The most productive entrepreneurs think about what their time will be worth in the future

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Three of the functions tend to bring entrepreneurs instant satisfaction: firefighting, the often daily duty of snuffing out smallish but urgent problems, such as dealing with a single customer’s complaint; revenue harvesting, or time spent immediately generating income, such as filling the day’s orders; and revenue enhancement, which sets the scene for longer-term growth—the design of new products, for instance.

Often overlooked is process improvement, hours worked making the business run more efficiently. That might entail clarifying written specifications for suppliers or training an employee to take on duties that free up the entrepreneur’s time. In general, these are “not a lot of fun,” and therefore easy to ignore, Corbett said in an interview.

But the authors channel Drucker’s 1967 research that emphasized the need for managers to take time eliminating recurrent crises to avoid being constantly distracted by them. The paper devises a model to guide entrepreneurs’ time-allocation decisions. “We show that they should invest more time in process improvement early on — that is, when the opportunity cost of doing so is relatively low,” the paper says.

When to Hire the First Employee

Yoo, Roels, and Corbett tackled the question of hiring by devising a startup growth model based on two principal inputs: the entrepreneur’s time and money. “We show that without hiring, the entrepreneur’s time eventually becomes more valuable than money in contributing to the firm’s growth,” they say in a paper. “In that context, the value of the employee is driven by how much relief he provides to the entrepreneur.”

In an interview, Corbett again noted the need for entrepreneurs to be realistic about the future value of their time. Otherwise, “The cost of not hiring may not be visible, so it’s easier to put off.”

To identify the best time to make a first hire, the paper dives deep into the math an entrepreneur will face. Time and money must be spent “to create a structure for the organization, such as codifying the work processes and assigning roles to accommodate this and subsequent employees,” the paper says. “Thus, hiring may require the entrepreneur to divert resources away from revenue-generating activities, which may involve a temporary slowdown in revenue generation.”

That means the firm’s current cash levels are key, because they must amount to enough to cover the employee’s wages until revenue rebounds.

Yoo, Roels, and Corbett warn that, because of the financial and time commitments entailed in hiring a first employee, “Mistiming hiring can be very costly.” The paper suggests that entrepreneurs might reduce hiring set-up expenses by thinking early on about the hiring question—by “being on the lookout for that first employee from the moment they start the firm.”

Despite the daunting challenges that hiring presents, the authors stress one elegantly simple takeaway from their analysis: “Entrepreneurs should not necessarily wait to hire until they feel they have to, but they should consider hiring as soon as they can afford to.”

This article originally appeared on UCLA Anderson Review.

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