This topic – 6 lessons I wish I’d known before starting my own business – was requested by someone in my Pilot To Profit program. She asked if I could do a Periscope on mistakes or lessons learned when I became self-employed, or things I wish I knew before I became self-employed.
Wow! Can you imagine if we knew everything we know now BEFORE we got started? How different our lives would be!
I have learned a lot of lessons in the almost 10 years that I have been self-employed. I considered what I wish I had known when I first opened my store in 2006 all the way to what would have been helpful to know at the point when I sold it in 2012. These 6 lessons are what I wish I had known.
Lesson 1 – it takes more money than you expect to get started, and it takes longer than you expect to start making money.
When I opened my store I invested a couple hundred thousand. It was a lotta money! I was opening a bricks and mortar location so not only did I have to pay for the build, I had to pay for inventory, equipment like computers and phones, office supplies, and uniforms, plus business cards and stationary, and so much more. It was ridiculous the amount of money I had to invest in that business just to open the doors.
When I started that business I had created a perfect business plan with projections for the first five years. Nothing ended up being true about those projections – everything cost more than I had planned and it took longer than I had projected to make any money. I didn’t start paying myself until 2 years AFTER I opened the business.
I worked for FREE for 2 years in that business.
When you start your business you really need clarity around how you’re going to make money and you can’t start a business without money or it’s going to take you a lot longer to build and grow.
The Internet makes it easy for you to start a business from home, online, and not really need a lot of money. You can hack your way through what you need to do and cobble a business together. But the truth is if you have money to invest in business strategy, really great branding and design, a proper shopping cart then you will actually build credibility around your business and get results faster.
It’s only the past couple of years that I’m now making the same kind of money I was making when I left my corporate job. But, I wouldn’t trade this for anything – I love what I do, I love being self-employed, I love the autonomy.
Lesson 2 – trading 4 quarters for a dollar will leave you resentful, unmotivated and angry.
That would leave you doing what you do for free and free is too expensive!
When I opened my store everyone wanted a deal. Everyone wants you to give them a break, wave this fee, or throw something else in. Everybody thinks that because you are self-employed that you’re rolling in the cash. They see the big beautiful store and think you can cut them a deal.
That is how your customer will treat you…in the beginning.
People will ask you if you can do things for less. When you start out as an entrepreneur, your confidence level around asking for money is lower than it is five years into the game. My confidence level asking for money now, almost 10 years after becoming self-employed, is at the other end of the spectrum. If you don’t want to pay for what I’ve got and you can’t afford it, then I’m OK with that.
When people were coming in my store I really wanted them to do business with me. I would cut them deals, waive fees, throw in accessories, and then send them thank-you cards because I just wanted them to do business with me so badly.
By the time I took out the cost of everything I’d given away or discounted and took out the cost of operating my store – you guessed it – I wasn’t making a profit.
Don’t do what you do for free – build your confidence to ask for the money – you are supposed to make a profit, that’s why you’re in business.
Lesson 3 – cash flow is EVERYTHING!Whoever said customer service is King has never met the cash flow Queen. Click To Tweet
When I first opened my store I got an invoice from Telus for $100,000 for inventory I had bought when I opened my store. Yes, $100,000. Remember, I said everything costs more than you expect?
I didn’t have $100,000. When I looked at what I was going to get paid in commissions, what had to be paid in rent, what money was in the bank, what was available on my credit line, I was still short – I did not have enough money.
I write about this in my book, Pilot to Profit: Navigating Modern Entrepreneurship to Build Your Business Using Online Marketing, Social Media, Content Marketing and Sales, that I remember laying in bed and thinking this does not make for good pillow talk, but I’m going to have to tell my husband that I’m bankrupt.
It was so stressful.
I got myself into that cash flow pinch because I was trading 4 quarters for a dollar. It was a scary time and I had to learn how to manage cash flow fanatically so that I always had money in the bank. I got myself out of that pinch.
Most entrepreneurs don’t understand cash flow. They understand sales. They understand expenses. But they don’t understand cash flow.
Cash flow is about timing – it’s about when the money is hitting your account and where it needs to go next.
When you don’t manage cash flow, money manages you and life becomes very stressful.
Lesson 4 – you cannot do it alone and you cannot abdicate responsibility.
This is an important one.
No one is successful by themselves.
I was not successful in my store on my own – I had a team. I am not successful in my consulting business on my own – I have a team. I could not do all of the things I do without my team.
BUT, just because you have a team does not mean you are not responsible. You can’t make the assumption that someone is going to do something. When you assume, you now what happens right? It’s that old saying – “Assume, makes an ass out of both u and me.”
When you have a team you need to be a leader – delegate and follow up. You need to train, coach, support, and check in. You need to have conversations, positive feedback, you need to do rewards and keep those people on your team.
You need to make sure your team knows what is expected of them – set them up for success, because you cannot do it alone and you cannot abdicate responsibility.
Lesson 5 – there are givers and there are takers, learn to identify those people quickly. Be a giver but don’t get taken.
Remember how I mentioned giving away all those freebies when I first opened my business? Well eventually those people would come back with their phones telling me their phone wasn’t working. We’d take a look and see that the litmus paper inside was pink meaning it had been exposed to water. They’d insist that they hadn’t gotten the phone wet, but rather that it was defective and that I needed to fix it or replace it. So I’d give them a new phone.
But who’s paying for that new phone? I am! And that person is a liar.
We knew the phone had a white litmus paper when we sold it, which means it came into contact with water after it left the store. The solution is to explain that it’s their responsibility and outline the ways you can help them – without replacing the phone.
This is an example of a taker. There are takers everywhere, but there are also givers. Learn to recognize who the givers are, and who the takers are, and be a giver yourself. You have to learn who the takers are so you do not get taken.
I have a team member, Adele, who works with me in Nova Scotia. She gets paid to work 40 hours a week, but many weeks she works more. She doesn’t do that because I demand it of her. She does that because she has a really strong work ethic and she’s a giver. If she’s in the middle of something she stays and finishes up before she leaves. She gives me that extra time.
When she asks me for an afternoon off I don’t take the money off her pay – I give her that time because I’m a giver.
Reciprocity works very well.
But if Adele was a clock watcher and never gave a minute extra, never got her work done, didn’t care and just wanted to take, take and take some more. It would be a different situation.
You are going to see givers and takers in both your clients and your team. Learn to recognize them.
Lesson 6 – when exiting your business, always sell high.
Don’t let your business fall apart and then decide to sell. You can’t make money on your business if it’s not profitable.
Your profit margin is what your valuation line is – if you’re not making a profit in your business it’s going to be a lot harder for you to sell and make money.
The biggest lesson that I learned is that if I’m feeling the slightest bit not engaged with my business anymore if there is something else that I would rather be doing, that the time to sell is when the business is at the top. Not, when the business is falling apart and it’s at the bottom. You won’t make any money if you let your business fall apart.