This is the second article in a series. Read part one here.
Many things were learned when my first business failed in 2014. As part of the post-mortem of the business, I made a list of things and am now digging this list out and expanding on them to try to pass on wisdom to the community.
1 – There will always be other business opportunities.
There’s always been a burning desire in me to not ‘miss the next big thing’.
I occasionally lose sight of what it is I’m really passionate about when an idea, pitched by a good friend, comes my way. I hear lots of good (and some awful) ideas due to the friends that I spend time with. However, once you start looking for business ideas, you will see them everywhere. There is always another idea coming around the corner. Be patient, be prepared and make yourself ready to pounce on the correct one.
2 – Plot out your burn-rate carefully, overestimate, then double it (just to be sure).
Burn-rate is a term that has been popularised with the global spread of tech startups. However knowing how much money you have left until bankruptcy is in no way a new concept. It is very important to know how long your money will last, and then be even more conservative about it. Doubling it might be drastic, but you don’t want to run out of money (ever) and certainly not at inopportune times.
This brings me on to my next point.
3 – You’ll spend money on the most ridiculous things.
When you first start you’ll spend money on things that you wouldn’t even have anticipated. For example, we were importing products into Romania, and so had calculated shipping and storage costs. We hadn’t calculated was ‘extra’ import costs, VAT and other small things that you had to pay at customs. It’s a learning curve for sure, and as you continue to run a business you will get better at estimating how much money it will cost, and timeframes involved. But as you continue to grow, and try new thing, you will need to continue to learn.
4 – If you can avoid fixed expenses, do it.
Fixed expenses are any costs that you have to pay each month, regardless of how much revenue you have made that month. We had one member of staff on salary, and it wasn’t a huge salary, but it would eat away at the money you had in the bank each month. It was tough to come to the end of a month with no sales and have to pay them when you’re not paying yourself.
This also goes for office space – we worked at home for most of the time so that we could save money to put into the business. When we finally needed an office we started working at a co-working space. Read our work to finding a good co-working space here.
5 – If you want to create a remote working culture, start with a team that is working in person, and then get them to go work by themselves, not the other way around.
When working in Oil and Gas in Albania (a whole another story) I learned about a concept called forming, storming, norming, performing. It is very difficult to engage remote staff (see – how to engage a remote team) when you haven’t spent some time together forming ideas, storming (where staff start coming up with ideas), norming (where concepts are turned in to process) and then performing (the final stage in the process where direction is clear and the team can go and get on with their work.
It is very difficult the other way around – and if you do decide to start remotely, or can’t get together in person, read our guide on how to engage employees who are not in the same office.
6 – The world will not end tomorrow if you lose all of your money.
This is a tough one for me as the money that was lost still hurts sometimes. But you have to learn from the mistakes made. The money wasn’t spent in vain if you have learned from the mistakes that you made. The way I look at it is I got an MBA education trying to start this business and wouldn’t trade it for the world.
7 – It’s easier to not worry about money when you still have some savings, but on the flip side it can make you have less urgency because you think you have a lot of time.
This is a tougher one to explain, but you might be able to relate if you’ve started a business before.
When I started this business I had money that I had saved both from my job, and being made redundant. This did two things to my mentality – it gave me a buffer and a sense of security, but on the flip side reduced my urgency to make money as quickly as I could. It almost made me lethargic because I knew that if I didn’t make that money this week, I still had money left over, and wouldn’t go immediately bankrupt.
I think there is a fine balance. You should have about 6-12 months (if you can) living expenses in the bank so that you know that you won’t be homeless if things go wrong. But I would also suggest that you set a fixed amount to put towards the business, and then think very carefully about dipping further into the savings if you go above and beyond that amount. I know this is very easy to say in theory, and when you’re in the thick of things it is more difficult to think logically, but try. If you need more money than you initially budgeted (which you most likely will), it is a good time to pause and reflect on what has happened. What has caused you to spend more? Will this trend continue? Are sales going to pick up? Are expenses too high?
8 – Take your time in thinking about important decisions, but once your decision is made pursue it relentlessly.
Decision making is one of the most difficult things we do day-to-day, and most of us will never master it. Some notable decision makers are Ray Dalio, who wrote the book Principles, and Warren Buffet and Charlie Munger, who are renowned for their mental models and ability to make rational decisions. I would recommend reading The Farnham Street Blog.
The important part is that once you’ve made a decision (whether it turns out to be right or wrong) you need to pursue it relentlessly, otherwise, why bother.
9 – Not making a decision is a decision in itself.
This is exactly what it says – if you’re avoiding making a decision, you’ve made a decision to not make a decision. A mouthful but true.
10 – If it doesn’t get you out of the bed most mornings then don’t do it.
Your idea will not motivate you every day. In reality, motivation is a fickle beast which we will cover in another article. If you’re not rearing to go and work when you get out of bed, then it might not be worth pursuing. Are you thinking about it all the time? Or is it just something you think might be nice. Entrepreneurship is really bloody difficult. Don’t forget it.