For those of you who read this blog regularly, (thanks, you are awesome), then you will be aware that I currently own a company I co-founded with my good mate James Blake around a year ago. It cost no money to setup and has been in healthy profit within the first year. I know this because we have just had to do our year review, something I would not impose on my worst enemy.
However, what many of you might not know is that this was not my first business and that I have experienced the depressing swim back to shore when the shiny new boat you were happily sailing away from the crowd on abruptly sank. On reflection, I should have seen it coming, the boat had many holes that I was just too foolish or blind to see, it was a miracle I got out of the harbor at all.
Enough of the metaphors. As many on this blog have asked to hear more about business as well as the more traditional lifestyle design then that is what I am going to offer and i’ll start at the beginning with failure.
I was discussing my recent failed business with my fellow swimmer and business partner Marho Bateren, whom joined me in the front crawl as our ship sank beneath the waves.
Fortunately no one was killed and apart from a few investors that might still be out for our blood we are relatively safe. We were reviewing, in between many laughs, where it all went wrong and so I have picked out some choice errors we made which riddled our boat with holes and ultimately encouraged it to reject its God given ability to float.
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1. We thought we knew it all
We were young, 21 and 19, and were relatively successful in our given fields and so we thought we were unbeatable. We were wrong…so very wrong.
The problem with being good, or successful in one field, is that you tend to completely overlook all the other gears that are needed to make a business run and this does cause problems…big problems…huge problems…catastrophic problems…boat sinking problems.
As a partnership Marho and I were good at product creation and marketing, what we were not good at was everything else. No worries we though, we are partnered with a good company, have a lot of resources available and have a great idea – what could go wrong?
A lot it seemed.
We knew nothing about what it took to actually run a business and didn’t take the time to learn or read up on it either. This was the first hole and it ended up being the largest and most responsible one for us getting wet.
Patch the hole: Realize that a business is so much more than an idea, it is the idea and all the systems and people that make that idea a reality. The idea is the first 1%, the systems are the other 99%.
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2. We thought we knew what cash flow was
The concept of good cash flow through a business is simple and we all know that cash flow is king. Marho and I knew that statement so we ticked the box and forgot about it.
Poor cash flow ultimately sank the business even though we had memorized the phrase of what good cash flow meant.
For future businesses I would recommend checking your bank balances every single day, even if nothing has changed. Get into the habit of knowing exactly how much you have in liquidity (cash), where your money is invested, when money is potentially going to come in and out and how much and as soon as you can put together a worse case, best case and most likely case cash-flow projection for each week, month and year.
It is a large time commitment and some would say unnecessary in a new, small startup but having known first hand how painful it is to watch your boat sink after 18 months of hard work just because you DIDN’T keep an eye on the figures, I say it it critical.
Patch the hole 2: Follow the money, it is the most important part of your business, without it you have no business, no matter how good the idea or the systems are. Don’t ever let the money out of your site.
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3. We Thought A Great Idea Would Always Be Successful
In all honesty I believed and still believe our product concept was sound and would have been profitable. Unfortunately what I didn’t fully appreciate was just how little the product actually has to do with it’s ultimate success.
True you need a high quality and valuable product to start with but really it is the systems and process, marketing, funding and customer support that ultimate is the make and break of success. This is why investors are so skeptical of “the next biggest idea”. they very rarely are. The investors know how much risk and need there is for the systems that surround the product, good ideas are easy to come by.
No doubt you can easily make a better burger (product) than McDonalds but they have the better systems and that is why they are making millions through beef and you are not.
A big part of Apples success and dominance with the Ipod was due to their systems. It’s a great product but coupled with the system of Itunes it is a outstanding product.
Patch the hole: Your great idea is only the very beginning, the penguin ON TOP of the tip of the ice burg. It is everything else that you do that is going to make you idea a success, not the idea itself. Admire great ideas, love great systems – that is the key to success.
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To Sum Up
My first business is underwater but my current one is still afloat. These are three big lessons I learnt from the failure of my first. Save yourself the swim and think about how they apply to your own business, blog or venture.
All the best people and stay dry.
Help Me Out
I give all this advice out for free and so if you like what I write and it help you, please help me out by letting others know. On this site, it has been scientifically proven that by doing so you will become instantly twice as attractive to the opposite sex. Can’t argue with science.
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Nice article. It must have hurt a bit to re-think those painful moments.
I’m no entrepreneur so I can’t say ‘#X was the most important’ and the like. What I can say is that this article showed me a few mistakes. If I start a business I’ll do my best to avoid them.
Cheers,
Ajay
Hi Ajay,
It actually wasn’t too bad, you move on and my old business partner and I had a great laugh at our own foolishness. No doubt I will make just as many if not more on my current business but it is all learning.
I wouldn’t rule yourself out as an entrepreneur as I think anyone can make it though you have to be dedicated as it is not an easy thing to do well in, only 1 in 10 ever succeed to the next level and then another 90% drop out after that so it is a game of stacked odds.
Thanks for reading.
“I wouldn’t rule yourself out as an entrepreneur…”
In my comment, the phrasing was awry. What I meant was I wouldn’t be able to apply all of them at the moment because I’m only in my teens.
When I finish college I definitely plan to be an entrepreneur. My dad is one too, so it’s in my blood!
You already have a head start then. Here’s to your success.
Great article, Jonny, as usual. I have an idea and, according to your post, I’m doing everything as I should: before jumping in I’m reading, researching, reading some more… and some how, that is what is making my boat sink before I even weigh anchor. The more I read the more insecure I feel and I wonder if I should start at all. Maybe, sometimes, you just need to jump in… and go for a swim.
On a side note, you weren’t swimming alone, which makes a whole lot of a difference.
Thank you for your priceless yet free help
Hi MaybeBabyRo,
First thing, awesome name. Second, you raise a very good point. The more I read about finance and money the less and less I seem to know and the more and more there seems to be to learn. This is definitely no different in business but looking at it pictorially I would say that in stead of jump in and swim it is more like actually “pushing away from the shore”. Sailing, like business, is scary and the more you read about it the more you will realise just how big a learning curve it is. However, if you never push away from the shore you will NEVER sail, it’s just I would always at least know what a bow, sail and rudder was before pushing off.
True I was never swimming alone, partnering in business is what I prefer as business is a people game though this also comes with its own complications.
Hope that helps and thanks for the comments.
love the visible learning
Hi Mirabelle,
Glad you like it.
gorgeous website
Thanks Mirabelle
Hey Jonny,
I haven’t sank my own business so far, but I know the feeling, as I’ve worked closely with some people who managed to sunk theirs.
The biggest lesson I’ve learned is that enthusiasm and a positive attitude is not enough. You actually need to understand what makes a business in a particular field tick and have a very wise approach to yours. Wow, that was kind of a blunt surprise
Hi Eduard,
Good to hear from you. Very true, the biggest misconception is business I believe is that people think passion is enough. Passion is critical but it will only take you so far. Without a good understanding of all the systems and mechanisms that go into a business you will struggle and probably never succeed.
Hope your business is going well.
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