“We learn from failure much more than we learn from success.”
Soichiro Honda
As an entrepreneur, I’ve made hundreds of mistakes. You’ll make mistakes too, but I don’t want you to make the sames mistakes I made. Learning from other people’s experiences is one of the smartest things you can do. I want to share with you 7 costly mistakes I made so you can avoid them in your own business.
Not All Sales Are Good
I used to think “as long as it makes us money, it’s a good thing”. Now I now how wrong I was. High-maintenance clients will actually LOSE you money. Plus, they’ll take so much of your time that your focus will be taken away from growing your business.
Use the 80/20 rule: 20% of your clients will suck up 80% of your time. Fire that 20% and go get more like the other 80%.
Also, detect what parts of your business are the most profitable and get rid of all the others. A few years ago I had a company that used to sell cool gadgets over the Internet. We were doing really well but we were too busy all the time to grow the business. My partner and I sat down and wrote down all the things that were taking a lot of our time. We realized that shipping internationally was very time consuming and so was gift-wrapping. About 5% of our orders were international and 7% of our orders were gifts. We decided to stop shipping internationally and we lost 5% of our sales. We decided to stop offering gift-wrapping and instead of losing 7% of our sales, we only lost 2% (as it turned out, some people were asking for gift-wrapping only because it was available, but they would’ve ordered from us anyway).
So, we lost 7% of our sales but we freed up 15 hours per week. We spent those 15 hours to market the company and tripled our sales in the following 6 months.
Analyze your numbers and time logs; identify what’s sucking up a lot of your time/money and eliminate those parts of your business. Focus on what you do very well that makes a lot of money and do A LOT MORE OF IT.
We Tend to Lie to Ourselves
Nobody likes failing and because we don’t like failing, sometimes we subconsciously choose not to see the truth. Our revenues have been dropping for the last 6 months and we keep telling ourselves it’s just temporary. More and more employees leave our company every month and we tell ourselves there’s something wrong with them. Our marketing doesn’t work and we tell ourselves things will “pick up” soon.
Lying to yourself will kill your company. It takes guts to acknowledge there’s something wrong with your company but it’s the only way to get things fixed.
Take a sheet of paper and make two columns: problems and solutions. Now figure out what’s broken and how you’re going to fix it.
When Most of Your Income Comes from One Source, You’re in Trouble
A few years ago we got a huge account. It was bigger than the rest of our clients combined. I was really excited. I started working 80% of my time for this client and I instructed the rest of the team members to do the same. This client was thrilled with our services but after 4 months they reduced their marketing budget and they stopped using us. I was devastated. Not only was this big client gone, but a few of our smaller clients had left us too. I was so focused on the “big guy” that I neglected everybody else.
Today, I’d rather have 30 clients each paying $2,000 a month than one client paying $100,000 a month.
If most of your income is coming from one single source, start working on changing that.
Reserves Can Save Your Business
No matter how strong you think your business is, things can always go wrong. Reserve cash can save your company when that happens.
Twice in my life I made the same mistake. The first time an employee stole a lot of money from me and put our company at great financial risk. The second time is when I lost my big client and a few small ones. In both cases I needed to borrow money to get out of the messes I got myself into. I was lucky enough to have friends with money that helped me out, but for most people that’s not the case.
Today I have a rule: 10% of our profits always go to a separate bank account. I don’t even think of that as “my money”. That’s the company’s money and the company will some day need it. I know it will.
Not only is this a great business decision but it also gives me the peace of mind I need. Now I know that when something really bad happens, our business will remain strong.
You Better Have an Excellent Reason to Have a Partner
Most people have partners for the wrong reason: “because he’s a really good friend”, “because he’s fun to work with”, etc. I don’t care if the person you’re thinking of asking to partner with you is your best friend and very funny. That’s a good reason to watch the Superbowl with him or go shopping with her, but not a good reason to go into business with that person.
Your partner should bring something to the table that you don’t have. It could be money, connections or a skill you don’t master. For example, I’m great at marketing but suck at finances. I get clients for our business and my partner keeps the business profitable. For one of my businesses I partnered with a guy who knows his industry extremely well. He brings to the table specialized knowledge and I bring to the table my marketing skills.
Every time I tried to partner with friends because they were good guys or fun to work with, I ended up regretting my decisions.
It’s All About Working with the Right People
Do you ever find yourself explaining someone how to do something over and over again? Do you ever feel like if you want something to get done right you have to do it yourself? I have news for you: you don’t have the right people on your team. I stressed for years because people I hired didn’t do as well as I expected them to. After a while I realized that if 99% of my employees weren’t doing a good job, I was hiring the wrong people.
When you hire the right people, everything becomes easier and more fun. The way I know someone is the right person for the job is if I can tell them WHAT to do but not HOW to do it. Tell smart people the outcome you expect and they’ll find a way to make it happen.
Your Happiness Shouldn’t Be Tied to Your Results
Every time I lost a client, I was really sad. Every time I got a new client, I was really happy. I don’t do that anymore. It’s just not good for me. Failures and successes are part of the game. Some things work out and some things don’t. If you can’t accept that, you shouldn’t own your own business or you’ll always be unhappy.
It’s great to work with a goal in mind, but you should enjoy the journey too. Otherwise, nothing makes sense. Love what you do and do it as well as you can. Some days you’ll see great results and some days you’ll find obstacles along the way. It’s the way it is. Accept it and keep on moving on. Enjoy your successes and failures. Remember: you’ll learn much more from failure than you will from success.
