Over the past 6 years I founded 9 .com companies. Most of the companies failed miserably and lost me a million dollars or so, but luckily a few of them did well enough to cover my loses. The main reason I had a lot of unsuccessful ventures is because I made some really big mistakes. Hopefully you can learn from my mistakes and not make them.
Don’t spread yourself too thin
A lot of good opportunities will come your way and your gut reaction will be to do them all, but don’t. I made this mistake and what ended up happening is that all of my businesses suffered, even the ones that were doing well. Within 3 to 6 months of me spreading myself too thin all my businesses suffered because I hadn’t spent enough time on each of them, even though I had employees and business partners who were helping me out. Remember, no matter how big or small your business is, you have to spend all of your time on it.
Pick the right type of incorporation
Not only is it important for you to incorporate your business, but it is important to get the right type of incorporation. It may not seem important when you are starting your company, but once you start making money it becomes a huge deal. For example, my accountant tells me that if your company makes under $200,000 in profit a year, a C corporation is good for you due to tax benefits. If you make more than that, consider getting an S corporation or a limited liability company.
I found this out the hard way, when my company started profiting 7 figures a year I had the wrong type of corporation. I ended up getting taxed twice, the company paid taxes on the profit and then I paid taxes on the dividends I got from the company.
Be careful whom you trust
I was working with a few developers and engineers for 3 months and they came to me with a business proposition. The first 3 months of working with them went well, so I decided to hear them out. The businesses opportunity they presented was supposed to revolutionize the hosting industry, but the catch was, they were broke. After hearing them out I ended up giving them some money for living expenses, I bought them a house to live in, and I was dumping 4 to 5 figures into the company every week.
To keep a long story short, they screwed me out of my money, stole stuff from the company, and ruined the house I bought. No matter how well you think you know someone, be careful, because you don’t know who is going to screw you over. One stupid mistake can make you lose thousands of dollars.
Have a thorough hiring process
If you really want to grow your company, you will need employees. You’ll probably post some job openings to find these employees or ask a few friends if they know anyone that you could hire. No matter how you get your applicants, go through each person with a fine-tooth comb. If a friend recommends someone, it doesn’t mean that they’re a good hire. I made this mistake multiple times by hiring developers, designers, and sales people that friends recommended. Just because someone did well at their last job, it doesn’t mean they will do well working for you.
Make your employees accountable
If you aren’t strict with your employees they will start slacking off after a while. And if you travel frequently like I did, they will really start messing around when you aren’t there. The first day a new employee starts, you need to be strict with them because it is hard to get employees out of bad habits.
During the first few years of being an entrepreneur, I didn’t hold any of my employees accountable. Every time they told me something, I took their word for it. On top of that I wasn’t strict when people came in 30 minutes late and after a while it became a daily habit.
To solve this I started using project management software, like Liquid Planner, and I made each one of my employees upload what they completed at the end of each day. This way I could keep track of what each employee did.
On top of that I made every one clock in and out. This allowed me to see who came in on time and who didn’t. At first I didn’t think it was a big deal that a few of my employees came in 30 minutes late each day, but over a course of a year it added up to 3 missed weeks.
Collect your money on time
Making money may seem like a hard thing, but collecting money from people can be even harder. In 2008 I worked for 8 companies that never ended up paying me. This wasn’t a few dollars either, a few companies still owe me over $100,000, sadly I don’t think they will end up paying.
With your business collect the money first before you provide anything. No matter how large a company may be, they can still go bankrupt. Things like contracts and debt collectors won’t help you much if the company doesn’t have money.
And for some reason if someone owes you money, whine to them until you get paid. If you act like you don’t need the money, you’ll never get paid. But if you whine and act like you are in financial trouble, hopefully they will feel sorry and pay you.
Time is not on your side
Especially with your first company, you will want everything to be perfect. The reality is, there will always be problems and nothing will ever be perfect. So instead of trying to make everything perfect, just launch your company before someone else beats you to the punch.
With my first software company, I wanted the software to be perfect before I launched it. I took so long in trying to make the software perfect that Google launched a competing product before I did. After that I had no chance of succeeding because Google’s product was free and mine wasn’t.
No matter what, you are going to make mistakes in life. Even if I told you every mistake that I made, you will still make more. If you want to succeed you can’t give up!!! Sooner or later you will do well, but like anything worth while, it takes time.