things i learned since my small business tanked
and mistakes i’m not likely to make again if i ever get the chance
by tim lockwood
- Before considering going into business for yourself, play Monopoly against people who enjoy the game, especially people who like to play with rules that aren’t in the official rulebook. You’re almost ready if you can win against them once in a while.
- If you are considering buying an existing business and something doesn’t feel right, don’t buy it, no matter how much people tell you it’s a good thing. People have died in dark rainy alleyways from not trusting their instinct, and if you get that feeling, go with it, even if it doesn’t involve a dark rainy alleyway.
- Whether you buy an existing business or set one up from scratch, it’s usually considered par for the course (and even preferred in some opinions) to use OPM — Other People’s Money — to do so. That’s fine, but if you think you are going to make it without having a significant reserve of your own as well, think again. Other People like to get their Money back eventually, and when you hit a soft spot in your sales, you still have to pay them back. If you use your own money to buy or set up the business and the business goes nowhere, you will have spent a lot of money, but in the end you will owe no one anything.
- If going into business with a spouse, whether you are buying a business or setting one up together, you both need to be fully prepared to quit whatever day job you have and run the business full time. Owning a business takes sacrifice, and one of the sacrifices includes giving up a little security to take that risk.
- With a small business, your main job as the owner is to be the head of the sales and marketing department. Your primary responsibility is to get out there and win new customers or clients, and keep the existing ones happy. Yes, you need to know every facet of your operation and be able to step in as someone else’s replacement when needed in the short-term, but do not confuse this with becoming a worker bee in the long-term. You are needed elsewhere.
- If you buy someone else’s business, you are only inheriting their troubles if you go into it expecting to keep the same crew working there for any length of time. At the moment the business changes hands, everyone needs to start with zero seniority and everyone must prove himself or herself all over. Everyone, no exceptions. Employees who are sticking with you through the changeover “as a favor to you until you get settled” are especially doing you no favors; they are merely looking out for their own jobs and wish to define yours for you. You owe them no loyalty.
- Never buy a business that employs people you know, and especially not one that employs people that are currently your co-workers, unless you are fully willing to let each and every one of them go if needed. Trust me, you think you know them, but you don’t really know them until you are their boss. By then it’s too late.
- When it comes to your employees, never value hard work over positive attitude. It’s easy to motivate someone to work hard if he or she has a positive attitude, but it’s much more difficult to change someone else’s poor attitude no matter how hard he or she works (and believe me, there are some hard-working Eeyores out there). Such people are more likely to bring you down than you are to lift them up; and if someone else’s poor attitude infects you, the whole business suffers.
- You are not there to make friends with your employees, you are there to be their boss, and that is how the relationship should be.
- The two worst things an employee could do is lie to you and steal from you. Aside from the obvious methods of stealing such as running off with shop or office supplies, or dipping their fingers into the till or the petty cash fund, other less direct methods of theft include plain laziness, riding the clock, and having a poor attitude with your customers or other employees.
- You don’t need as many employees to do the work as you think. Watch your payroll.
- Firing people stinks, even if the people deserve it, and if you ever grow to enjoy it you need serious psychological help. Being fired hurts, and the kindest way to do it is to be polite, professional, emotionless, and quick. Think of the last time you received a shot at your doctor’s office. The nurse who gave it to you knew it was going to hurt so she got it over with as quickly as possible.
- Not firing an employee who needs to be fired not only does you no favors, but does the employee no favors either. He or she will never be able to grow as a person if you allow them to continue at an ill-suited job.
- The more a fired employee rants and raves about suing you for this and that when you fire him or her, the more likely you were justified in firing that employee.
- If you buy an existing business that is solid at the core but needs some obvious changes, make those changes right away. The longer you wait, the less likely it becomes you will make them. If it is financially unwise to make the changes right away, for pity’s sake set a timetable to make the changes and stick to it. It is a good way to set the tone that a new boss is in charge who isn’t afraid to shake things up and try new stuff.
- You don’t have to be a raving loon, but since it is your business and your investment, you have the right — nay, the responsibility — to express your displeasure when things go wrong. There’s especially nothing wrong with expressing outright anger, if you do so sparingly and have picked your battle wisely. The flip side to this is, be sure and make a point of saying thank you periodically to employees who help make your business successful; at least once a day if you can swing it. Be specific in your praise (for example, “Thank you for handling Mr. Jones’ order today, I think he prefers dealing with you.”), otherwise it becomes generic and meaningless.
- If you find yourself financially going down the tubes past the point of no return, pay your bills in this order: payroll, suppliers, utilities, rent/mortgage. You might switch utilities and suppliers around depending on your arrangements with them, but payroll always needs to come first and the rent/mortgage come last (which is probably the opposite of what you were taught as a kid about your home finances). Landlords and mortgage companies usually draw the line at ninety days, and utilities get cut off at or around the sixty days mark; but it is flat illegal, not to mention immoral, to not pay your employees in the timely manner to which they are accustomed. They have lives and families, too, you know.
- If your business goes under, own up like a grown-up to whatever your failures were. Be objective. But don’t kick yourself too hard; take a moment to learn as much from your successes as your failures. You certainly didn’t work that hard for nothing, and there is no way that every aspect of your business’ failure was within your power to stop. Sometimes circumstances just are what they are.
- If your business goes under and you co-owned it with a spouse, make an agreement with each other right off the bat not to point accusing fingers at each other. Yes, make honest assessments of your performance as owners of the business, and learn accordingly. But remember, owning a business together is just something you did for a while. Being married is something you are for the rest of your lives. You will need each other now more than ever.
- Up to and including your last day of business, continue striving to make the best product and provide the best service you can. Don’t cut corners even when it feels like no one cares any more, and you’ll be able to walk away with your head high and nothing to be ashamed of.
- Whenever possible, don’t burn bridges with your employees, customers, clients, or suppliers. Unless you discover you absolutely hated what you did, you may wish to stage a comeback one day. You’ll know a lot more next time than you did this time.
- When you first went into business, you had a dream of what that business could be. When the dream dies, feel free to grieve and mourn and cry, because it was a death. But eventually you must move on, because it was only a dream, and there are other dreams.
My life is an open book. A comic book, about a superhero with the amazing ability to make his nose hair grow. Oh, and someone's torn out the order form for the $2.99 X-ray specs.
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3.16.09 @ 2:32p
Excellent piece with very good advice.
3.16.09 @ 6:35p
Tim, I'm sorry to hear about this. But boy, if your wisdom helps others....
I went through this once. I got over it (and yes, I grieved), worked full time for someone else for a couple of years, then tried it again. I corrected a lot of mistakes from the first time, and was much more successful. In this article, you cover about 40% of what I should have known the first time out, and what I corrected the second time.
I'll add two more bits:
1-Don't be afraid to fire a client. Anyone who monopolizes your time, resources, and energy for very little gain and no future swell is keeping you from working better. If you can't fire a client, delegate the project to a junior member of your team so that member can learn about proper customer service. If you do have to fire a client, do so politely, stating you're not meeting their needs, and provide a list of alternative resources that might.
2-Yes, you have to do everything, at first, but you may not be skilled to do everything. At some point, outsource or delegate certain aspects of business management to someone more qualified/with more time. For example, do you need to approve all ad copy? In the first year, yes. After that, trust someone with more experience in the field to do it for you or, at the very least, take up only 30 minutes of your time giving you the overview and signoff. Aren't good with the books? Spend money on a good CPA with an interest in small business growth. Put him or her on a monthly retainer, if necessary, to handle all the checks and balances so you can focus on the core business.
3.17.09 @ 1:41a
We're not officially closed yet. We've set a date of the 31st of this month. We've contacted the local paper, and they did an interview with me that should appear sometime this week. If I were to add one minor point of my own, it would be to be prepared to tell the story of why you are closing many many times. Everyone will ask.
Tracey, regarding your add-ons, which are both very good:
The first one I've heard many a time and have never had the misfortune to actually need this one at this particular business, although I could have used it back when I was doing some part-time casual free-lance work in web design. That was where I learned the hard way that the only important shade of red is the one that looks good on the client's monitor, even if it looks like total crap on everyone else's.
The second one is good, but in our case the only thing that would have applied is hiring a CPA, which we were going to do anyway. Interestingly, though, it was also a piece of advice I received from someone who owned an automotive upholstery shop that he inherited from his father. He spoke of his dad spending long hours at the shop after close figuring his taxes when he should have been going home to his family, all because he was so hands-on that he felt he couldn't trust that duty to anyone else.
3.20.09 @ 9:21a
sobering and helpful, tim. sorry you're dealing with this, but thanks for sharing so others may learn.
3.20.09 @ 6:37p
I'm sorry you had to go through this, and wish you better days in future. You certainly seem to have learned from the experience, and that's got to be a plus.
3.25.09 @ 1:46a
insightful and interesting. I echo Margot's comments.
4.1.09 @ 8:11a
(two weeks later...) This is excellent. One of the reasons I don't read non-fiction that often is because most of it is wisdom like this which can be contained in a few thousands words padded with mindless, vacuous drivel so that it fills out around 300 pages -- I guess because no one would buy a short book. Fiction can (and sometimes should) be expansive. Non-fiction should be succinct. Again, excellent.
4.2.09 @ 2:04p
Thanks for the kind words, John. Yeah, it was (and still is) a little too painful for anything but short and to-the-point facts. Now that the shop is closed, I could probably add a couple more bullet points to this, but they would be just as short as the rest of them. There is no way I'd pad it out to 300 pages.
Now it's time to surf over to my local Craigslist and start looking for work ...