Three Mistakes That Shipwreck Entrepreneurs
In baseball terms, I’m batting about .250.
Of over 50 startups I’ve personally been involved in, I have successfully exited 10 and another handful are making money. A couple of them are very profitable. I’ll call those wins. But I also have to acknowledge the 35 or so that are struggling to stay afloat or are just plain done. But as much as business failures suck, they might be the most valuable thing I own.
Using My Shipwreck Experience To Serve Others
One of the benefits of failure is it creates a kind of “cautionary tale” that can teach others what not to do. As cynical as that might sound, it’s actually a really good thing. I’ve always said that learning from others’ mistakes is the most efficient type of education, especially in business. As it turns out, when it comes to shipwrecking a business, I’m a pretty good teacher.
Now, I’ve had some really exciting wins in my business life, but they don’t ever seem to help anyone as much as my mistakes do.
What’s interesting to me is that, when I look back over my own business failures, as well as my clients’, a pattern emerges where at least one of three common mistakes did the most damage to the business:
- We didn’t hire help when we needed it.
- Several times, we hired the wrong help.
- There was no master plan to set strategy.
These may sound like small issues, but they can be catastrophic. Like the richest man who ever lived once said, “It’s the small foxes that spoil the vines.” Let’s look at how each of these mistakes can shipwreck up a perfectly good business.
When Bill (Almost) Lost Everything
I’ve had the privilege of working with several people who were either heading into a crisis in their business or already circling the drain. One case was a young man in Ohio (I’ll call him Bill) who was trying to fulfill his dream of operating a network of fitness centers in his city and raise a family. Smart businessman. Powerful vision for helping people. Amazing love for his family. But the business was a mess, taking all of his time away from his family, leaving him frustrated and angry. Bill was a physically gigantic human being and a retired soldier, so he wasn’t someone you wanted to get angry.
By the time he asked me to get involved in rescuing his business, the damage had been done. He was bleeding money, turning people over faster than he could hire them, and pretty much doing all the work himself. He needed to make some different choices because his situation was unsustainable. It was going to kill him or destroy his family, but it wasn’t going to turn out well.
I helped him transition out of that business, which may have saved his life (it certainly saved his beautiful family). Even though he went through a bumpy transition financially, I will always count that as a win. He’s doing great now, but my heart hurt for him while he was going through it.
Shipwreck Mistake #1: Not Hiring People When You Need Them
I see this one all the time with freelancers and creatives, whose livelihoods are based on their technical skills. They reach a point in their business where they need to hire help to get the work done and continue to grow, but they don’t. They make the excuse that they can’t afford to hire help, but they really can’t afford not to.
The Identity Trap
One reason is that their identity is tied to their work. “The clients came because they want to work with me,” they reason, “so I can’t hand off the work to someone else, or the client will feel cheated.” If they were really honest with themselves, they would realize that the client wants to get the work done more than they want someone specific to do the actual tasks.
The Ego Trap
Another reason is that they are certain nobody else could ever do the work exactly like they would do it, so it’s easier just to do it themselves. It’s a lie we tell ourselves to keep our ego comfortable. If you hire someone who only does it 85% as well as you, that’s still time you didn’t have to spend on it. Your willingness to ask for help is the difference between a business that will grow and one that won’t. Ever.
One of my friends is a talented writer who almost ran himself into the ground because he felt that everyone who came to him with a project was expecting his personal touch on every paragraph. Another was a restaurant owner who personally cooked everything that his customers ate. I’m not sure if he was afraid of divulging his recipes or just loved his work that much, but his restaurant’s growth began and ended with him.
The Power of Multiplication
One of the signs of a successful business is that it is growing. A landscaper starts by doing all the work himself and then adds a second person to do the same job, so they can be in two places at once. That’s called scaling, and the businesses that do it successfully survive, even if the original people leave the company. If you can reproduce yourself multiple times, you can get more work and grow your revenue.
This concept escapes millions of entrepreneurs, though. When I see a talented person start a business around their talent, it’s a red flag to me, because so often their growth is limited to their physical capacity to get work done. You only have 24 hours in a day, and if your identity is tied to your talent, it will be very difficult to let someone else in to help. That caps your scalability at 1. You can only go up by raising your rates, which is a dicey proposition.
While it’s true that it might be easier and cheaper to do the job yourself, you are shipwrecking your own business by doing so. Get some help and you will take the cap off your earning potential. That can be hard on your ego, but as my coach, Dani Johnson has said many times, “weigh your ego with your bank account and tell me which one weights more.”
Shipwreck Mistake #2: Hiring The Wrong People
I know I’m going to get some pushback on this one, because it seems like it contradicts the previous point, but I’ll show you that it doesn’t.
I’ve hired (and had to fire) hundreds of people over the years, and it never gets easier. But as much as I dislike letting people go, I kick myself for the fortune I’ve lost by not taking the time to properly vet people before hiring them. I can even say honestly that some of my business shipwrecks have been because I had the wrong people in the wrong roles.
I’m not even talking about hiring people who turn out to be crooks and thieves, or the ones who steal your clients out from under you. I’ll let God be their judge. I’m talking about the ones who create more problems than they solve, who waste time while on the clock, who spend money inappropriately, who don’t think through their actions and create technical problems (or PR problems) that I have to spend the time to solve.
The Critical Skill I Look For
The top skill set I look for when hiring someone is teachability. You can’t teach someone that; it’s a heart attitude, a character trait. A person with a proactive attitude who is willing to teach themselves the skills necessary to solve problems is worth their weight in gold. Problem solvers allow you to sleep at night, because you can trust them to handle situations appropriately in your absence.
How Much Toxicity Can You Handle?
I’ve worked with dozens of companies that were in the midst of a turnaround. One of the first things I look for when I come into a business is the morale on the team. It doesn’t take long to identify a toxic culture. Is there grumbling? Complaining? Blaming and finger-pointing? Is it a fun place to work (see more about fun in my article, Does Your Business Pass The “Seven Pillars” Test)? If not, why not?
Now, there is one group that I will extend a little more grace to, even if they are hard on morale at times. Straight commission sales people have to be high performers day after day in the trenches. Their life is difficult, and they have to produce if they want to feed their families. It can be stressful. They can be high strung. They might come into the office and raise havoc with the team. I can adjust for that. After all, they are producing the life blood of the company.
When Do I Allow A Diva?
Think of your favorite NFL teams that have “diva” players that bring home the touchdowns every week. You make accommodations for that kind of toxicity as long as they as delivering consistently. I will do my best to work with people like that (I have been that way myself at times, so I understand the mindset). At the same time, there has to be a threshold of complaining and toxicity to avoid a shipwreck.
Some of the best business advice I ever received was to be slow to hire and quick to fire.
- Be slow and methodical about the hiring process.
- Interview dozens of people to find a short list of the top candidates.
- Put candidates through multiple interviews (if possible, with multiple members of your team that you trust).
- Expose them to different scenarios where you can observe how they respond: are they quick to fly off the handle or do they rise to the challenge?
- Look for reasons not to bring them in.
- The right candidate will survive scrutiny.
- Use 30-day, 90-day, and 180-day probationary periods to give people a chance to for into their role.
If it’s not right, it’s not right, even if it seemed perfect in the hiring process. When it’s clearly not working, act:
- Don’t make excuses for employees that create contention in your team. Confront it quickly and get everything out on the table or it will fester.
- Separate your friendship from your professional roles or it will be emotionally complicated to release them when you need to for the greater good of the business.
- Be decisive about when it’s just not working and let people go in a swift but professional manner. Don’t let bad situations linger or it could hurt the whole team.
This can be difficult; I’m not going to lie to you. People get their emotions and their self-image tangled in their work; relationships can be permanently damaged in a separation, even if you do everything right. Be prepared for that. We’re dealing with humans, and humans are fragile.
To avoid the shipwreck of a bad hire, take the time to hire slowly, but be ready to take quick and decisive action if it isn’t working out.
Shipwreck Mistake #3: Not Having A Clear Master Plan
I’ve lost count of how many eager entrepreneurs have approached me with business ideas that keep them awake at night with excitement. I just smile and encourage them.
Now, if they come to me for coaching, trust me: I put them through the wringer. I want the heat of tough questions to morph the blazing flame of enthusiasm into a glowing coal of sustainable confidence. Where does that confidence come from? From having a clearly-defined plan to execute. That’s why we run such a hard diagnostic gauntlet before they launch out into the world.
Great Ideas Require Great Planning
Just because you love to do what you do doesn’t make it a good business. You must create a master plan for where you want the business to go or it won’t go anywhere. It’s easy to go fail, but that’s not why you start. Most entrepreneurs have an idea that will change the world, but they don’t know what to do after they sell the first one. They haven’t thought through production and delivery of the product, or how to mass produce ten or 100 of them. All of a sudden, they need fulfillment people, sales people, customer service, accounting, HR, and everything else, but they don’t know how to strategically place people or to set them in motion when they show up for work. A master plan creates a purpose and direction for every role in the process from advertising to post-production support.
You have to be able to answer some questions: If you go from one customer to 10 to 100, will it crush your business or make it stronger? Massive growth is a great problem to have if you have all your assignments and roles in place. But if you don’t, it will ruin you. Have you thought through your customer intake and on-boarding processes? Who handles customer service calls? If you don’t have these roles defined and filled, it will be you doing it all yourself. That’s a shipwreck waiting to happen.
Whether you’re a solo entrepreneur or leading a team of fifty, these are crucial questions to ask yourself if you want to grow. And this isn’t even all of the questions you must consider. But until these three issues are settled, you won’t be able to handle the next level of problems that confront every business. Your business will be dead in the water, and whoever is with you will suffer, like passengers on a shipwreck.
I don’t want to see you fail. My heart is to give back to entrepreneurs every chance I get. Let my failures and my clients’ failures guide you around the storms and on to smooth sailing.
Let’s connect on Facebook or LinkedIn, if we haven’t already. I’d love to hear your thoughts about this week’s article. If you prefer audio, you’ll find this same topic addressed in Episode 102 of my “Messes To Successes” podcast. You can find it almost anywhere you get podcasts.