Turn People Into Money
Tuesday, January 6, 2009
Turn People into Money
For any startup, raising money to hire people is always a problem. There’s a lot to be done, and inevitably it takes people – who are very expensive – to do it. But how do you get the money to hire the people if you don’t have the people to create the money in the first place?
The key is to reverse the trend – turn people into money.
Finding out how to bring staff members on board before you have a chance to pay them in real dollars will allow you to convert their time into money. In order to do this, you need to understand just how elastic the cost of people really is.
The Elastic Cost of People
The interesting thing about the cost of people is that while they are the most expensive resource you can buy, they are also the one resource that has the potential to cost nothing at all. A startup company has a unique currency – potential – that is used to convince people to trade their valuable time for little or no up front compensation.
If the 1990’s taught us anything, it’s that sometimes the potential of what a company can be tomorrow is worth far more than what a paycheck is worth today. Companies like Amazon, Yahoo and recently Google have reminded us that trading a steady paycheck for a potential jackpot can be a great bet.
These companies and the people that worked for them recognized that taking a risk in the form of lower compensation in the formative years of the company would be worth it if the company took off. Even if you aren’t planning on creating the next billion-dollar company, a modest plan that affords a healthy return for the time your people will put into your company is still a great payoff.
How to Win Friends and Influence People
Dale Carnegie’s popular book “How to Win Friends and Influence People” provided one of the most important lessons for entrepreneurs looking to recruit talent who will work for nothing but potential – find out what motivates them. I said them, not you!
Everyone believes they are worth far more than they are being paid. We want to believe that one day we will finally get properly rewarded for our hard work and become fabulously wealthy. Unfortunately very few of us have a distinct and obvious path to get there. As a startup company you have the potential to fulfill that dream and many others. The currency of “potential” and the opportunity to change the world is a fantastic motivational force that you absolutely need to leverage in order to convince anyone that they should work for free.
Although a big payout is a great start, remember that people are motivated by lots of things, not just money. The right title, job responsibilities, or terms of employment such as flexible hours can be just as much of an attraction as money. You must understand the needs of your people in order to create a startup opportunity that makes sense for them.
Keep the Drive Alive
Bringing people on board to work for your new startup without paying them is only half the battle. The other half of the battle is keeping them there while their bills keep tumbling in and a regular paycheck isn’t. A savvy entrepreneur knows that in order to keep everyone on board, he needs to keep the drive alive. The entire team must be constantly reminded that they are making forward progress, especially when times get tough, as they always do.
The “startup euphoria” felt by new team members is incredibly powerful, but also quite fleeting. Eventually people will want to see a tangible return on their time investment and it’s your job to make sure that happens in a very short period of time.
Celebrate Small Victories
Not every payback needs to be a paycheck. Sometimes recognition for a job well done is a good start. On a larger scale, let everyone know about the forward progress of the company as a whole. Celebrate every small victory as though you just won a Superbowl title. Emotional payback is one of the greatest returns you can provide to your team without spending any cash at all!
Convert to Cash Quickly
While the clock is ticking, your goal is to convert the time and energy invested into actual dollars to keep the company growing. When the pixie dust wears off (and it will) you want to be sure that you’ve got real dollars to pay your team with. The true realization of the dream would be to build a great company without having to sacrifice a great deal of personal income along the way. If you can satisfy both of these goals in the minds and hearts of the people that work for you, you’ve crossed the finish line.