Monday, October 29, 2012

Transcending Small Business Obstacles: An interview with Arturo Noriega

Arturo Noriega is an entrepreneur, small business expert and founder of Centro Community Partners.  His career includes work as a manager of advisory services at Ernst & Young, consulting for Deloitte and Aon, and business development at Barclays Global Investors.  

I first met Arturo through my work as an MBA Advisor at Centro.  I thought he would be a great resource, as someone who works every day to help small business owners and entrepreneurs overcome obstacles.  Here's the transcript from an interview I did with him a while back: 

LBBB: When professional investors assess the viability of a startup, they often examine three core ingredients: the Market, the Team, and the Technology/Innovation...not necessarily in that order.  Which of these core elements do you find to be the most important, and why?

AN: Most important to success?  I think there’s a pecking order from most to least, the most being the people.  Regardless of how good your tech is, unless you have a great team, you don’t really have anything.  Anything good starts with good people.  But you have to have a complimentary set of skills, meaning that everyone has a different sweet spot that contributes to the overall success of the company.

The next I’d say is market, the unmet need.  Then it would be the innovation or advantage that you’re offering but only so far as it responds to the need of the market.  And everything comes back to the team, the leadership.  You need that vision – leadership – that’s able to respond quickly to market demands, and really leverage whatever tech is being created here.

LBBB: What would you say is the greatest obstacle that small businesses tend to face?

AN: The greatest obstacles?  Time and money – the two things that kill any startup, especially in tech.   Lack of capital, running of money, underestimating capital requirements for carrying out operations…If the company does run out of capital it obviously can’t meet requirements of the market.  Also time, time for setting up and carrying out processes.  In one of the ventures I’ve been working on, everything has proven to cost twice as much as I thought and taken twice as long.  See, no one ever forecasts how much money and time it really takes.  Usually, take your forecasts and multiply by two.  That 2x multiple – most startups don’t see that coming and it’s really a killer.

LBBB: What about the flipside of that coin?  What would you say is the greatest asset that small business have but often overlook or fail to take advantage of?

AN: Ideas that are generated by the team because no one asks the question – in other words, the unidentified opportunities.  In startups, people are so focused on specific things and tasks that they don’t fully explore ideas or opportunities, don’t really look at the big picture.

Also, communication.  Because people are not available, they’re working virtually, or working on different projects, they don’t get that interaction and cooperation that stimulates the process, asking those what-ifs.  Human capital is the greatest asset – the potential is not fully recognized.  Leaders don’t even ask “what do you think?”

Another asset that’s overlooked is networks.  People feel they have a limited amount of professional advice to navigate waters of startup when really there are unlimited resources outside of the organization to help the startup succeed.

LBBB: We had a guest speaker talk to our class about the importance of space.  How important do you think brick and mortar is to a small business? What kind of pitfalls have you experienced that you would advise readers to avoid?

AN: Getting an office is important…if your budget allows it.  Many people now meet virtually or work from home, maybe even meet up in a café somewhere to get certain things done, though that’s not always conducive to work.  The key thing is making sure you have appropriate office space.  You know what I mean?  Many startups get office space – because they don’t know better – and it’s just  inappropriate for their level of growth.  It’s either too expensive or too small, but either way it doesn’t allow for organic growth.  The trade off here is productivity, right?  That’s the whole point of office space, to make your company more productive.  You also want a physical address and that sense of legitimacy, that you’re a legitimate business in the eyes of your customers and the public.

LBBB: Besides the obvious issues of liability and regulations, what is it about HR and staffing that proves so difficult for small businesses? 

AN: You know that’s a really good question…(laughs) and I haven’t really come up with a solution yet.  HR is ongoing challenge, not just for startups.  The big thing I think is that vetting process – you want someone to be able to walk right in and be able to do [the job].  But that comes with a premium beyond the reach of small businesses.  What happens is that as they’re forecasting growth and allocating capital to staff, that’s done really poorly.  Roles and responsibilities are not well defined because people do multiple things.  In order to manage that , managers must really be sure to create detailed job descriptions.  You might realize you can split work between part-time workers instead of getting one fulltime professional.  I’ve done that and that works great. 

What happens, too – you don’t know how committed they are to the mission.  Motivation is so key. It is rocky.  You can navigate and manage that situation but until you measure performance… Another solution is to give up more equity to attract better people.  That way they have a vested interest in the success of the organization.  Motivation becomes the big issue and keeping people committed to the mission. 

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