11 min read
The opinions expressed by the entrepreneur's contributors are their own.
Ten years ago, on October 14, 2010, shortly before graduating from college, I went to Boston City Hall, paid an application fee, and registered my company Yeti, LLC.
I soon hired my business partner Rudy Mutta, and now, 10 years later, we're still in business and growing despite Covid throwing us some big curveballs.
We're a bootstrap services company, so we've seen only modest achievements compared to some of our colleagues in our hometown of San Francisco, having never gone public or become a billion dollar unicorn.
If we look back on our decade of running this business, we peaked at being on a Netflix documentary, building high-profile apps with world-class customers, and making it into the Fortune 5000. But what you don't hear much about from entrepreneurs are the mistakes they have made.
If we look back on the past decade, these mistakes are the moments when we have learned the most. Instead of announcing 10 years of triumph, I thought I would share 10 of my biggest mistakes and the lessons that came from them. Since I knew very little about running a business 10 years ago, I could have saved myself a lot of time, money and energy if I had known these things.
1. The tax officer comes
In our first year of business, we felt it made sense to show how profitable we were. We even made sure we cashed a massive check from a customer in late December to end the year with even more income.
We didn't notice that nobody really cares about your profits at this point, but the tax officer does make sure you pay what is due.
After failing to properly track our expenses, not paying monthly or quarterly taxes, and not saving enough, we were almost completely decimated after our first year.
In hindsight, it would have been extremely beneficial to understand some of the business tax fundamentals that go into this business.
2. The world is not flat
When we started our company, we were very excited about the idea of keeping our organization completely flat, where everyone took the initiative and organized themselves to achieve the company's goals. This works when your business is six people, but when it grows it becomes impossible.
When I think back, I think because I was afraid to do the work that it takes to be a leader. A business coach finally told me, "It sounds like you're trying to run a pirate ship." That may sound funny, but the reality is that pirate crews don't do very well.
Leadership is an art form that is important to study and practice. Often you can give people more freedom and job satisfaction by giving them a structure in which to do their best work.
3. Establish basic values
As our business grew, so did our team. However, we kept hiring and losing staff, which it turns out to be quite costly. A conservative estimate is that the cost of replacing an individual employee is between half and two times the employee's annual salary.
What was frustrating was that there wasn't always a specific reason why some people didn't exercise. We couldn't quite tell. After consulting with many other business owners, I found that setting core values would help us ensure we are aligned with employees during the interview process before we get them on board.
We have made it our business to constantly communicate with the team about our core values and have since used them to develop and retain employees. It is important that all understand and align with these. It creates more harmony in business.
Related: 9 Common Mistakes Made By New Business Owners
4. Enjoy the moment
Running a business is going to be a headache. I haven't met an entrepreneur who was completely stress-free. Regardless of the struggles, be it for money or personnel issues, cherishing the moment, time and space that your company is in is important.
For a while we tried to be a company that we really weren't and it took a toll. We tried to be who people thought a software development company in San Francisco should be. It wasted a lot of time and money and left us frustrated and unhappy chasing something we weren't.
5. There are no silver balls
When you're starting a business, it's really easy to think, "I just have to hire that one silver bullet or do this one tactic. After I do that, we'll move on to the next level."
It never works.
The honest truth that has taken me a lot of attempts to learn is that nobody or anything comes in and solves all the problems in your business or just takes you to the next level right away. It's all an iterative process and you need to find the people who want to go through this process with you. Make it clear to everyone on your team that you are all in the business of working on the business.
Even if someone you want to hire has been great at another company and done great things, it is not the same company as yours and it will take work to make your business this way. One person new to your company will not do this.
With any new strategic initiative like hiring, the most important thing is to take the time to understand your core values and to honestly share with your team where you are and what work is required to level up. Align people so they know which way you are going. Running a business is more about creating and navigating a roadmap than looking for silver bullets.
6. Design your culture to have a cadence
Corporate culture doesn't mean “cool” swag, BFFs with your co-workers, or happy hour in the office every Friday. They are superficial.
I started this business right out of college so you can imagine that at first this was exactly what I thought was corporate culture. We rented a fun office with a roof terrace, had bands come and play, had parties. It was a lot of fun but the business didn't really gain much … and I lost a lot of Saturdays cleaning up beer bottles.
The company would have benefited from a more meaningful team retention, and I'm pretty sure we lost some customers when they saw that our office looked more like a hacker's house than a place where professionals worked.
As I grew into a "real" business owner, I realized that culture is how your team comes together, holds each other accountable, supports each other, gets the job done, and celebrates victories together. We now have more structured team days and meetings that focus on topics with actionable insights that our team believes are more effective.
Build the systems, make room, and have a cadence for how these things are done.
Related: 8 Big Mistakes Most business owners don't realize they are making
7. Marketing should be authentic
Any entrepreneur who's been in business long enough can give you a laundry list of marketing tactics they've tried.
It's hard not to fall for some of the "get rich quick" programs, including us. (We literally spent hundreds of thousands of dollars learning this lesson folks, so if you're not following any of the other pieces of advice, at least listen to this tip.)
However, we have found that when it comes to sales and marketing, when it seems too simple and too good to be true, it's perfectly easy. It works in movies and people like to brag about how they played the system, but in reality nothing can replace the hard work.
We have found that we need to be authentic and true to who we are as a company in order to resonate with leads and prospects the most. The more authentic you can design your public relations and communication, the more you will get in touch with people – maybe not with everyone, but with the people who are right for your company.
8. Focus on relationship building
As a young company, we didn't realize the power of relationships in our business, but as we grow up we are constantly reminded of how important they are.
When we started we were very focused on getting one job done and then moving on to the next. We have been very focused on the here and now. We haven't looked at the big picture of three, five, ten years and beyond.
Regardless of how much lead-gene marketing we did, referrals were the main driver of our business. They may not be referrals that we receive right after completing a project with someone, but our efforts to maintain and strengthen our relationships have absolutely paid off over the years. (Plus, the people on my team and I made some lifelong friends along the way!)
I wish I had spent more time focusing on that in our early years. There are really simple things you can do to keep in touch, connect with people, and build relationships. This is the best marketing you can do, especially for a service company.
9. Know when to say "no"
At first it was a real struggle for us. We hired bad clients because we didn't figure out how to add value to the table. They had the money to pay us, why not?
It has always led to more pain on the street.
Everyone. Single. Time.
For us, bad customers usually come in the form of independently wealthy people who don't have business building apps but have come across a significant amount of money and dream of being the next Mark Zuckerberg.
Ultimately, these people didn't want to do the job of building the business or take the time to understand some of the complexities involved in building a product from the ground up. We now have the experience of identifying exactly where we value our customer relationships and where we don't go well together.
Since relationship building is important to us, we now have tools that make it very clear when there is red flags in sales calls so we can be honest and tell people when it is not appropriate to hire. This saves time and money for anyone, even if it seems wrong to miss a potentially lucrative opportunity.
10. Don't let your gas tank run out
You probably wouldn't believe how we managed our finances when we started (or maybe after reading this article). We regularly sketched all of our claims and liabilities on a whiteboard and were given a rough idea of when it was "D-Day". We used this to motivate us to get new projects and finish the work.
As you can imagine, this was neither very effective nor sustainable and scalable. As our business grew and became more demanding, we almost ran out of money. This is very common when you are growing and your spending is increasing but you are waiting for payments. It's scary as hell when you have 15 or more people who depend on you for their jobs. I never had sleepless nights again.
In the end, we had a 12-week cash flow forecasting tool that was vital to our business success. That means we know if and when we will ever run out of gas.
Using such financial tools to better plan the future is vital to the longevity of your business and enables you to effectively communicate with your team about why you are making certain decisions. If in doubt, also contact the experts. Don't be afraid to hire a consultant to help if finance is not your specialty.
Having a good financial reporting structure and a basic understanding of your income statement and balance sheet will ensure that you identify problems before they kill your business. Use bookkeeping to hold yourself accountable!
It is well said that you learn more from your mistakes than from your successes, and I honestly believe this is true. I like to think of the hundreds of thousands of dollars I spent learning these lessons as unofficial classes at a business school.
If we hadn't made the mistakes we made, we wouldn't have been able to correct ourselves as effectively. With the recent turmoil of the Covid pandemic, we are relying more than ever on these experiences to move us through the pandemic and come out stronger.
You will no doubt make your own mistakes. This is how you will ultimately be successful. I hope these 10 mistakes can help you avoid some problems, but can inspire you to master and learn from the challenges you face on your entrepreneurial journey.
As Richard Branson says, “You don't learn to walk by rules. You learn by doing and falling over. "