“The secret of getting ahead is getting started.” –Mark Twain
Many entrepreneurs I meet have incredible stories about the way they started their businesses. Some had a wild idea and found a way to sell it; others accidentally bumped into an opportunity they were able to seize and monetize. Rare are those who spent months planning with a highly detailed strategic plan filled with metrics and key performance indicators.
My own journey started in the toughest of circumstances. My wife’s family had started a business. They were able to take it public and experienced exponential growth within eight years through mergers and acquisitions. The business was a true local success story.
Then the recession hit. The company was ill-prepared to handle the pressure of reduced revenue with growing expenses. Within 18 months, all was lost. It truly felt as if life were ending for us.
My brother-in-law and I did the only thing we could think of: Buy some of the remaining assets and start our own thing from scratch. I wish I could say we had exceptional vision and knew we were building “the next big thing.”
In reality, we were naive and just doing our best to survive. No bank would even consider us for financing, so we had to find a way to make it all work. A tough situation to say the least.
After years of working tirelessly and getting (pushing) our business onto the right track, we achieved stability and have been able to sustain growth several years in a row—but many mistakes were made along the way.
Still, today I may be slightly underplaying it: There were numerous major challenges, each of which on its own could have spelled the end of our business entirely. We made it through, but with a ton of battle scars. And like most entrepreneurs, we wear those scars as a badge of honor.
I look back and wish I had known certain things which would have made my entrepreneurial journey a little clearer, smoother and better poised for success.
Here are four lessons I wish I’d known as an early-stage entrepreneur.
1. Understand the Numbers
The numbers: One of the most important aspects of any business. So many young entrepreneurs only look at certain financial metrics which they deem relevant. In reality, cash flow means everything; margin will only take you as far as your bottom line expenses will.
For the longest time, we struggled with cash flow. We didn’t understand the “Cash Conversion Cycle” of our business—the amount of time it takes for inventory to turn into actual cash in the bank account. We assumed all was under control until we calculated our cycle took eight months! That is an excessive amount of time. We were paying deposits to suppliers and getting paid in 90 days from key customers. Our structure was unacceptable and it stretched us thin, causing a massive cash crunch.
We put all of our efforts in improving this crucial metric. We consolidated and then renegotiated with all of our suppliers month after month. We found ways for our customers to pay quicker. In the end, we achieved a six-month improvement in our cycle, which solidified our cash position.
2. Implement Processes—Early
Many businesses wait years before implementing clear processes. Or worse, they wait for a catalytic event to cause massive issues and play defense as a result. Our business was no different. We waited and waited, not giving process any attention at all. Then we suffered huge consequences.
We work with many key suppliers. When we pay for our goods, they are released by our suppliers and delivered to us. It was straightforward: We were sending money and getting the merchandise. Eventually, we went to visit our partners. We quickly discovered there had been massive fraud and the money we were sending was going to a criminal. The supplier kept releasing the merchandise based on the blatant lies of this criminal.
The discovery left all of us in shock. We came to realise we had approved a bank account change from our supplier without any proof. The criminal had done his dirty work and we didn’t question anything. We lost a six-figure amount, setting our business back months. We had to make a desperate deal with our supplier to save us from massive issues.
Since then, we have implemented a foolproof process that requires several checks before changing bank accounts. We are incredibly careful and well-organized. Processes abound in our business. Living through that tough experience taught us a lot, and I would prefer to help others learn from my mistakes and avoid the same frustrations. Implement processes. Build safeguards.
3. Hire Slow + Fire Fast = Company Culture is EVERYTHING
When we launch a company, we often hire friends, family or any person willing to take a chance on us. It’s normal, part of the game. I did the same.
Today, I spend a lot of time teaching young entrepreneurs the importance of hiring “A” players from day one. The quality of your people will determine the strength of your culture, which will determine the success of your business. It is crucial to find individuals who are an excellent “values” fit for your company (yes, that means you need to define core values from the outset).
What happens when you hire according to your values? The following will happen: Eventually, the company will either outgrow your existing employees because they weren’t the right people from the start, or your culture will erode and you will feel stuck. In both cases, big decisions will be forced.
In our business, in year three, we realized our team did not fit our plans in the least. We had kept all employees from a previous failed venture, never questioning compatibility. We simply took on (more or less) whoever knew the job and needed to work. In the ensuing five years, we changed 85 percent of our team. Yes, 85 percent! Sounds hard to believe, but it was done slowly, step by step, integrating true team-players who understood what we were trying to accomplish.
We now have what I consider to be one of the absolute strongest teams in our industry and a rock-solid company culture.
4. Take time and BREATHE
When launching a new business, things will move at lightspeed. Decisions will be made hastily to ensure survival. This is completely understandable. But there is an opportunity to do things differently.
I strongly recommend taking a step back. Think strategically. Implement a proven hiring system to hire only the best people from day one. Build processes and stick by them. Create a vision of the business of your dreams and take the right steps early on to lay the foundation for that vision. Hire a coach if you can afford it. All of these decisions will ensure the viability and success of your new venture. You will have to make these moves eventually—and delaying them will only delay your business’ growth and your personal growth. Why not start now?
Shawn Johal is a Scaling Up Certified Coach currently working with several entrepreneurs and their businesses to help accelerate their growth, while finding personal balance and happiness.