When asked about the skills most critical to an entrepreneur’s success, leaders tend to emphasize soft skills like creativity, purpose, and grit. There is no doubt that these are important qualities to nurture and cultivate as you build your idea and business. But I’ve noticed one essential skill that is often excluded from the mix – I call it business backbone. While sheer business backbone may lack the glitz and glamour of passion or ingenuity, all your hard work could be meaningless without it.
Why is business backbone so critical? Along your entrepreneurial journey, you will regretfully but inevitably encounter fraudulent or predatory players whose motives are greedy and manipulative. For example, a bright entrepreneur I’ve helped coach previously brought on investors who set such onerous contract terms that they effectively took over her company and left her with extremely limited control over her enterprise. I’ve also seen investors claim that a company needs to be capitalized and then proceed to pump more money into the company in order to dilute the entrepreneur’s stake.
It requires enormous strength to stand your ground, but you will almost always be rewarded for knowing your rights, recognizing injustice, and defending your brand. I recall a time at KIND when an investor brought in its own talent, only to later use its people as leverage. The investor threatened to pull all its team members from the company unless I agreed to unfavorable terms; I held a firm stance and refused. In the end, not only did I protect my company, but only one of the investor’s team members ended up leaving.
Business backbone is also important when dealing with large competitors. I have seen several instances of large corporations threatening to sue small startups unless they change their brand names. In every scenario, the brands were sufficiently differentiated in non-competitive categories so there was no chance of trademark confusion. But even when large companies have little-to-no case to make in court, they can often afford to litigate until they bankrupt the small startups – and will often use that power to force early-stage entrepreneurs into unfavorable settlements.
So how can you protect yourself? Here are a few best practices for developing your backbone and finding asymmetric ways to outsmart coercive players.
1.) Line up strong legal counsel: You don’t have to have a huge bank account to secure quality legal aid. Dig through your network – including friends of friends – to see if you have contacts who are practicing attorneys. Some may be willing to defer compensation if they know you will be a loyal client. KIND’s attorney, AJ Weidhaas, was my law school roommate. He initially charged me almost nothing; now KIND is one of his largest clients. Lawyers who are just getting on their feet themselves may be more willing to help out – or may accept equity in lieu of their going rates.
2.) Level the playing field with transparency: If trying to win your case in a court of law could bankrupt you, consider taking your case to the court of public opinion. Social media offers a powerful platform for exposing injustice or foul play; it’s harder for bullies to get away with bad behavior once their dirty laundry is aired in front of a public audience. While posting to social channels is not an excuse to slam competitor brands, it can be utilized with integrity to hold others accountable for their actions. I recommend first issuing a warning that you will share your story with the world if foul players do not start acting fairly. And if you also did something yourself that warrants correcting, be honorable and make the requisite changes.
3.) Don’t let the fox into the henhouse; choose your investors wisely: Business partnership is like a marriage and should not be entered into lightly. Put in the time to research your potential investors’ reputations. Before bringing in new investors, talk to several companies in which they previously invested, and make sure that those companies had a positive experience before you jump in. Proceed with particular caution if your investor is also a supplier. These arrangements can create an unbalanced power dynamic by which your investor can use your own supply chain as leverage.
4.) Practice the strength to say ‘no’: Whether taken over by awe or intimidation, early-stage entrepreneurs often struggle with putting their foot down or rejecting terms they find questionable or badly structured. It’s okay to stand your ground in contentious situations, especially if it means protecting your ownership and brand promise. In combination with the advice of your lawyers, trust your gut and be firm. This is not a license for you to be overly inflexible, just balanced and pragmatic.
5.) Align with heroes who can be your champions: Surround yourself with a network of mentors and ambassadors who can advocate for your brand in good times and bad. Allies like industry veterans can help you get taken more seriously at the negotiating table. And when push comes to shove, they can write letters and make calls on your behalf.
In the end, the rules of the playground apply: don’t be a bully, but don’t be bullied either.