October 20, 2020 11 min read
Opinions expressed by Entrepreneur contributors are their own.
Ten years ago, on October 14, 2010, right before I graduated college, I went to Boston City Hall, paid a filing fee and registered my company, Yeti, LLC.
I soon brought on my business partner, Rudy Mutta, and now, 10 years later, we’re still in business and, despite Covid throwing us some major curveballs, growing.
We are a bootstrapped service business, so compared to some of our peers in our hometown of San Francisco, we can really only claim modest success, having never IPO’d or become a billion-dollar unicorn.
Looking back on our decade running this business, we’ve had the highs of being in a Netflix documentary, building high profile apps with top-tier clients and making it into the Fortune 5000. But, what you don’t hear a lot about from entrepreneurs is the mistakes they’ve made.
As we look back over the past decade, those mistakes are the moments when we learned the most. So, instead of touting 10 years of triumphs, I thought I would share 10 of my biggest mistakes and the lessons that came out of them. Knowing very little about running a company 10 years ago, I could have saved myself a lot of time, money and energy knowing these things.
1. The taxman cometh
In our first year of business, we thought it would be wise to show just how profitable we were. We even made sure we cashed a massive check from a client at the end of December to close out the year with even more earnings.
We didn’t realize that no one really cares about your profits at this stage, but the taxman cares that you pay what is due.
Not having kept track of our expenses properly, not paying monthly or quarterly taxes and not saving adequately left us almost completely decimated after our first year.
In hindsight, it would have been hugely beneficial to understand some of the basics of business tax going into this venture.
2. The world is not flat
When we started our company, we got really excited about the idea of keeping our organization completely flat, where everybody had the initiative and self-organized to hit company goals. This works when your company is six people, but as it grows, it becomes impossible.
Reflecting back, I think it was because I was scared of doing the work necessary to be a leader. I had one business coach eventually tell me, “It sounds like you are trying to operate a pirate ship.” That might sound fun, but in actuality, pirate crews don’t perform very well.
Leadership is an artform that is important to study and practice — you can often give people more freedom and job satisfaction by providing them with a structure to do their best work.
3. Establish core values
As our business grew, so did our team. However, we kept hiring and losing employees, which, as it turns out, is quite costly. In fact, a conservative estimate puts the cost of replacing an individual employee at one-half to two times the employee’s annual salary.
What was frustrating is that there wasn’t always a tangible reason some people didn’t work out. We couldn’t quite put our finger on it. After consulting with many other business owners, I learned that having established core values would help us make sure we were aligned with employees during the interview process before bringing them on board.
We made it a priority to have constant communication with the team about our core values and have since used them to promote and retain employees. It is important to have everybody understand and align around these. It makes for more harmony in the business.
Related: 9 Common Mistakes Made by New Entrepreneurs
4. Enjoy the moment
Running any business is going to come with its headaches. I have yet to meet an entrepreneur who has had an entirely stress-free go of it. Whatever the struggles, be it struggling for cash or dealing with personnel issues, it’s important to appreciate the moment and time and space your company is in.
For a while, we tried to be a company that we really weren’t and it took a toll. We were trying to be who people thought a software development firm in San Francisco should be. It resulted in a lot of wasted time and money and left us frustrated and dissatisfied, chasing something we were not.
5. There are no silver bullets
When you are growing a business, it’s really easy to think, “I just need to make this one silver bullet hire or execute on this one tactic. After I do that, we will get to the next level.”
It never works out.
The honest truth, which it’s taken me many attempts to learn, is that no one person or thing is going to come in and solve all the problems at your company or just immediately take you to the next level. It’s all an iterative process, and you need to find the people that want to go through that process with you. Make very clear to everyone on your team that you all are in the business of working on the business.
Even if someone you are thinking of hiring has been amazing at another company and has done awesome things, it’s not the same company as yours and it will take work to make your company that way. One person alone, new to your company, isn’t going to do it.
What’s most important with any new strategic initiative like hiring is to take your time, know your core values and share honestly with your team where you are and the work it’s going to take to level up. Get people aligned so they know the path you are on — running a business is more about creating and navigating a roadmap than going out searching for silver bullets.
6. Design your culture to have a cadence
Company culture doesn’t mean “cool” swag, being BFFs with your co-workers, or in-office happy hours every Friday. Those are superficial.
I started this business right out of college, so you can imagine that, at first, this is exactly what I thought company culture was. We rented a fun office with a roof deck, had bands come and play, threw parties. It was a lot of fun, but the business didn’t really gain much … and I lost a lot of Saturdays cleaning up beer bottles.
The company would have benefited from more meaningful team bonding, and I’m pretty sure we lost some clients when they saw our office looking more like a hacker house than a place where professionals worked.
As I’ve grown into becoming a “real”” business owner, I have realized culture is how your team all comes together, holds each other accountable, supports one another, gets the work done and celebrates victories together. We now have more structured team days and meetings focused on themes with actionable takeaways that our team finds more impactful.
Build the systems, make space and have a cadence for how these things are done.
Related: 8 Huge Mistakes Most Entrepreneurs Don’t Realize They’re Making
7. Marketing should be authentic
Any entrepreneur who’s been in the business long enough can give you a laundry list of marketing tactics they’ve tried.
It’s hard not to fall for some of the “get rich quick” schemes out there, ourselves included. (We’ve literally spent hundreds of thousands of dollars learning this lesson, folks, so if you don’t take any of the other advice, at least listen to this tip.)
But what we have found is that when it comes to sales and marketing, if it seems too easy too good to be true, it absolutely is. This sort of thing works in the movies and people love to brag about how they gamed the system but in actuality, nothing replaces doing the hard work.
We have found that to resonate most with leads and potential customers, we need to be authentic and true to who we are as a company. The more authentic you can make your outreach and communication, the more you’ll resonate with people — maybe not everyone, but the people who are right for your business.
8. Focus on building relationships
As a young company, we didn’t realize the power of relationships in our business, but as we’ve grown up, we are continually reminded of how important they are.
When we started out we were very focused on getting a job done and then moving on to the next one. We were very focused on the here and now. We weren’t looking at the bigger picture of three, five, 10 years and beyond.
No matter how much “lead gen marketing” we’ve done, the primary driver of our business has been referrals. They may not be referrals we get right after we finish a project with someone, but putting effort into maintaining and strengthening our relationships has absolutely paid off over the years. (Plus, people on my team and I have made some lifelong friends along the way!)
I wish I had spent more of my time focused on that in our early years. There are really simple things you can do to stay in touch, check in with people and develop relationships. For a service business especially, this is some of the best marketing you can do.
9. Know when to say “no”
This one was a real struggle for us at first. We took on bad clients because we hadn’t identified how we bring value to the table. They had the money to pay us so, why not?
It has always resulted in more pain down the road.
Every. Single. Time.
For us, bad clients usually come in the form of independently wealthy individuals that have no business building apps but have stumbled upon a significant amount of money and have dreams of being the next Mark Zuckerberg.
At the end of the day, these people didn’t want to do the work to build the business or take the time to understand some of the complexities involved in building a product from scratch. We now have the experience to be able to identify specifically where we bring value to our client relationships and where we won’t be a good fit.
Since building relationships is important to us, we now have tools that make it very clear when there are red flags during sales conversations so we can be honest and tell people when it’s not appropriate to hire us. This saves everybody time and money, even if it seems wrong to pass up a potentially lucrative opportunity.
10. Don’t let your gas tank run out
You probably would not believe how we managed our finances when we began (or maybe after reading this article, you would). We would periodically sketch out on a whiteboard all our receivables and payables and get a rough idea of when “D-Day” was. We used this to motivate ourselves to get new projects and complete work.
As you can imagine, this was not super effective nor sustainable and scalable. As our business grew and got more sophisticated we nearly ran out of cash, this is very common as you grow and your expenses go up but you are waiting on payments. It’s scary as hell when you have 15 or more people who are depending on you for their jobs. I never had more sleepless nights.
We ended up with a 12-week cash flow forecasting tool which has been a vital tool to our success as a business. It means we know if and when we’ll ever run out of gas.
Using financial tools like this to help you properly plan for the future is essential to the longevity of your business and enables you to effectively communicate with your team why you are making certain decisions. Also, when in doubt, turn to the experts. Don’t be afraid to hire a consultant to help if finances aren’t your area of expertise.
A good financial reporting structure and a basic understanding of your P+L and Balance Sheet will ensure you catch issues before they kill your company. Use accounting to hold yourself accountable!
It’s well said that you learn more from your mistakes than you do your successes, and I honestly believe that to be true. I like to think of the hundreds of thousands of dollars I’ve spent learning these lessons as my unofficial business school tuition.
If we hadn’t made the mistakes we did, we wouldn’t have been able to so effectively right ourselves. With the recent turmoil of the Covid pandemic, we are leaning on these experiences more than ever to navigate our way through it and come out stronger.
You’ll no doubt make your own mistakes, it’s how you’ll ultimately succeed. I hope these 10 mistakes can help you avoid some troubles but more so inspire you to overcome and learn from whatever challenges you face on your entrepreneurial journey.
As Richard Branson says “You don’t learn to walk by following rules. You learn by doing, and by falling over.”
