What is the single biggest mistake you made in your first year of business?
I'm writing a new book this summer (From Geek to Peak, a guide for technical professionals eager to start their own freelance/consulting business). The focus is on the first year of business--all the things you have to tackle in order to "survive and thrive." So I'd like to ask my LinkedIn colleagues to chime in on various topics...and this is the first question. I'll be blogging about all of this over at http://www.myerman.com
Good Answers (6)
Laurel E
CEO and Principal
Best Answers in: Events Marketing (1), Business Development (1), Small Business (1), Starting Up (1)
Hello "Myerman,"
I am still in my first year of business, but with 6 months under my belt, I feel I have some wisdom to share.
My number one mistake: Giving away the farm. As a consultant, I felt that in order to prove I could do the job, I had to tell my prospect everything I planned to do for them upfront. Guess what? They often opted to "Stay inhouse" or "go it alone" WITH MY IDEAS!
Number two: Not having a true understanding that cash and workflow will ebb and flow. Advice: Prepare for the down times by budgeting cash and pacing workflow from high volume periods.
The best thing I did was very carefully CHOOSING my clients. I took select friends and former colleagues out to coffee once/week to share what I was working on. I never once SOLD anything to these people. Having seen me in action in different work environments, they were already sold on my value proposition. And hearing about my business, projects and success was inspiring to them. I have been told on numerous occasions that my passion is contagious. They want a piece of the action.
Growing too fast.
Ironically, we dream of having our operations at full speed, but without the proper preparations the 'wheels start to fall of the wagon.'
Though Im not qualified to speak in the Tech industry, let me share with you a great analogy we have in our banking industry. The original cancelled check, now delivered as a 'picture' inside the bank statements, at one time had to be returned to the person who wrote it. Think about the time and loggistics behind the operations for a major bank to make sure they all made it back to their members (even now is much of a task)... quite tedious.
Thus the saying.. "dont worry about ALL of the checks getting back correctly on time. Worry about ONE, then repeat the process as many times needed." (Bank of America founders may have to be credited for this process)
Growing too fast was kind of like that for us. We go nuts in marketing to make the phone ring then our costumer service suffers because they most got to voicemail. We pump our fist in the air as we beat our competition for the bid, then stress out for weeks to make the project on time... while our competition is happily working smaller projects. Growing too fast is not biting more than you can handle, for me it is inadequate experience at the next level. I wanted to be my own shop for a while, but was I ready to make ALL the shots?.. nope. If you rare eady, then you shold not sweat the growing pains, as much.
Enjoy the ride. Learn from each step. There is plenty of room at the top... just not much space to sit down.
Pablo Pereyra
Founder- Hispanic Business Center
Alexa P
CMO & Paradigm Buster at FossaTec
Best Answers in: Guerrilla Marketing (2), Business Development (2), Events Marketing (1), Internet Marketing (1), Branding (1)
The single biggest mistake I made was allowing my fears to interfere with my business decisions. I started my life as a freelancer by posting a profile on a freelance site and bidding on projects. I was so eager to take on clients that I didn't choose which clients were right for my company. I accepted jobs out side of my specialty just because I had the skills to do them. I accepted a couple of "work now for almost nothing and get paid a commission later" type of projects. Both turned out to be disastrous as I spent a lot of time and energy just to find out that my work was not being used. I only have a positive impact on a client's business when they follow my advice and "free" advice is not valued the same way as paid for consultation.
Luckily, I recovered from those errors quickly. Now I treat my business like a business and not like a hobby. My decisions are strategic and I am enjoying the benefits of these changes.
Hi Thomas
The single biggest mistake I made was getting into "Perfection Mode" nothing from my website, to my business cards was good enough for me. I must have redesigned them ten times or more. This meant no marketing and no clients for almost the first year of business.
My advice to others, just get started, if your website isn't the best keep working on it, but put up something to start.
Good luck with your book.
Luis R
President, Occu-Med Health Services Inc.
Best Answers in: Organizational Development (2), Web Development (2), Staffing and Recruiting (1), Advertising (1), Philanthropy (1), Manufacturing (1), Quality Management and Standards (1), Small Business (1)
Thomas:
I made so many mistakes, it's hard to pick one. So let me share three:
1. ONLY Cash pays the bills.
It was easy to get caught up in the excitement of the big sale. Revenue and Billings don't pay the bills. Only the amounts collected pay the bills.
If I had to do it over again, we'd manage receivables much more agressively in our first years. You can go broke while increasing revenues, if you're still waiting for your receivables to arrive.
2. Holding on too long...over and over ...
I made the mistake of keeping bad employees and bad clients too long, hoping for things to improve. What I've since learned is that those employees/client act like a cancer on the entire organization -- so when you realize you have that kind of problem you need to move fast and decisively and it's best to take the hit and move on.
3. Clients don't just show up.
We didn't do nearly enough pro-active marketing and advertising in my first years as an entrepreneur. We were naive about the strength of referrals and networking activities.
Gotta stop there. Lord knows I could keep going.
Good luck with your book.
Richard T
Experienced Moron & Tedius Narcissist: wish to set up Excellence Science & Creativity Colleges via new PHD job in 2011
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Responding to problems or bad news the same day as I heard/encountered it. ALWAYS sleep on it first before responding--my rule now.
More Answers (14)
Hi Thomas!
Great to hear about your book. I wish you the best with it!
I'd have to say the single biggest mistake I made was to sign contracts for "needed" services such as marketing ads, alarm services, and janitorial services. During "cash crunches" it would have been nice to be able to skip a couple payments or competely stop these services.
Obviously the service provides know this and that is why they offer discounts for signing the contracts. If I could do it over again, I would not allow myself to sign any contract for at least the first 18-24 months (while I got to know my business better).
Cheers!
Wendy Dee
Owner, Curves - South Grand Prairie
Lynn C
Partner, Mercury Mambo - Hispanic Sales Promotion, Experiential and Event Marketing Agency
Best Answers in: Advertising (1)
I have two business partners. When first starting out, it's hard to spend money on things you think you can do - even if you do it well.
In our case, we needed a bookkeeper. We were horrible at getting our invoices out and even worse at following up on them if they didn't get paid in a timely manner. And, tracking expenses? Forget about it!
Finally, after a very stressful tax season, we bit the bullet and hired our first employee, a bookkeeper.
This one decision allowed us to focus more of our time on things we were good at and, in turn, ended up letting us go out and make more money. What we didn't realize at the time was how much struggling with this one issue was holding us back.
As our business continues to grow, this issue comes up over and over.
Many of us that start business are "technicians" (that's E-Myth speak). We tend to do too many things ourselves because we either think that nobody can do it as well as we do.
While this may or may not be true, we have to keep in mind that to grow a business eventually you can't do it all. Figure out the things that are essential that you do and start figuring out how to bring in someone else to do the other things as soon as the growth of the business warrants it.
There are a lot of really talented folks out there. I've been fortunate to hire many people that are much better at the job that they do than I ever was.
We hired the wrong CPA. I advise you to know your taxes. Local, state, federal, payroll and sales.
Read up on the employment laws in your state. An employee can take advantage if you do not know your laws.
Check on licensing requirements. Most states are very helpful, it always helps to be friendly and courteous to the person that you call and ask for advice. In most states there are small business advisory organizations that can assist you.
Hello,
I think an entreprenuer is one who is not afraid of making mistakes, and that's what taking risk is all about. I have made my share of mistakes, and most of them have been captured in the lists above.
I think a entreprunuer is one who accepts that mistakes will be made, and is ready to jump into the fire, and learn from the mistakes.
First few years of business, one must be ready to go through lots of unpredictable downturns, and work through them, learn from them, and come out overcoming them.
After all 70% of all businesses close down in the first 3 years of operation.
Best of luck to all,
Roy
Hi Tom:
Two major issues stood out during my first year of business.
One: Would you order steak at a Chinese food restaurant?
We all like to think of ourselves as capable, savvy professionals. In an effort to save time and money, we take on tasks in areas for which we have no expertise.
Granted, I was smart enough to hire a CPA to handle my taxes. But I really should have hired a firm to handle my billing and collections. I'm a professional communicator. Thus, it is in my best interest to hire a professional whose expertise is in billing and collections. That way I can concentrate on my clients needs.
Two: Show me the money!
A client should pay half of the agreed upon monthly or weekly fee before I begin working with them. It shows a commitment and intent on the part of the client.
See you at the next meeting.
Desiree
Hi, Tom,
1. Not making billing a priority. As a "creative type," billing was always the LAST thing I wanted to do.
2. Ignoring the gut feeling that a prospective client was not a good fit for my company.
3. Not preparing well enough for the tax hit.
Things I did right:
Be visible and active in a professional association.
Encourage happy clients to refer me to others for new business
(Project By Project Marketing Communications celebrates 15 years in 2009!)
Peter G
The More Clients More Profits Coach
Best Answers in: Business Development (1), Professional Networking (1)
Hi Thomas,
First, good luck with your book. I went into business for myself 18 years ago, and in looking back, I'm not certain which was my biggest single mistake. But there were a number of them. One problem I did not have was with my account; I'm married to her.
As a marketing coach, I work with numerous small business owners. I often see the problems that others have mentioned here. Perhaps the biggest problem I see is startups not being well-funded. The lack of cash often prohibits them from hiring the experts who help them attract customers, have sufficient revenue, and realize profits.
The other significant problem I see is grand expectations. Startups often rely on unsubstantiated forecasts of sales -- the "If I build It, They Will Come" syndrome. Of course, the this can be withstood longer and with less agony if they had greater access to funds.
I hope this helps.
Peter George
Hazel M W
Referral Institute Indiana
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I spent to much of my time doing low value activities instead of high value activities. Like Networking instead of Nurturing my Network.
Sammy K
Student at University of Pennsylvania
Best Answers in: Staffing and Recruiting (1), Career Management (1)
In my first year of owning and managing a consulting company (home business), my mistake was in terms of adopting an effective accounting policy, which for the first few months impacted my financial performance.
"Knocking" on a clients door is not the most effective strategy.
After that I adopted net 10 terms. In addition to the adoption of accounting terms; the other major aspects of owning a business (a few previously mentioned by linkedin members) include, but are not limited to the following:
1. Can you, as an entrepreneur handle a new life style. For example, in launching my business I had committed (for the first few months) 60 to 70 hours in developing an image in the marketplace and till now developing and implementing strategies to tackle the experience barrier in the Consulting Industry.
2. Never lose sight of your clients needs. All clients listen to the same radio station, WIIFM: What's in it for me. Creating "value" for your clients (which is based on your businesses internal activities [i.e. HRM]) is crucial to surviving in today's marketplace. Value in the Consulting Industry is based on providing clients with a positive ROI.
3. Time management is an important skill to master before entering the Consulting Industry. What automotive parts are to Advanced Auto Parts time is to Consultants; inventory.
4. Develop a business plan before entering or investing capital into a business venture. Understanding the industry from the perspective of its cost structure, barriers to entry, and bargaining power of both suppliers and buyers will help you to determine (or estimate) the required capital to launch your business.
Of course there are other important factors to consider, these are just some of the stepping stones to business success.
Sammy Khayat
Clarification added June 24, 2008:
PS: Good luck with your book.
Thomas,
One word - UNDERCAPITALIZATION! Small business owners often worry too much about thier financials, when early in business, the cashflow is the one vital factor to keep the business moving forward.
I have worked with numerous small businesses, and for the ones that struggle, this is the major reason why.
Diana R
Internet Marketing, Local Search, & Relationship Marketing Expert
Best Answers in: Lead Generation (4), Small Business (4), Direct Marketing (3), Advertising (2), Business Development (2), Sales Techniques (2), Public Relations (1)
I hate to even admit it - but failing to analyze whether or not people were willing to PAY FOR what I was offering.
I knew there was interest in the subject, based on search engine analysis - but didn't mean someone was willing to buy an ebook about it.
Of course, I didn't realize that until much later. My ebook still sells, but not anywhere near as well as I'd initially hoped.
Jason F
Owner, winner-net
Best Answers in: Lead Generation (1), Sales Techniques (1), Starting Up (1)
take y'pick, Thomas:
- not doing it sooner
- doing anything at all that wasn't contacting potential customers
- listening to anyone that said I was a dreamer
- letting Plan B take my eye off the prize
Jack L
Director, Internet Strategy and Operations - Internet business and marketing professional
When we went into business we were just "3 geeks", we knew computers, web & networking - but NOT accounting. We foolishly worked with a bookkeeper who only reviewed our reports and not an accountant that actually generated the reports. As the saying goes; garbage in, garbage out. It almost cost us the company and it took us years to get over that one.
I don't know if my industry will convey to consulting, but I do know each client/customer wants to feel as if they are your only concern. My biggest mistake in my first year was overbooking myself. Thinking I was "desperate" for work, I took every job I could and wound up running late, stressed out, and unable to provide quality service. Fortunately, a mentor set me straight very early on.
My close second was taking on too many "outreach" jobs. In massage, that's a common ploy to bring in volunteers with the promise of gaining contacts. In reality, it translates not only to unpaid, but also to unappreciated. People are often unwilling to pay for a service they've received for free. Volunteer jobs should be worked only for the sake of volunteering.
Best of luck with your book!
