~ by Haley Lynn Gray ~
What I’ve learned in business is that there will be plenty of failures and a few successes, and that the failures frequently teach the more useful lessons.
I have a good education in business, which helped me avoid a certain number of mistakes. It did not prevent me from making others, because most of these aren’t taught anywhere.
Here are mine.
On partners and paperwork
Decide how someone leaves before anyone joins. Every partnership starts in a honeymoon period. Then things get difficult, or they go extremely well, and at some point somebody wants or needs out. Agree the terms while everyone is still delighted with each other — who does what, who pays for what, what happens on exit and under what conditions.
In my case there’s no horrible story. My former business partner is a remarkable woman and still a dear friend. But we made a mistake: when she was no longer involved in day-to-day operations and had no visibility into what was happening, neither of us recognised that the right move was for her to exit properly. We drifted instead of deciding.
Read every personal guarantee, including what kind it is. You incorporate to separate personal from business liability, and then banks and landlords ask you to sign that separation away. Frequently they’ll insist.
We learned this unpleasantly on a company credit card after I sold one of my businesses. Rather than negotiating the balance or apportioning it, the bank pursued my business partner — a minority owner — for the entire amount.
So check not only whether there’s a guarantee but what it reaches. Specifically, whether anything can result in a lien on your home.
On money, and people offering it
Be extremely wary of anyone arriving with cash. Factoring arrangements and high-interest lending look like salvation at exactly the moment you’re most vulnerable to them. They’ll set up auto-drafts and take money at the worst possible time, and collection tactics can be aggressive to the point of being legally questionable in some states.
I backed out of one loan because the rate had been misstated to me. I was told 10%. Reading the fine print properly, it was just over 40%.
Always read the fine print. Always.
Pay payroll taxes on time, before anything else. The IRS is not a creditor you negotiate with, the customer service is dreadful, and this is one debt you essentially cannot escape. It will bankrupt a company that could otherwise have survived.
Don’t bank personally where you bank commercially. A friend learned this one the hard way. Her business fell behind on a payment and the bank helped itself to her personal account — which she discovered while trying to pay her mortgage.
And separate personal and business finances completely. Not mostly. Completely. Untangling them later is painful, and you’ll lose deductions you were entitled to simply because you can’t evidence them.
On hiring, and letting go
Hire only who you genuinely need. Over-hiring cost me a great deal of money. The temptation is real — hiring feels like progress, and a bigger team feels like a bigger business. It’s also a fixed cost arriving before the revenue that justifies it.
And act quickly when it isn’t working. I held onto people far longer than I should have, having been advised otherwise, because I was being loyal to people who weren’t reciprocating.
Here’s what I’d add now, having thought about it for considerably longer.
When someone isn’t performing, there are two possibilities and they need opposite responses. Either they don’t know what’s expected, don’t have the authority to do it, or are stuck and afraid to say — all of which are mine to fix. Or they can and they’ve chosen not to, which is a conversation and then a decision.
I used to assume the second more often than was warranted, and treating a clarity problem as a character problem is expensive in both directions. But once you’ve genuinely established which it is, don’t linger. Keeping someone who isn’t working out isn’t kindness — the rest of the team is carrying it, and they know before you do.
On growth
Be careful what you spend to grow. It’s seductive to think money in yields money out. Sometimes. Not always. I invested heavily in things that produced no clients at all, and the most obvious growth routes frequently don’t work as advertised.
It is very tempting to try to buy customers rather than doing the slower, more effective work of talking to people.
Sales is harder to hire for than operations. I tried to hire salespeople while I concentrated on operations, and it was the wrong way round. Competent operational people are findable. Someone who will genuinely sell your service, in your voice, without you standing over them is rare and expensive — and in the early years it’s usually the founder or nobody.
You need systems as well as customers. Winning work you can’t deliver consistently creates a different and worse problem than not winning it.
What connects most of these
Reading them back, the majority share a shape: I knew the right answer and didn’t act on it quickly enough.
I knew the partnership needed resolving. I knew the person wasn’t working out. I knew the advertising wasn’t producing anything. The information was available; what was missing was the willingness to act on it while the action was still small.
That’s the actual lesson, and it’s less about business knowledge than about the discomfort of doing something about what you already know.
Accountants generally have it right when they suggest being conservative. And it is genuinely funny how, with a good education and plenty of warning, it remains entirely possible to make every one of these mistakes with considerable flair.
More on why people underperform and why fast growth breaks things.
About the author
Haley Lynn Gray is the founder of Leadership Girl, of In2itive Biz Solutions, and of the Women’s Entrepreneur Network — a community of more than 77,000 women in business.
She writes here about what happens when running a business starts demanding that you lead one. More about Haley →
