Business owners make mistakes. They're inevitable. BUT . . .
As I see it, there are two primary differences in the mistakes we make: not all are as public as Mariah Carey's performance on NYE and how we react and adjust makes all the difference.
In this post, I'm going to share the three biggest mistakes I made in 2016 as the owner and CEO of Invoq Marketing, and the one thing I did that kept me grounded and in business through it all.
These mistakes were not publicly embarrassing, but they created uncomfortable and awkward situations that could have lead to devastating consequences for my business. However, seeing these as lessons, or teachable moments as some may call them, I analyzed what happened. I painstakingly studied what went wrong and figured out ways to adjust so that I can avoid these mistakes in the future.
So, a little about me. I'm passionate about marketing and I love owning my own business. I'm also aggressive, so being an owner of a marketing company makes total sense. Most of us who own businesses are eager to learn and grow, excited for new opportunities, and obnoxiously passionate.
Being a 2015 startup - with myself as the only full-time employee - I had to rely on subcontractors to do the majority of work, which at that time, was project-based.
Just weeks before 2016 began, I started transitioning my business from a project-based model to retainer-based model. With this shift, I decided to hire two full-time employees to take over the workload of my subcontractors.
As 2016 progressed, Invoq gained more client retainers which meant I needed a bigger team to handle the work. So, I hired three additional full-time employees. We went from a team of three (including me) to a team of six. It felt right. I mean, customer service went up 25 notches (at least) and the quality of work increased by leaps and bounds.
At the time, these changes felt like wins all around.
My top 3 mistakes from 2016
1. I hired employees too quickly
At the end of 2015, I brought on a new client that provided enough new work that I felt ready to hire my first two full-time employees and scale back on my use of subcontractors. At that point, I didn't know that things weren't going to work out with that new client and that I didn't properly factor in cash flow projections. All I could think was, "Wow! Business is picking up; it's time to grow my team! Woohoo!"
My eagerness to bring on employees outweighed my desire to pause long enough to crunch all the necessary numbers and consider the all the potential risks. Because I made the mistake of hiring too quickly and not considering the full ramifications of the highest-level risks, there were weeks that I sincerely wondered if the needs for payroll would be met. There were days when literally nothing was in the bank.
Thankfully, cash always showed up when it was most desperately needed. I can say truthfully that my employees never went without their hard earned paycheck. Thank God!
Regardless, this real and ongoing concern was an eye-opener.
2. I didn’t know my numbers well enough
This point piggybacks off the last. Numbers really matter. If you don't keep a close eye on payroll, overhead costs, and profit percentages, it can quickly become a sticky and uncomfortable situation. Even though I had someone working my books and cutting checks, these things didn't provide enough information to forecast future income and cashflow.
At the time that I hired my first two employees, we were transitioning from project-based work to retainer-based work. Now that we've fully implemented the new business structure, I have access to more data. This additional and robust data is helpful to me when I need to weigh risks properly.
Also, I wasn't pushing my team to keep a tab on the number of hours they were putting in for each client. Longer projects weren't being tracked properly, and scope creep was a consistent issue. As a team, we wanted to please our clients and exceed their expectations, so we work many hours to make it all happen. The downside was that profit margins were nonexistent, there was virtually no financial runway, and cash was unavailable way too often.
3. Not selling to the right people
You gotta know who your client is. If you don't know who you're aiming at, you'll miss. You need to know your target persona. I thought I knew my audience, but it wasn't until the last few months that I truly got a handle on who Invoq can best service.
I learned this when our relationship with not one, but two clients failed. It took me a while to figure out why, but then I had an "AH-HA!" moment. The reasons why things didn't work out were simple.
- They didn't buy into the partnership. Woven into the fabric of our team is the need for committed partnerships. When a client isn't bought in 100%, and they're not willing to work with us as an equal partner, our processes and methodologies begin to break down. To the chagrin of some, partnership to us also means that both parties are willing to put in the necessary work, no matter how challenging.
- We didn't see eye to eye on business goals and KPIs. In general, they weren't even sure what their goals were, and the ones that they thought were good were immeasurable or unrealistic. What we believed were great growth indicators and Key Performance Indicators weren't anywhere on their radar. For Invoq, conversations with potential clients always need to start with clear and deliverable business goals and KPIs.
If I knew then what I know now, I would never have brought on those clients. The few months that we did work with them were aggravating and exhausting.
I can't say it enough: it's so important to identify your target personas and to know whether or not your product or service will make them successful.
The one thing I did right in 2016
While I made some mistakes last year, I experienced many wins. There is one win in particular that I want to mention here. And this I nailed. Through the past year, I've surrounded myself with the right people. People who care about the success of our team and the success of our clients.
These people. They've put in countless hours. They've told me when I was wrong. They let me know when I wasn’t providing the direction they needed. But they've also affirmed me, cheered me on when I was right, and encouraged me when I was down. Together we've celebrated the landing of our two largest clients and together processed the loss of others.
I believe that if you hire great people, you will be able to get through almost any challenge that comes with being a small business owner.
As I think back over 2016, I wonder how I even did business in 2015. The rate of growth in myself and my team has been that astronomical. I've learned a lot, and I've made a ton of positive adjustments. Things are going better than they ever have. I can't wait to see what this year has in store.
To all of you small business owners reading this: here's to the new year and to more mistake-driven learning!