diverted more of the money to boosting the morale of those who stayed. Today, Kramer says, the company is more thoughtful about how it handles layoffs and maintains a positive culture. The company gives employees development opportunities and encourages them to have fun at work. "We put a lot of emphasis on making our office a place where people want to come every day," Kramer says.

http://www.entrepreneur.com/article/222767?cm_mmc=Newsletters-_-BOTW-_-020312-_-AnEntrepreneursTopLeadershipChallengesandHowtoMeetThem

Richard Branson on Decision-Making For Entrepreneurs

Editor's Note: Entrepreneur Richard Branson regularly shares his business experience and advice with readers. What follows is the latest edited round of insightful responses. Ask him a question and your query might be the inspiration for a future column.

Q: What were your most important managerial decisions -- the ones that changed your business? -- Volodymyr Kravchuk, Kiev, Ukraine

A: Most good chief executives or entrepreneurs only make three or four key decisions every year. Running your business's day-to-day operations and managing your team can take much of your time, so there are usually only a few that stand out -- the game-changing decisions that can make or sometimes break a business.

Looking back over my career, which now spans more than four decades, there were many occasions when I got it right and a few when I did not. A few guiding principles helped; these are the things I would have liked to have known when I was just starting out.

1. Trust your instincts.
There have been many occasions when I have led our team into markets that industry experts told us to avoid because the competition was too fierce or the cost of entry too high.

This was the case when we launched our airlines Virgin Atlantic and Virgin Blue (recently rebranded Virgin Australia), in 1984 and 2000, respectively. On both occasions, my fellow directors were nervous about our chances for survival, given the strengths of our competitors -- namely their market share and fleet sizes and experienced personnel. But I felt that our competitors had become complacent; that passengers wanted something different. With the right energy, focus and flair, we could make our mark.

Virgin Atlantic went from strength to strength, and now carries over 5 million passengers per year. In the case of Virgin Blue, we backed the plans of a former Virgin Express executive and entrepreneur Brett Godfrey, who first presented his ideas to me sketched out on a beer mat. After launching the business with just two Boeing 737s, we have built Australia's second biggest airline, and now have a fleet of nearly 90 planes.

2. Focus on your customers, not your critics.
It wasn't just our team that occasionally worried about our stepping into tough markets. Over the years, our critics fretted about Virgin's expansion into airlines, financial services and mobile phone services. What did our company know about these industries and how would we manage the complex issues?

Related: Richard Branson on Embracing Change

I rarely paid attention (which also drew criticism from some analysts). My answer was always to focus on the customer experience, ensuring that we offered the best service, most innovative products and best value.

This worked especially well in mobile services, where most companies still require customers to sign contracts that are difficult and expensive to exit. We revolutionized the market by offering a pre-paid model. Our position was radical, but we were selling exactly what a number of younger and newer users wanted. Our businesses grew quickly in the U.K., Australia, Canada, France, South Africa, the United States, and more recently in India, expanding our customer base and brand far and wide.

3. Always support your team. 
In previous columns, I have discussed how crucial it was for me to find great managers to run our businesses. Day-to-day management has never been my forte, and my early decision to step back from operations gave me the freedom to focus on our main challenges and opportunities.

This meant that I had to learn to trust the management teams, and to support them when they saw an opportunity. When Matthew Bucknall and Frank Reed came to us in 1999 with the concept of a family friendly health club, we decided to invest. Very quickly, they impressed all of us with their innovative approach to customer service and team building.

Related: 10 Time-Management Tips That Work

Soon after we opened the first few clubs, Nelson Mandela called me, asking if Virgin could rescue a chain of South African gyms. That seemed a stretch, because we had only a handful of locations in Britain, but Bucknall and Reed were confident, and such was our trust in them and their team that we signed onto the deal. And they were right: Virgin Active South Africa is one of the key drivers of that business's growth.

4. Know when to say goodbye.
It can be very difficult to know when to sell, since as a founder and entrepreneur you become very attached to your business and your team. Look into whether selling will be good for the overall health of your company, or if you need objectivity, ask trusted advisers to do this. But brace yourself -- the answer might be yes.

We have sold a number of Virgin companies over the years. Probably the most notable occasion was in 1992, when we sold Virgin Records to EMI and used the cash to expand Virgin Atlantic and other companies in the group. It was a very emotional day for me -- at one point, I broke down in tears. Looking back, it's clear that we sold at the right time and the decision made sense for Virgin as a whole. That secured our group's future and gave us a war chest for investing in new businesses.

Selling is difficult, and you will be tempted to hold on too long. This is one of the biggest mistakes an entrepreneur or chief executive can make.

I held onto Virgin Megastores for too long. Despite the warnings of my management team, I could not bring myself to sell the business until a few years ago. By that time, DVD sales had collapsed and the whole industry had been revolutionized by Apple's iTunes store. You can't get them all right!

Finally, when you are facing a difficult choice or must make an important decision on behalf ofyour company, keep in mind that the answer might not always be yes or no -- sometimes there are other options. Your job is to lead your team in the search for the best solutions, which are not always the easiest ones.

http://www.entrepreneur.com/article/222739

It's thursday, which means team night @nepartners http://ow.ly/8YHrd

FOR LEADERSHIP GROWTH.

MAKING THE MOST OF LIFE’S SIGNIFICANT MOMENTS

By themselves, significant moments do not alter a person’s behavior. Events certainly can make powerful impressions on us: they stir our emotions, capture our imagination, provoke our conscience, or bring revelation. However, events do not automatically transform us, and the feelings they evoke usually are short-lived.

Leadership breakthroughs happen when we seize the opportunity presented by a significant event to adjust our thinking and to change our patterns of action. For example, having a heart attack could have brought me nothing more than pain. However, I used the experience as a springboard to change my thinking about my physical health. Prior to the heart attack, I considered exercise to be a nuisance and dietary restrictions to be a drag. After suffering the heart attack, I reevaluated the importance of a healthy lifestyle. I contemplated the implications of ignoring my health, and I thought about how poor fitness would shorten my life and would limit my influence. I modified my mental attitude toward nutrition and physical fitness, and I took practical steps to build exercise into my weekly routine.

The tragedy for many leaders is that they let major life experiences slip by without learning from them. Once a pivotal moment alerts you to the possibility for a better future, I suggest embarking on the following four steps to bring about positive change.

1) Embrace Bottom-Line Thinking

When touched by a significant life event, project yourself into the future by asking yourself the following questions: How will my life improve by making a change? What is at stake if everything remains the same?

2) Generate Reminders

I agree with Samuel Johnson: “People need to be reminded more often than they need to be instructed.” For instance, physical fitness isn’t rocket science. Indeed, the formula is amazingly simple: eat healthier and exercise more often. Yet, breaking a bad habit involves reminding ourselves of the action we need to take and what’s ultimately at stake. Generating reminders may include creating visual mementos, setting calendar prompts, asking friends to provide accountability and encouragement, or celebrating progress made.

3) Find a Model

I started off as a lousy public speaker, but I was committed to improving. For that reason, I began to study, in detail, the great communicators within my circle of friends and colleagues. I listened intently whenever they spoke, and I observed their strengths. Then, I incorporated the lessons learned into my own style and delivery. Progress came slowly. In fact, I’d estimate that it took me eight years to become a polished public speaker. However, by modeling myself after other skilled communicators, I eventually gained competence myself.

4) Adjust Your Surroundings

To translate the momentary inspiration of an event into life transformation, we must limit our exposure to negative environments. The people closest to us have tremendous influence over our lives. To make the most of pivotal moments in our lives, we often need to reevaluate our relationships and to cut ties with unhealthy acquaintances. 

CONCLUSION

Pivotal moments in life stir our emotions, but they don’t necessarily affect our day-to-day motions. In fact, if you wait until you feel like making a change, then you’ll never experience personal growth as a leader. The next time you’re touched by a significant life event, look for ways to adjust your thinking and behavior so that instead of temporary enlightenment, you experience lasting breakthrough. Remember: leaders develop daily, not in a day.

John Maxwell Company