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What I learned from my first Startup Failure

I was inspired to write this from many articles referenced in the December 21st Edition of Startup Digest. In that newsletter, I found many articles about "What I learned from my Startup Failure" (or along the lines). Therefore, I thought I would write this.

Work on the business, not in the business


As the quote from Michael Gerber goes, it is best to work on the business instead of in the business. In my college career as an aspiring Entrepreneur, I never really understood that quote. My logic consisted of the following phrase: "If you can do the task, then do it and market yourself. You are the business - it's your idea, it should be your fame." It took me roughly 7 years to understand that I was wrong.

From Day 1 up until the end of 2012, I was the "CEO/President" of Shadow Development (CEO from 2005-2009ish, when I learned that if I was a "CEO of a small company, then the credibility hasn't been built", so I downgraded to "President" thinking "Yeah, that'll work"; yeah right). In 2013, I stepped down from "President" to "VP of Operations" basically stepping aside from the Presidential duties and taking a look at the business as an outsider and not just as myself.

That was probably the best thing that I've ever done. Not in the "This was a great decision, it made a million bucks" kind of way, more of a "I see what is actually happening and not just want I want to happen."

I saw that the business had been running on my hopes, my dreams, and my stubbornness for far too long. I should have shut the doors a long time ago if I saw this happening. Even throughout the ups and downs, it was my stubbornness that kept my business up for so long.

What should I have done? Hired someone to take care of the project management, project development, and selling. I shouldn't have done those things back when the business was started. I should have managed the business, sought out investment, asked others for help, evaluate the cash flow, find ways to save money, establish marketing channels, etc; not become the primary developer.

Basically, I've learned that "If a person can't do the work, then they should be fired. Based on the logic, if you can't do the work, then fire yourself, but then the company will no longer exist." However, I couldn't fire myself because I was too damn proud.
Entrepreneur Fail


Surround yourself with like-minded people who can do the jobs you ask


After dealing with managing people, it's a lot harder than just "Do this task." You must take into account their schedule, their emotions, their skill sets, not "playing favorites", their quality, etc. I always thought that "If I surround myself with people that have the skill sets, I can delegate tasks to them" (see the next point as well). Well, I hired developers, designers, project managers, sales people, and interns. What did I get: next to nothing.

My designers didn't have anywhere near the skill sets that I had imagined. I thought "They have design experience and an eye for design. Their designs will be great!" What I received was "This is what I think will work", not what I had in mind.

My developers knew what they were doing (for their development levels), but they had a long way to go in order to provide what we promised the clients.

My sales people said they knew the material, they knew the sales process, they knew the contracts and services. However, they also fell short of expectation and probably couldn't sell water to a dying man in the desert. (Hell, neither can I)

My interns were treated as "gofers" instead of the "learn as you work" kind of experience. I didn't like that.

My project manager was great at managing projects, but we didn't have many projects to give them that weren't already being managed (or the budget to allocate to them).

In short: Just because the person you hired had the title "X" doesn't mean that they can do what you expected of your last "X".

(However,) Hire Slow and Fire Fast


Just because you are in a company doesn't mean you need to have 10 employees around you. Take your time to hire the right person for the right job. If you hire someone just because they have "X" in their previous title, that doesn't exactly mean that they know everything there is about X (for example: just because someone says they are a salesperson doesn't mean they can actually sell).

If a person isn't the right fit for a job, get rid of them. If a person isn't doing what you want them to do, get rid of them. If the person is trying to take over the company, get rid of them - quickly.

I know that many Managerial books have said "Hire Slow, Fire Fast", and I never really understood what that meant. However, now I know what they meant, and I have been burned in order to learn that.

Don't think that "If I just keep them on the payroll for another few days/weeks/months, things will turn around." That never worked for me. I also knew that my stubbornness got in the way for "being nice to people" because I wanted to see them come around, like in TV shows. Yeah right.

If a person isn't doing their job, you have 2 choices, and you better choose one fast. Either 1) Train them to do their job better, or 2) Fire them without resentment.

If I could go back in time and do one or the other, I would have chosen #2 in a heartbeat instead of waiting around for about a year to see what would happen. I would have rather hired the right person for the job, instead of someone who I thought would work based on their previous title.

Never expect to copy yourself


If you are super-skilled in X, don't expect others to be as well. They may have the same basis, but you can't expect them to know what you know in 24 hours - especially if you were trained over several years.

I have been studying Web Development since 2001, since my first HTML class in high school. Since then, everything else has been self taught: Advanced CSS, PHP, MySQL, jQuery, XML/XSL, DHTML, JavaScript, Python, Ruby on Rails, etc. So I've had over 10 years of experience in the field.

When I hired on extra developers, I had a high expectation: they were on the same level as myself and could crank out stuff just like me.

I could not have been more wrong.

Most of the developers I hired on worked under the premise that they would learn additional skills under my leadership. Well, I spent roughly 2 months teaching them the most common advanced PHP techniques, jQuery items, CSS3 markup, and even Database management with MySQL (as much as I could do). What did I expect? I expected them to come out of the training doing what I was doing. The actual result: I advanced their skill set a bit, but they were still a long way off from developing what we needed for our clients.

I always said "If I could copy myself, I would", but in today's technological era, that's an impossibility (unless you're a sheep).

Basically, it came down to the education gap between me and the other developers; I knew a lot more than they did, and they needed to know a lot more if they were to crank out stuff like me. That wasn't going to happen in 2 months or 2 years - they needed the "on-the-job training" like I had; they needed the "decade of wrong-doings" that I had; they needed to "do things the hard way before learning the ease of a shortcut" like I did (I spent nearly 2 months of nights and weekends in my room hand-coding a visual editor (without advanced PHP functions) because I "wanted to do it").

Location, Location, Location


Waynesville, NC, is not the place for a high-tech kind of company. It took me many years of trial and error (mostly error) to figure that out. As my business advisor once said, "I'm sorry you are in this area." If I was in Raleigh, Charlotte, Atlanta, San Francisco, New York, etc, it would make more sense, but you can't force a business model (or technique) into an area that isn't ready for it. Most of the businesses in this area are "Mom and Pop" stores with owners who are usually the ones behind the counter. While there isn't a problem with this kind of business operation, it isn't the kind of market that can allocate thousands of dollars towards marketing.

I also didn't find out until a few years in (after moving to a small office space in 2007) that we could not put up any additional advertising on the building we were renting, or near the building in general. The landlord did provide us with a large sign on the front that had all of the businesses listed that were inside our building, but any additional logos, signs, even something saying "HERE WE ARE" were prohibited.

My suggestions: prime location for exposure (like Main Street), a professional environment that you can advertise with/on, and/or an easy access office.

Price is not always a factor, but it is a big one


Price may be beneficial, but you can always set it too high or too low. Most people in this area want a low-cost solution, and if your only price range starts in the $1000's, you can easily price yourself out of a market, which is pretty much what we did. After calculating how many hours went into the research, the design testing, the development creation, the usability tweaking, and the launching of a site, $1000 was the bare minimum for the kind of work we produced. While a company in Atlanta wouldn't bat an eye at that, people up here would turn us away within a second. The people up here want the $5 solution, the "What can I pay you to do that won't cost me an arm and a leg" type of solution, the "I have $100, what can you do" kind of solution. Not the "$1000 will get you X, Y, and Z" kind of solution.

Create an enjoyable work environment


A happy team is a productive team. While I'm always the one to think of an enjoyable environment such as Google, IDEO, Patagonia, etc, we didn't really have that, and it showed. Although the extent of our budget allowed for the purchase of some darts with my own dart board, it didn't provide much of an "enjoyable environment" as it were. I also brought in my personal PS2, games, and TV to hopefully provide a few hours of entertainment for the staff. It was never touched. I would love to provide a ping-pong table, a pool table, a HDTV with PS3 entertainment, and more, but our budget didn't allow for it, because I didn't put the money aside to do so.

Don't grow too fast


Grow your company as needed. Don't expect to have your own glass-covered office in 5 years. Don't expect to have a pool table and 200" TV next year. Don't expect to have 30 employees and your own stock options next month.

If you grow too fast, your goals and focus will be thrown out of alignment and you will be focused on the end-goal, not the "right now" goal. So your company is 5 years old - does that mean you need your own conference room? No - invest that money into more marketing and product development, maybe even some staff training. If you absolutely need that conference room, then your company will tell you so. Until then, find a library meeting room, somebody's house, or even a coffee shop to meet at.

Don't get caught up in meetings


Just because you have meetings doesn't mean that they (or the people who attend them) will be productive. As I learned from my years at Last Minute Productions, the majority of items that were discussed in the board room usually stayed in the board room. During my reign as President, I vowed to change that, although my board didn't like the idea (they wanted more money for doing less). In most Board Meetings, assigning a task to someone that will get it done usually results in responsibility, accountability, reliance. If a task is not assigned, then it will not get done.

Also, I always thought it was a great idea to bring my board member attendees up to speed with what has been happening. Usually, that turned into 45 minutes of me blabbing about calls, meetings, and other items that didn't concern, relate, or include the other members. I could have just as easily summarized those blabbings, or even just said the end result and cut the time down to 5 minutes, but my stubbornness got in the way and I was too proud of myself for all of the work that I did (and nobody else). What I should have done is delegated out some of those items to the members so I wasn't always bogged down with items like that.

Don't over complicate things


When I first started my company, I thought that the idea of making websites easy to use would be easy. I mean, the whole world was doing it wrong: Geocities, Yahoo Sites, Homestead websites, even "Welcome! I'm HTML Code!" websites were designing things wrong. The wrong resolution, relying on "Best Viewed in Internet Explorer" tags, over complicating things with animated GIF's to make the site "cute", creating 5-minute flash "splash pages" that you had to sit through in order to get to the site's content, and the list goes on.

I thought I could change this. Instead, I made it more complicated.

In The Oatmeal's blog posting on "How A Web Design Can Go Straight To Hell", the artist/programmer/fun guy Matt Inman talks about exactly what I mean: taking a poorly designed website from the 90's and improving it with high-def graphics, a nice content flow, a beautifully laid out menu, and easy-to-read items. Instead, the client wants what they had: a poorly designed site from the 90's because that's what they had, and that's what they're used to (hence, the "cute kitty", the "mother who designed a Bake Sale flyer in the 80's", and the "pop" and "edgy" items that only exist in their mind). Personally, I also hated it when people would come into Staples (when I worked there) and acted like they knew more than I did in Technology - the same concept applies here: when clients think they know what they should based on the latest article, blog, or news report and want "Web 2.0 items" and "SEO Techniques" integrated into their sites, thinking that those are the most important and absolutely necessary items to have a great site.

I also tried to put too much focus on "how the site worked" and not so much on "how the site looked". My logic said that "if the site worked beautifully, we can design around it. Too many companies focus on how the site looks and not how it operates. Let's flip that." I was wrong. I knew that people went to websites because they looked great (the latest graphics, the flowing sections, even the effects on the photos). I also knew that people left websites because they operated poorly (bad links, page redirection went wrong, server errors that didn't make sense, etc). I wanted to focus on the development of the site to make it operate as expected.

What should I have done? Balanced the design and development, making sure that the design was exciting and the site operated as expected - nothing more.

Always have a backup. And when you do, backup some more


Having your hosting company hold your content hostage is bad business. Over the course of 8 years, I switched hosting companies 4 times. In 2005, I self-hosted, thinking that it wasn't that hard. I was wrong.

In 2006, I moved over to "Website Source" and it was pretty easy to manage, but it cost roughly $66/mth. I did lose some data while with them, and it cost me $50 to recover it from one of their backups.

I migrated to some larger systems while with Website Source, but in 2013, I had to call it quits. In early 2013, I switched to another company (I won't name names here) that would provide me with direct access to our server with backups.

In late 2013, they called it quits with us and froze our server, which meant that all of our data (ours, customers, databases, financial, emails, etc) was gone, and it took me nearly 4 days to get them to "unfreeze" the server so I could transfer the data off. And their "promise" of a backup system? Never happened, so the only place that our data existed was on one single hard drive.

Late 2013-now, I'm now back on my own hosted server (with a lot more experience for managing) and have a backup script to an external server running 2x/day, just in case.

Overall, backup all of your data. Once you do, back it up again, because you never know when you will need it.

If you are going for professional, don't cut corners


Even the iPhone 4 launch was pushed back due to some flaws. Back in 2005, our slogan was "We stay in the shadows, you get all the credit" which was okay. In 2007, our slogan changed to "Simply Professional, Professionally Simple." Personally, I liked it; it portrayed an image of professionalism along with the confidence of knowing that we would be simple (not to contradict a previous point, but that wasn't relevant right now). We even got some professionally printed white polo's that had our company logo on them to display our professionalism. Whenever I went to a client meeting, I made sure that I was clean shaven, my hair was washed, my teeth were brushed, my polo was clean and tucked, my pants were clean, and my shoes were shiny, along with other items to show that I was "A Professional." I thought that this image would be a standard and everybody who copied me would show that we were professionals.

My primary sales person thought otherwise. When I first brought on our primary sales person, I knew that he was a laid-back guy. He was my old freshmen english professor, and I thought that with his "relaxed state" and our "hardened professional mind", we could go far. I didn't expect him to cut so many corners in our "professional environment." For starters, he thought that just because we were a "company", we had millions of dollars sitting in the bank, and $20 meal wouldn't be missed. Little did he know that the $20 he just spent on a meal could have gone towards other resources, such as supplies (and we didn't have much in the bank to begin with, so $20 could have been all that we had!) To make matters worse, I had to order a button up shirt instead of a polo for him, because he didn't like things over his head. When he went to client meetings, he rolled up the long sleeves on his button up shirt. Sometimes he arrived with his button up shirt untucked from his pants, and even left it unbuttoned. He would approach potential clients like they were old friends, taking the conversation on completely irrelevant tangents, and even throwing in a few curse words to get his point across (playfully). Although I knew that we should have let him go a lot earlier, my stubbornness got in the way and thought "he can be reformed." Again, I was wrong...for 2 years (he finally left under his own accord).

Keep in touch with your team


Miscommunication (or lack of communication) can make team members drift apart, and if you constantly rely on them, then losing them is not an option. When I used to talk to my team members on a daily basis, it almost got annoying. However, going days, weeks, even months without any communication seemed like we were drifting apart, almost to the point of "Do I have a job anymore?" (which I have received a few times). Communication is key, but effective and frequent communication is better.

Make all of your goals and intentions clear


Stick to a timeline, schedule your goals and expectations, make sure that everyone knows what the result will be. Missing a deadline is a lot more than just a lowered grade on a test - in the real world, it can mean losing somebody's business.

Whenever I assigned a task to someone, I expected it to get done by the deadline set. When the person says "no problem", my expectation of getting the job done seems worthy. However, when the deadline comes along and there isn't a completed project (or even progress on said project), then my reliance becomes less and less, almost to the point of "If you can't do the task, then you're fired." But, once again, my stubbornness got in the way and I didn't fire anybody. However, when something is delegated out to a person, and that person hasn't completed the task, then the blame is put on the person that delegated the task in the first place, and personally, I'm tired of being blamed for delegating uncompleted tasks (which is why I would take the tasks in the first place, so that I knew it would get done on time, but then I was blamed for not giving anybody else any tasks and hogging everything). It's an endless cycle....

Basically, make the goals and intentions clear. Make the deadlines important, and the punishments clear. Don't allow anyone to slip by because of something that isn't understood.

Never stop seeking out investments


Bootstrapping is a great solution...if you are in your 2nd week of operations. But much later, you will need to seek out more investments in order to grow your business and can't always rely on bootstrapping. If you are taking in your income and only keeping 30% of it as profit, then you won't have enough to cover any additional items, such as moral-boosting get-togethers, upgraded office equipment, RENT, and more.
Also, make sure your team can get paid. Basically working a "freelance" job (or an on-call part-time job) isn't going to pay the bills. If your team isn't committed to you, they will seek out other opportunities for income and leave you.

Set the example


You are the boss. Show your team what you can do. Otherwise, you're just a team member. If you need to resolve a conflict, then resolve it peacefully. If you ARE the conflict, fire yourself or get a 3rd party arbitration.

If you expect your staff to be there on the holiday, you need to show up on the holiday(s). If you expect your team to be there at 7am, then make sure that you are there at 7am (preferably with a hot pot of coffee). If you expect your team to work 40 hours on a project, then you work 40 hours on a project.

Don't just sit back and expect to take the credit while your team does all of the dirty work.

Never expect someone to completely understand what you are offering, and the benefit of it, within the first few minutes of your presentation


Entrepreneur Fail

I expected people to see what we offered and go "Hey! That's what I need! And look at all of the great features!". Instead, I received glassy-eyed stares, basic technology questions, bored attendees, and other signs saying "I have no idea what you are talking about."

When we offered "Advanced, modern websites with the technologies of HTML, CSS, PHP, MySQL, jQuery, and more", I expected a bit of confusion among the crowd, especially at the acronym part, but that was to show our expertise in the technologies and show that "We know what we are doing." Therefore, the potential client would say "They know what they are doing - we should go with them." Instead, it resulted in "I have no idea what that means; therefore, I'm not listening to you anymore."

My expectation was that people would easily understand what we were offering by our presentations, our elevator pitches, and our portfolio. Instead, most people didn't understand or care what I had to say. It basically took an educational session to bring them up to the same level as us for them to understand what we were saying. Let's just say that it didn't turn out well.

Therefore, simplify your techniques. Don't throw in all of the bells and whistles just to impress people. Tell them what they want to know, not what they need to know. It's like an interview: tell the person interviewing you what they want to hear ("I can do the job"), not what they need to here ("With my three decades of experience in X, I suggest that you should do A, B, and C"). Even if it means that they are missing out on an important aspect (ie: security flaws), they want to hear what they want to hear.

Do research on your market, then create the product - not the other way around


I always thought "If you build it, they will come" (insert movie reference here). That may work for some items, but not everything, such as my business. I created a "modern, high-tech web design company" that I thought people would be busting my door down for us to work with them. Instead, of the clients that we found in the Western North Carolina area, most of them were busting my door down because they were unhappy with the service.

I also thought that if we created a service that cranked out quality websites and charged a monthly fee to maintain them, then we would be rolling in the profits. Easy as pie, right? Well, it wasn't so. First, we had to go out and almost physically drag the potential clients to sign with us. Then we had to make sure that we did almost every project underbudget, then provide continuous tech support for the most basic items, even if it went against our "best practice" recommendations. Yada yada yada.... Not really the best idea for starting a business, then sitting back and relaxing while the profits roll in.

Another developer wrote an article about a similar concept, and I agree with him: Research the market, then build the product. Just because you have the best designed, flashy, sparkly billboard in the desert doesn't mean that people will see it, or want to see it.

Don't screw up your credit


As an 18-year old, my first credit card was a surprise. I just entered college and had a personal banking account with Wachovia for a few months (there wasn't a branch of my local bank in my college town, so I switched). A few months in, I received a card from Wachovia saying "Your New Credit Card". I thought "My parents warned me about this. My sister had a bad experience with one. I should not use this unless it is an absolute emergency." So what did I do? I went to Taco Bell and got a drink to test the card out. It worked!

A month later, I used the card some more on a few small things, thinking "I'm getting paid, I can pay it off." I receive my first credit statement. "Amount due: $105. Minimum payment required: $5." When I saw this, I thought "Great! I can make the minimum payment and pay it off slowly." I would like to point out that this card had a limit of $10,000 because I used Debit since I opened the account.

Six months go by. I pay the minimum payment for six months. My credit bill is probably in the medium-to-high 100's. Suddenly, on my credit bill for the 7th month, minimum payment jumps to near $75 or so. In my mind, I'm thinking "Whoa! What happened? This is insane!" I call Wachovia asking about the jump in payment, and they say it's a "Promotional Period that has expired." I told them that I never heard of a promotional period when this started, and I was never offered it as the card was sent to me in the mail, which I never signed up for anyway. The lady was extremely persistent on the fact that since I had the card and was using it, that I was liable for any purchases, regardless of what the promotional period was or what the minimum payment was. I told her "I can't make the minimum payment right now! I don't even have a (well funded) job!" She basically said something along the lines of "Not my problem."

I will say at this point: I never expected my personal credit to cross paths with my investment record.

A few years go by, I get a job that pays roughly $150/mth. Not bad for a part-time gig. I start to pay off my credit bill little by little. Next thing I know, my minimum payment jumps to around $250/mth. I call again and complain, but I was told again by the bank "Not [their] problem". So, my credit bill keeps going up because I can't make the minimum payment, and 29% interest is gained on the bill because it hasn't been paid. At the $7,000 credit mark, I completely stopped using the card altogether. After all of the interest and "late fees" added up, my card topped the $10,000 limit within no time at all. I told Wachovia "I don't use the card. I will never use the card again. Please close the account and I will pay it off." They basically said "The account can't be closed until the card is paid off." So, the account stayed open and accrued interest. Just great. It finally got closed a few years ago, and I'm still attempting to pay it off, but I expect that will take about 10 years or so to pay it all off.

Later in my college career, I start to seek out additional funding for my business. The first few places I go say "Your business plan looks good, but in order to get you funding, we need to take a look at the Owner's credit report." What? This was never covered (in depth) in college!

Let's just say that pretty much every investor I talked to said "Yes" to the business, the plan, and everything else, then changed their mind to "No" once they saw my credit score.

I have never accepted another credit card since the first one, and never will again, regardless of any "offers", "Cash back deals", or "frequent flier points" they provide.

If I could go back and change history, I would have never bought that drink at Taco Bell and shredded the credit card. My credit score would keep going up because I was making so many on-time payments with debit, and I could probably have a few thousand (if not hundred thousand) in investments right about now.


Summary
I know that I've covered a lot of points in this entry. I just wanted to get most of them off my chest before I went to some type of therapy (Even referencing this article was a stretch). Hopefully, other entrepreneurs will read this and discover that not everything will work out like in the movies, the books, or even in the classroom scenarios. You are not indestructible. Your life does hold secrets that others will find. You cannot hide from everything. There is no "reset" button. And, you should fail before you succeed. I know many Venture Capitalists may not look at me because "I have a failed business", but you know what? So what. I've gone through 8 years of self-torment, stubbornness, hopefulness, and grief to know what to do and what not to do. If that means that you won't look at me because of that, then I will go elsewhere.

I'm not saying that you (as an entrepreneur) should read every business book out there. I'm not saying that every article on the internet is right. Go through your own experiences and learn the mistakes. Even Albert Einstein once said, "Anyone who has never made a mistake has never tried anything new." Therefore, I have learned many lessons through my mistakes?

Am I done learning mistakes? Not by a long shot.


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