By Carol Frank, managing director of SDR Ventures and the author of, Do as I Say, Not As I Did! Gaining Wisdom in Business through the Mistakes of Highly Successful People.
As a long-time entrepreneur, I’ve endured my share of highs and lows in business. The analogy that running a business is a lot like being on a rollercoaster is dead on, as you never really know what direction work will take you. Throughout my topsy-turvy business journey, I’ve discovered five critical things an entrepreneur should never do.
- Believe bigger is better. When selecting a public relations firm, it may seem natural to assume that bigger firms with hefty fees and impressive client lists are a good bet for entrepreneurs. But, you could make out better by selecting a smaller, hungrier firm that will be as eager to have you as a client as you are to have their services. That’s the lesson Amilya Antonetti of Soapworks learned when she hired a big public relations firm to help turn her all-natural, soap-based home cleaners into a national brand. The big PR firm devoted its attention to its bigger clients and generated no results for Soapworks. Instead, it sapped several years of the company’s cash growth. Amilya later found a younger, more aggressive firm to handle her account, one that got her the results she craved using cost-effective marketing, consumer and corporate education, and guerilla techniques.
- Put all of your eggs in one basket. Businesses that rely on a single supplier, vendor or type of customer are only one move away from disaster, as Gary Hoover discovered when his retail travel store, Travel Fest, took a dive because it was too dependent on the airline industry. Travel Fest took off in the early 1990s as customers embraced its travel superstore concept, but things began to fall apart when cost-cutting airlines drastically cut travel agent commissions, an important part of the company’s revenue. At the mercy of an industry he could not control, Gary never saw the fatal blow to his company coming.
- Neglect your best employees. Jeff Taylor lost many talented people when he started Monster.com. Before developing the largest job and recruitment site on the Web, Jeff owned an advertising agency called Adion. Not wanting to dilute the strength of Adion, he invited only young, up-and-coming employees to join the fledgling Monster.com. Months later, he learned that many key employees at Adion were leaving because they felt left out. Jeff was able to woo about a third of them back with offers of jobs at Monster.com, but it was too late to save the rest. Jeff realized that he kept his key employees in the dark about Monster.com and erred by not asking them to get in on its development.
- Trust everyone. Remember— it’s not personal, it’s business. For a lesson on what not to do, ask Judith Briles, whose venture as a hotel developer with a “friend” cost her more than US$1 million. Looking back, Judith realizes she missed several red flags about her partner because she was too trusting. To make things right, Judith had to sell her house and her family’s clothes to satisfy her creditors after her partner declared bankruptcy. The experience changed her career direction and taught her the importance of knowing exactly where the money is going.
- Ignore your finances. When Susan Jones Knape and her husband started their advertising agency, Knape and Knape, they hired an in-house CPA and fired the outside CPA firm they had been working with. Susan devoted all her energies to growing her agency’s client base and let the CFO watch the money. She was unaware of his history of mismanaging money at other companies, and with no outside CPA firm to check up on him, he proceeded to make poor decisions on her behalf, including choosing to pay media vendors instead of the IRS, which eventually cost her US$350,000 in penalties and interest.
These five tips have helped me learn and grow as a business leader. By applying these lessons learned to my company, I’ve able to position my business toward sustainable success. What’s more, I’ve learned how to be the best entrepreneur I can be.