Entrepreneurs Should Stop Lying To Investors – And Themselves

I use to think that transparency was overrated — not because I didn’t want to be open, but because I didn’t believe much value could come from it.

One thing that strikes me as interesting, time and time again, is the hesitation that exists within us all to reveal uncomfortable information. Whether it has to do with a everyday company decision or a compounding, lingering strategic issue, leaders often refrain from shining a bright light on challenges – especially when communicating with investors.

Clearly, the objective is to either preserve “character” or delay reality. However, when we shy away from a problem, it ultimately destroys both.

 

Why transparency in business is essential

Facing business challenges head-on is by no means an easy task. Based on my experience, both positive and negative, here are five ways you can challenge yourself to always be transparent, and why they are important.

 

1. Build credibility and trust

Transparency establishes trust over anything else. Whether it be within the context of a personal or professional relationship, the more straightforward you are, the faster you are mutually comfortable with one another. The same is true with investors.

 

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The most profound indicator of integrity and respect is the willingness to reveal the uncomfortable things. The result is trust, which then leads to expedited resolution; a win for all involved. For example, I send out a monthly update to our entire investor base with most of our metrics, regardless of whether they’re good or bad. This nurtures trust with our partners.

 

2. Emphasize team cohesiveness

When you face uncomfortable things  it results in blood, sweat, and tears. At this time, your team can either come together or it can crumble. When we face problems we don’t have an immediate solution to, we bring it to our investors’ attention.

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When you identify and state the issue it saves everyone a lot of time. It positively directs everyone’s energy. Plus, the benefits are worth it: more time spent discussing the actual issues, and less time dancing around the elephant in the room. Ultimately, it means there is more team training for everyone involved.

In our case, both internal and external partners get to observe how we respond to certain complexities and so on. This leads to more cohesion among our leadership and our investors. Our lead investor graciously offers to take time to meet every three weeks to touch on the most burning of issues. In the early stages, push your external partners to meet more often than not.

 

3. Keep your team on their toes

If you operate in a transparent environment, then you also know that shortcomings will immediately come to light. This approach keeps you and the rest of your team on your toes, with no pause.

 

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This goes for external partners as well. When we know the depth and frequency at which we dive into strategic issues with our investors, it forces me to constantly ensure we are on our A-game. Transparent teams want to capitalize on every single opportunity. We strive to squash every problem as quickly as possible. If investors know you operate on an aggressively transparent basis, it will force them to operate at their best.

Although we do not have an investor on our board just yet, we still go through the motions to conduct a formal board-type meeting every two months or so. It forces us to not only set ambitious yet realistic milestones, but also to prepare us for operational scale.

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4. Get the right help at the right time

The more known everyone’s problems are, the higher the probability you will receive a helping hand. Years ago, when I hit a roadblock or needed help I would have been ashamed. This was all insecurity.

Over the years, I’ve come to realize when you are able to lean on other intelligent people you accomplish so much more. Today, I leverage my teammates and investors more than ever by letting them know constantly what keeps me up at night.

 

5. Learn to accept failure

There’s nothing worse than overlooking defeat or wrongdoing–not because it gives people the perception you’re not confident, but rather it slows down the rate at which you receive feedback (and subsequently the rate at which you learn).

 

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No matter how successful you or your business may be, feedback is the most powerful tool to help you get better at your craft and lead those around you. The more transparent you are, the more feedback you will receive. Always push your teammates and yourself to give and receive feedback.

 

Is transparency overrated?

I use to think that transparency was overrated — not because I didn’t want to be open, but because I didn’t believe much value could come from it. After all, being transparent sometimes means you have to tell others what they may not want to hear.

But I can safely say that I would not be working with the people I am today if it were not for my transparency. If days go by and you don’t receive any feedback, chances are that you’re not being straightforward enough with your real challenges.

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This article has been edited.

Giuseppe Stuto is the co-founder and CEO at Fam, Board Member at Baystate Financial Charitable Foundation, and a former student mentor at BUILD.

 

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