I started out in my own business around 13 years ago. When I was looking to get into business, I had a goal of owning a coffee shop. I was working for a franchise coffee and cake chain in Sydney, Australia. The owner of the store I was managing was experiencing bad times, with a relationship breakdown, health issues and financial uncertainty.
He offered to sell the store to me - quite cheaply compared to other similar stores as it was not making profits. This should have been my first warning sign. Mistake number 1.
I strongly believed at the time that I could do a better job and build the business up. I didn't have a lot of money saved, so I borrowed the funds to buy the business from my parents. This was Mistake number 2 as it was a big risk I was taking, and by borrowing from my parents, I was involving them (and some of their retirement savings) in my risk. But I put together a business plan and they wanted to see me succeed so they lent me the money.
I purchased the business and set to work. I started to build up and focus on the coffee sales instead of the cake side of the business, as coffee had a much better profit margin than the cakes I had to buy from the franchise company. Slowly I gained ground but this is where Mistake number 3 kicks in.
I chose to keep my coffee prices lower than my nearby competitors, thinking that would build my volume up. This worked, and over the next 6 months my coffee sales nearly doubled. I gave away a sizeable portion of my profit margin, to chase sales growth. The problem with that was that the coffee needed more staff, so I has higher wage and employment costs than I could really afford. In hindsight, I should have focused on value adding options, and building sales through better quality instead of cheaper prices.
I ran the business, without having a full grasp of the admin and paperwork side of things. In Australia, employers have to contribute an amount to their staff members superannuation account for retirement. I started to fall behind on this obligation and my record keeping was poor. Mistake number 4. My staff became less motivated, and the standard of work dropped off.
The next mistake is debatable. From a purely business side of things, absolutely a mistake. From a personal life choice perspective, definitely not a mistake. But for money reasons it was so I shall make this Mistake number 5. I moved close to my business and started living with my girlfriend at the time. I had found love just before I bought the business, and my partner lived close by. Financially, moving in together in a expensive rent part of town, was a big mistake. I don't regret this one for a second.
The relationship caused more issues for my business. My staff felt I was taking too much money out of the company for personal use. They also formed an opinion that my partner was using me and was only in it for the money. I knew this was not the case, but perception is everything.
Despite all this the business kept growing. I eventually put my prices up, had doubled the size of the weekly takings, and was slowing the bleeding of money out through debts and late payments. Things were looking promising, and then we got more good news - My partner was pregnant, we were going to have a baby.
As things progressed, I experienced more negativity and doubts from both my family, and my staff. They were pretty much all of the opinion that my partner (at this point my fiance as I had proposed) was taking advantage of me. A gold-digger they suggested (or at least gossiped behind my back)
Mistake number 6 in all this was not having any other assets backing me up. The lease on the business was due for renewal. Despite the fact sales had grown, the company had very little money, and some large debts accrued over the two years of misguided management on my behalf. The shopping centre I was located in required stores to renovate the store before they would get a new lease. I found myself trying to borrow $100,000 from a bank, during the middle of the global financial crisis (2007-08). This proved to be impossible as I had no outside assets (property) to secure a loan. The franchise company I was a part of wanted to keep the store operating, and I was in debt to them for a significant amount of stock and franchise fees that I was behind on paying for. They ended up taking back the store from me in February 2009.
That was the end of my business career. I had lost $70,000 of my parents retirement money. I was in personal debt on credit cards, tax debts, behind on car payments and so on to the tune of around $40,000. I had some very angry staff that didn't end up receiving their entitlements, a fiance, a teenage step-daughter and a 6 month old baby - and no job.
We ended up moving out of Sydney all together, moving 500 kilometres away to restart our life. We moved in with my partners parents, I got a job working for a big supermarket chain and moved on with life.
10 years on, I can say I do not regret this time of my life. It was a massive learning experience. And as for the "gold-digger", well she stuck by my side through all that life threw at us. We had another child and finally got married a couple of years ago. Still in financial difficulty, have been living week to week for 10 years. But happy, with the love of my life, and having survived some down times and carrying a lot of guilt around for many years about how badly things went wrong.
I hope my story can help someone to avoid some of the mistakes I made (there was others but these were the highlights)
Thanks for reading,
John aka @jk6276.
I have started, owned and closed several businesses. Here are some of the mistakes I have learned, in a hard way:
1. Doing business with friends: Believe me, if you are to open business, hire someone to work for you, not your friends to work with you. In the worst case, you loose your business, and your friend.
2. Enjoying the ride: If your business is making profit, try to bring that profit to 70/30: 70 back to the investment and 30% for saving. After you get back all of your investment, you can enjoy your profit. I enjoyed the profit too soon, which lead to the lack of capital for further investment in later stages.
3. Passion: Whatever you are doing, be passionate and always ask yourself what do you want to build and WHY. I lost the passion in two businesses, which resulted in a close down and loss of revenue.
Those are my most significant lessons in doing businesses.
For me, when I tried to venture out my business my first ever mistake that made it difficult for the business to go out is - financial planning. I didn't evaluated all of the possible cost which totally drained my financial funds making me miserable and cheap at buying things for the business. I loaned and borrowed money which has an overwhelming interest rate and that alone is a big mistake I've done initially.
To cut the story short, I've been in a financial debt due to poor financial planning. What are the cost of buying the materials, the product itself, venue rental, labor, employee salary, and possible break-even situation which I totally failed to capitalize. My thinking is only be able to set-up the business and realize those things little by little as the business progresses.
Its a good lesson to learn and this time I am mindful of all the in's and out's of the finances when I set up a business. Its a great lesson to learn and a slap to reality that poor business planning often leads to salvage especially the financial ones and maturity of the mind in every aspect that we look on in setting up a business.
I guess one of the things that I thought was this one product was going to keep selling as it sold for quite well for around a few months but then competitors came and offered the same product and slowly profit margins decrease. One of the most important thing is to keep innovating and that is one part that failed when I started business and paid too heavy of a price to buy lots of technology to aid in selling products instead of doing it slowly.
Hiring people when there wasn't much business. It's a huge mistake that I guess everyone in the business world would do as it is not easy to keep earning when we just hire employees without knowledge of the direction of the business.
When you have an incomprehensible thought, it's common to need to acclimate it with the world in a full created state. Notwithstanding, it doesn't take a CPA to comprehend that the more you take to dispatch, the more you neglect exchange turning out.
"This is a typical goof, particularly for tech individuals," says Drew Williams, co-creator of Feed the Startup Beast. "Many need to manufacture an application and won't let it go until it's ideal, yet then you take too long and spend pointlessly." Specifically, this screw up will in all probability desert you with no "runway"- - the money you'll have to keep up you as you're attempting to get your thing off the ground once it's prepared, in any case before you have clients.
"You have to consider the smallest baffling, key modification of your thing that gets the thought crosswise over completed and endeavor to discover somebody you can pitch it to," Williams says. "Discover a few customers who will complete a pilot where you assemble, test and repeat it. Undeniably, your thing will be unprecedented in association with what you expect, and after that you make it. On the off chance that you get a true blue, live customer, you make an overwhelming thing in an extraordinarily monetarily gifted way."
I admit, I wasn`t born entrepreneur.
When I launched my first "successful" business, I made several mistakes that cost me money, emotional instability and doubting myself.
Briefly stated, this business was basically a web development agency.
Some of the mistakes that became MY REAL SCHOOL were:
Do not know copywriting.
It is not common for you to see this reason, and with good reason. Many people live crushed by not knowing how to communicate effectively to sell and that makes it very difficult to promote a business.
In my case, he communicated my proposal horribly. It said something like "I do complex web development using Drupal and open source philosophy". WTF!
I have no idea how many sales I lost simply by making a horrible presentation, but there were so many!
Needless to say, the terrible impact on my motivation was to see the disinterest of one person after another in what he said. They were just nice and told me "go that interesting ...".
Personally, I consider along with many other successful entrepreneurs, that direct response copywriting is one of the most useful skills you can have.
So much so that I even published a book on how to do it properly to have results that make you jump out of your chair
Believe that an incubator would help me sell.
Similar to the previous point, in this business I had a problem to sell my services. So I got into the best incubator in the country. So much so that I even won a degree from ITESM and Stanford that I like to show off from time to time.
They helped me put together a nice business plan with which I even won a contest, but when selling, the advice was extremely rudimentary. So much so that when I heard it I felt sick and stopped going to the incubator.
Based on my experience, I believe that an incubator is good only for those who need financing (since it facilitates access) and who do not know anything about the organization and administration of a business. And possibly to make relationships with other incubated.
If you want to know how to sell without selling, you better learn to make spectacular offers.
Not knowing how to do customer development processes
When I managed to sell websites (which were basically clients who "fell out of the sky" and who bought me despite me ruining everything with my verbiage), the site ended and then "another butterfly thing".
Well, having this type of process that considers people who are ready to buy, those who are not, to increase the size of the purchase and to achieve more future sales is CRUCIAL to have a good business. I learned it hard.
Believe that I can do business from my chair
Yes, I am somewhat egomaniac.
But I know that many also make this mistake, of wanting to "do it and they will come".
That is only real when you do something "magnetic". So that when you present your offer, they are attracted.
Hence the importance of knowing how to make good offers and know how to copywriting.
The reality is that knowing how to do this is a process. And like any process, it has its learning curve.
When you study, test, analyze, return to study, improve and reevaluate your results, you are breaking your shell that your wings are showing you.
Without wanting to, I have the talent to be a semi-born salesman. I am not much to use "closing techniques" nor to be a seducer with words. Nor am I a particularly sociable or extroverted person (I am "intravert", which is the middle point), but I can sell to anyone if I try a little.
And I know that you can too.
Really selling is not difficult, it is a matter of preparing a little and trust in the process that we give you people who have tried it and it has worked well for us.
It will not go well the first time, nor will it probably be as easy as you expect, but it is important to go out and relate. Talk to people and learn from their problems, what they want and their aspirations.
That's why I like to help new entrepreneurs from time to time, like in that question I answered what advice I would give to a young entrepreneur, and what better than to help you sell so that you have more confidence in yourself.
Wait for a partner
If you do not have the fortune of having a "partner" for your business that complements you and that you trust in him or her, then do it yourself.
In my case, I got a bit traumatized because all the success stories I read were a "dynamic duo". Even legally it is complicated because if you do a limited company, you require partners.
But that does not have to be an impediment if you do not have someone with whom.
Do not wait for anyone Do not wait for the "ideal moment".
Speed always wins to perfection.
Do something that people really want, add a great offer (I mention my book wink again wink) and put it in front of people who will make you happy to have it. There's no more.
I have had four or five attempts at entrepreneurship with partners that have gone very badly. They are stories in which I prefer not to get involved because there really is nothing good to extract apart from what I already told you, do not wait for anyone!
Look at yourself in the mirror and just think you're as smart as you can be and start moving forward.
I hope my answer serves someone!
"Being organized is key to every business be it small or big. Running a small business is like being a circus ringmaster.
It's normal to have dozens of things happening at once.
So, keeping up with the daily task list was a problem, things that I need to do. And I never had a list by their priority.
It never simple, but if you can achieve this, it works. This actually made me far more unproductive at the beginning.
Thanks for reading. Cheers.
I was the first-run through business person and I had no clue how really a business functioned.
I have made fuck ups in abundance, botches aplenty and got numerous things off-base. I have picked the wrong ways at the wrong occasions, worked with the wrong individuals, and sought after the wrong thoughts.
Overlooking a word of wisdom, and taking awful guidance - obviously, it is smarter to tune in to the a word of wisdom, yet which exhortation is best is generally just clear looking back.
Not associating with individuals and experts who could develop my business adventure.
Poor systems administration - Not going to nearby occasions, not being integrated with the network. Not bigging up my business. Not tossing that 30-second lift pitch to everybody and anybody that will tune in.
Working with the wrong individuals - Always ensure that you are not working with a period bomb sitting on the barrel with explosive.
Refreshing sites each day - Everyday I got another thought and was adding another component to the site. we were confounded what include required all the more advertising or which one not.
Invested a ton of energy to manufacture MVP - We took around 5 months to fabricate our MVP and we lost a great deal of footing.
Not connecting for help when it was required (i.e. excessively obstinate!)
Consolidate - Spent a considerable measure of cash and time on it.
I have quit seeing mix-ups as a negative, and have diverted them into an instrument from which to pick up information and gaining from.
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