Every day my Twitter feed is full of people telling me how successful they are, how much money they can make or how many Twitter followers they can promise me. Braggadocio!
In an effort to return to some semblance of normality and in the cause of perhaps passing on some lessons learned, here is a blog about how badly I have done some things. Five ways in which I have contrived to destroy value in my businesses.
1. Be seduced by the monster customer
Without question my biggest single blooper was allowing a huge customer to dominate our business. At the time our new e-billing company was less than a year old and the customer was Orange! What entrepreneur could resist? Sure enough after a very well run sales campaign we won the contract to build a solution to present Orange’s business bills online.
Don’t get me wrong – I am not suggesting that I wish I hadn’t accepted the business. The mistake I made was in not setting out clearly what we were being contracted to deliver. The consequence was that Orange kept finding ways of improving the solution and dazzled by the glory of having such a mighty customer we kept on building. For a period of time they dominated our business much to its detriment. Eventually we woke up to what was happening and soon crossed a bridge in our minds that to continue like we were could jeopardise our entire business. Once we had made that leap, dealing with the problem was easy. We put a fair but firm proposition to Orange reflecting the real cost and value of what we were doing. They wouldn’t accept it and to our credit we swallowed hard and parted company with them. It was a great lesson for me.
2. Believe my own business plan
Somebody wiser than me once told me that you should get three quotes when having building work done – ask for a price and time to finish. Then to get the most accurate estimate of cost and time, add all three together. I think there is a rule similar to this but in reverse when writing your own business plans. Look at the sales growth you are assuming and then double the length of time before the first sale and halve the rate at which you win customers. The trouble is that entrepreneurs are eternal optimists and will always believe the best case scenario. But it never happens that way and the very real consequence in a start up is that you run out of money because you don’t bring revenue (and therefore cash) in as fast as you predicted.
I have done this once and I had to very sheepishly return to investors with my tail between my legs with a revised plan. Luckily we spotted it early before it became a cash problem and we got through. The simple lesson here is “get real”!
3. Be cheap about paying good people
If I was only allowed to give one piece of advice to someone starting or running a small business it would be – surround yourself with good people. Especially in areas where you don’t have experience yourself. For me that is on the technical side. I would describe myself as a technical entrepreneur – I understand the major concepts – but I not a technologist. I have to admit that on a couple of occasions in order to keep start up costs down, I have been cheap about hiring a technical leader. The result was that what I got was someone who did an OK job at keeping development on track and ensuring the data centre didn’t fail – but when it came to the leadership, the vision, the roadmap, they looked at me blankly. Yet that is the bit that creates value in the business. Let’s assume I saved £25,000 a year for three years – total £75,000. Would a truly talented CTO have created more than £75,000 of value? Without question. The lesson here is, within reason, don’t think about the short term costs, think about the value. In other words don’t be cheap!
4. Believe I can do everything
A common misconception in a start up is that because you are small everyone must be willing to do everything – including the CEO. I admit I have fallen into the same trap. There is something worthy and inclusive about seeing the CEO put in a shift on the helpdesk but is it really a recipe for the best result?
The CEO is in that role because someone has decided that he is the guy with the vision, the leadership skills, the drive and the knowledge to take the business forward. So ideally you want your CEO to spend all of his time doing things only he can do. That doesn’t include a shift on the Helpdesk. Entrepreneurs are a confident group who think they can do virtually anything. But doing everything is not only impossible it is not right for the business.
It might seem stand offish, but I am afraid that is the way it is. The CEO is an expert – don’t waste his time. It took one of our investors to point out to me that if we needed an extra person part time on the Helpdesk then we should spend the £15,000 that it costs to hire one so that I didn't spend my valauble time doing it. He had invested in me to grow the business (and his investment) and he left me in no doubt that that was what he expected me to be doing!
It was quite a lesson - now learned and a mistake not to be repeated. The lesson is simple: Whatever you do protect your time valuable time. Work out what you do best and do it. Hire experts to do what you are not good at. And if you are a start up CEO, don’t be ashamed about ensuring your time is protected so that you can be a CEO.
I hope this helps and I also hope it inspires a bit more humility in my Twitter feed!
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