One of the truly rewarding things about launching a new business is the learning experience.
While much thought and planning went into the way the Judo Bank team took a PowerPoint presentation and built the first new commercial bank to list in Australia in more than 25 years, in addition to the triumphs, there have been many practical challenges and pitfalls along the way.
Take the approval of the banking license, for example. That ended up taking at least six months longer than anticipated, and every month of delay brought with it uncertainty around capital, anxiety among the team and significant financial costs as we continued to go through our cash resources without being able to enter the lending market with any real momentum.
While we have highlighted many lessons in our book Black Belt: A Masterclass for Start-ups and Entrepreneurs, if we were to pick the 10 key lessons on our journey, they would be as follows.
1. Vision, stamina, persistence and resilient optimism are critical
This is the hardest, most exciting, most nerve-racking and potentially most rewarding thing you will ever do.
Nothing in business will ever be as exhilarating or compare to the feeling of living the roller coaster that is startup life. There will be many dark days and weeks when the prospect of failure – and significant financial loss – is staring you in the face. To succeed, you need inner strength and a deeply held belief in the vision of the business that you (and others) are looking to create.
If the vision stays strong – and your resilience, persistence and stamina remain equally strong – then, with careful planning, excellent project management and first-class execution skills, the prospects of success are real.
2. Getting early decisions right is critical
Mistakes made early on can be difficult to correct, such as choosing the wrong investors, making the wrong hiring decision or selecting the wrong technology partner (a mistake we made early on).
This is where our measure twice, cut once philosophy was so important, and where most entrepreneurs make big and often defining mistakes.
There is a temptation, with adrenaline flowing, to ‘just do it’, and come back and tidy up early miscalculations at a later stage. Warren Buffett’s saying here is instructive: "Don’t test the depth of the water with both feet." Avoiding this risk is our strong advice.
3. Hire well to form high-functioning teams
Of all the inevitable mistakes made in building a new business, hiring the wrong people – particularly key personnel – is at the top of the list. This is true across business generally, but it can be particularly debilitating in the formative stages of a young company. We made this mistake.
Of all the inevitable mistakes made in building a new business, hiring the wrong people – particularly key personnel – is at the top of the list.
We are all susceptible to making hiring decisions based on the three R’s: reputation, relationship and referrals – often without much objective rigor being applied. Getting the right hiring practices and frameworks in place is the first step, but great businesses are rarely built by an individual: they are almost always built by a cohesive and passionate team of like-minded people.
Place great emphasis on teamwork and do rigorous due diligence to satisfy yourself that a candidate is a team player. Be sure that all key hires are fully aligned with the purpose of the business. When people are aligned with purpose, they give 100 percent and more. If there is no alignment with purpose, effort fades over time and you never get the best out of someone.
4. Purpose and end-state vision are critical
Applying this philosophy more broadly, you cannot build a great business on flawed foundations. This is again where the philosophy of measure twice, cut once becomes so important.
In many ways, it is a bit like the first 100 days in a new role: you never get that time again, and it is a hugely significant time in learning and mapping out how things are going to work. From presidents to prime ministers, CEOs to leaders in any organization, the first 100 days are sacred and should never be wasted.
It is during this period that so many big decisions are made, and none bigger than being clear on the purpose and values of the organization and how they are aligned with the founding leadership team.
Having a strong sense of purpose that is aligned at a personal and organizational level creates the right conditions for a goal-directed and motivationally driven sense of destiny, where everyone can visualize the business they are seeking to build.
5. Conflict is inevitable; address it early, proactively and constructively
It is 100 percent certain that there will be conflicts in any organization, particularly a young, fast-growing one.
A principle we always tried to adopt was the "point easy, point difficult, point crisis" model. Deal with emerging problems at point easy and don’t allow them to progress to point difficult.
As it relates to those within the leadership and the business, conflict will also naturally arise between founders and investors and, potentially later, also between founders and boards of directors if not carefully managed.
6. Keep the structure flat and take advice on the design of equity incentives
Take care in the design of remuneration, particularly when it comes to equity.
It is vital to properly incentivize people for their commitment and passion.
It is vital to properly incentivize people for their commitment and passion. However, mistakes are often made in the initial design of equity arrangements, which are later regretted.
Loosely linked to remuneration is organizational design. From the outset, we wanted to avoid the kind of hierarchical organizations that are endemic to big businesses the world over.
7. Prioritize creative thinking and the ability to deal with ambiguity
Hire people who can deal with ambiguity.
Most people nominate themselves as strong or as people who thrive in an ambiguous environment. The reality is that many find it deeply uncomfortable. This is particularly the case during the first two years of a new business, which can be quite chaotic. Startups are not for everyone.
8. Constantly seek to shape the culture
Think about culture at both a macro and micro level.
At the macro level, be very clear on the culture you are seeking to build. Culture can be the defining factor of a business’s success and a huge multiplier of its potential. Early-stage organizations have the opportunity to shape the cultural concrete of the organization as it dries.
At the micro level, think long and hard about how, in a practical way, you embed the cultural drivers throughout the company concerning the way things are done, from the big to the small.
9. Choose your partners – including third-party suppliers – carefully
We have always sought to build real partnerships with our key providers and have always valued and built a particularly strong sense of loyalty to those who supported us in our early days.
When your key partners are more than simply in a transactional relationship but are metaphorically inside the tent with you, there is a depth of understanding they bring that can create material value.
We have found that, when your key partners are more than simply in a transactional relationship but are metaphorically inside the tent with you, there is a depth of understanding they bring that can create material value.
10. Watch out for bureaucracy
Bureaucracy can spread like a virus, and this is particularly the case as the business grows.
The paradox of growth is that it can beget complexity and, with it, bureaucracy, which in turn can kill growth.
Watch for this like a hawk.
Joseph Healy is a 35-plus-year career banker with a broad background across most aspects of banking. David Hornery is also a 35-year veteran of the banking sector, beginning in the financial markets and investment banking before moving into commercial banking. He spent more than a decade at ANZ before moving to NAB in 2008, stepping out in 2015 to work with Joseph on Judo Bank.