Co-founders of Judo Bank Joseph Healy and David Hornery break down 10 lessons gained from founding a successful firm in an excerpt from their book Black Belt: A Masterclass for Start-ups and Entrepreneurs.
The learning experience that comes with starting a new company is one of the things that is truly rewarding.
Despite the fact that the Judo Bank team spent a lot of time and effort turning a PowerPoint presentation into the first new commercial bank to list in Australia in more than 25 years, there have been numerous real-world difficulties and mishaps along the way in addition to the successes.
As an illustration, consider the licencing of the banking industry. That took at least six months longer than expected, and with each month of delay came uncertainty about capital, stress among the team, and significant financial costs as we kept using up our cash reserves without being able to enter the lending market with any real momentum.
Even though we have covered a lot of lessons in Black Belt: A Masterclass for Start-ups and Entrepreneurs, if we were to choose only 10, they would be the following 10.
1. It’s crucial to have vision, strength, perseverance, and persistent optimism.
You will never do anything harder, more thrilling, more nerve-wracking, or possibly more gratifying than this.
Nothing in the world of business will ever be as thrilling or comparable to the experience of experiencing the up-and-down existence of a startup. There will be many gloomy days and weeks where you will be staring at the possibility of failure and considerable financial loss. You need inner fortitude and a strong conviction in the idea of the company you (and others) want to found in order to succeed.
With meticulous preparation, superior project management, and top-notch execution abilities, the possibilities of success are good as long as the vision and your tenacity, persistence, and endurance remain strong.
2. Making sound decisions early is crucial
Early mistakes can be challenging to fix, such as picking the wrong financiers, choosing the wrong employees, or picking the incorrect technology partner (a mistake we made).
This is where our measure twice, cut once philosophy proved crucial, and this is also where the majority of business owners commit significant and frequently fatal errors.
With adrenaline pumping, there is a tendency to “just do it” and address any early errors in judgement afterwards. Here’s a wise quote from Warren Buffett: “Don’t test the depth of the water with both feet.” We strongly advise you to avoid taking this risk.
3. Make smart hires to create productive teams
The hiring of the incorrect people, especially crucial personnel, is at the top of the list of all the blunders that will inevitably be made while starting a new business. This is true for all of business, but it may be especially damaging to a fledgling company as it forms. We erred in this.
The hiring of the incorrect people, especially crucial personnel, is at the top of the list of all the blunders that will inevitably be made while starting a new business.
All of us are prone to basing recruiting decisions on the three R’s: reputation, relationship, and referrals – frequently without applying much objectivity. A great firm is nearly always formed by a cohesive and passionate team of like-minded individuals, but putting the correct hiring practises and frameworks in place is the first step.
Put a strong focus on working as a team and conduct thorough due diligence to ensure that a candidate is a team player. Ensure that the goals of the company and all key hires are perfectly matched. People give their all and much more when they are on the same page as their mission. Effort fades with time and you never get the finest performance out of someone if there is no alignment with purpose.
4. It’s crucial to have a goal and an end goal.
A great business cannot be built on weak foundations, to use this principle more broadly. Here once more, the adage “measure twice, cut once” becomes crucial.
In many ways, it is similar to the first 100 days in a new job because you never get that time back and it is crucial for learning and outlining how things will operate. The first 100 days are holy and should never be wasted, for anyone in a leadership position, from presidents to prime ministers, CEOs to those in any organisation.
One of the most important decisions taken during this time is to be clear about the organization’s mission and values and how they relate to the initial leadership team.
The ideal circumstances are created for a goal-directed and motivationally driven sense of destiny, where everyone can visualise the business they are striving to establish, by having a strong sense of purpose that is aligned at a personal and organisational level.
5. Resolution of conflict should be early, proactive, and productive.
Conflicts will inevitably arise in any organisation, but they will especially do so in a young, rapidly expanding one.
We always tried to follow the “point easy, point difficult, point crisis” approach as a general rule. Deal with newly arising issues at point easy and prevent them from moving to point tough.
Conflict will also inevitably occur between founders and investors as it relates to people in the leadership and the firm, and, potentially later, it may even arise between founders and boards of directors if it is not carefully controlled.
6. Maintain a flat structure and seek assistance regarding the equity incentive design
Be cautious when designing compensation, especially when it comes to equity.
It is crucial to adequately reward people for their dedication and zeal.
It is crucial to adequately reward people for their dedication and zeal. However, initial equity arrangement design blunders are frequently made and afterwards regretted.
Organisational design is tangentially related to compensation. We set out to steer clear of the hierarchical organisational structures that are typical of large corporations everywhere.
7. Give innovative thinking and ambiguity-handling skills top priority.
Hire those who can handle ambiguity.
The majority of people describe themselves as strong or as persons who do well in confusing situations. The truth is that a lot of people find it really unpleasant. This is especially true in a new company’s first two years, which can be very hectic. Not everyone is suited for a startup.
8. Strive constantly to influence culture
Consider culture from both a broad and micro perspective.
Be extremely clear about the culture you want to create at the macro level. A company’s culture has the power to define its success and greatly increase its potential. Early-stage organisations have the chance to mould the organization’s cultural concrete as it hardens.
At the micro level, consider carefully how, practically, you might integrate the cultural drives in the way everything is done at the organisation, from the big to the little.
9. Carefully select all of your collaborators, including any outside providers.
We have always worked to establish lasting relationships with our major suppliers, and we have a special appreciation for and sense of loyalty for those who helped us get started.
There is a level of understanding they provide that may produce tangible benefit when your essential partners are more than just a commercial relationship; rather, they are symbolically inside the tent with you.
We have discovered that when your important partners are symbolically inside the tent with you as opposed to just being a transactional connection, they may bring a level of understanding that can add tangible value.
10. Be wary of bureaucracy
In particular, when the business expands, bureaucracy can spread like a virus.
The paradox of growth is that it has the potential to breed bureaucracy and complexity, both of which can stifle future expansion.
Keep a close eye out for this.
Joseph Healy has been a banker for more than 35 years and has extensive experience in most areas of banking. David Hornery has worked in the banking industry for 35 years total, starting in the financial markets and investment banking before transitioning to commercial banking. Before transferring to NAB in 2008 and leaving in 2015 to work with Joseph on Judo Bank, he spent more than a decade with ANZ.
