Five years ago I received an email from a college friend about a business idea he was working on! His idea was to create a journal/game around a concept called “My Life List!” I was familiar with the concept, having read about John Goddard’s Life List in the first “Chicken Soup for the Soul” book.
Personally I was an avid ‘life lister’ having ticked off a few Life List goals over the years such as; Qualifying as a Chartered Accountant, living in 4 different countries, climbing Mt Kilimanjaro, Scuba diving the Great Barrier Reef, and most recently completing a Sydney Hobart Ocean Race aboard a Volvo 60 round the world yacht.
The one thing missing from my list of achievements was running my own business. So when my friend called with the idea to build a business around a concept I was passionate about, it seemed like a no brainer…
Let’s fast-forward to three years after the call! I spent nearly $200k developing the business and my college friend and I are no longer active partners. The total revenue to date from our efforts is a whopping $135.00! So what happened?
Here are 5 mistakes I made in trying to get my business started and the lessons I learned.
Lesson 1 – I had no idea how to start-it!
While I was passionate about the concept I had no idea how to run a start-up business. In fact my corporate experience actually worked against me as I gravitated to what I knew. The problem with gravitating to what I knew was that I never got paid for my two months of efforts in creating the perfect business plan and financial model. I became a CFO as opposed to an entrepreneur.
Solution – Learn from experts how to get started!
No matter how original you think your idea there will be someone who’s been successful doing something similar. If there isn’t, you have to question the business merits of the concept. I have since reached out to the experts and have completely revised our business model and most importantly I am taking actions to make money, not more paper!
Lesson 2 – I did not have the keys
The idea of working with an old friend seemed like the dream scenario for me. While we were equal partners I was the only one with the funds, however as founder he felt significant ownership over the idea. In time he decided he wanted to go in a different direction and wanted to dissolve our business relationship. Thankfully I had structured the business properly with a partnership agreement and I was able to buy him out leaving him with a small non-voting interest.
Solution – Having the keys means having control
I now have full control of the business and I am now able to execute the business plan more effectively. I do have minority investors but they are all non-voting and leave all decisions relating to the direction of the business with me. If I were ever to do this again I would structure a share plan that better represents future contributions of both cash and time (ie: both start at 10% and have clear targets for increasing ownership stakes)
Lesson 3 – There was no fuel in the tank!
I had started out with the plan to fund the business $100K which I felt was sufficient capital to see us through to profitability. That amount has now doubled and I nearly went broke every month for a year. I now understand why they call it runway, because when it runs out there are very few options other than flames.
Solution – Cash is the fuel for all business
Before you even start your business maximize the amount of cash you have available. Run the idea by friends and family to see how much they would be interested in investing before you desperately need their help. Even if you have no intention of ever borrowing money establish credit lines as an additional safety net.
Lesson 4 – I had no idea if the engine started what it would sound like!
Over the last year there has been so much noise surrounding social media and start-up web companies. It only seemed natural that this was the hot business for us. Unfortunately as I did more research into the model it became quite clear the money is not as large as I originally believed.
Solution – Revenue should roar like a V8
We significantly changed our revenue model and I now know what success sounds like. For us it roars when we sell our books and other services. We have a multi-strategy model with multiple revenue streams that roar and are much easier to execute than getting paid for web traffic.
Lesson 5 – I did not prepare everyone for the ride!
Over the course of the last 2 years I have hit a few unexpected roadblocks. The support of my friends and family has been wonderful but I don’t think I prepared everyone for what it was going to take to be successful.
Solution – Have everyone put on a seatbelt
When you decide to venture into the world of starting a new business it’s vital you prepare everyone for the ride. This decision will impact so many people in your life and by having them prepared they will be better able to support you.
“Some of the best lessons we ever learn are learned from past mistakes. The error of the past is the wisdom and success of the future.”– Dale E. Turner
Originally posted @ Startup professionals musings
Bill Starr is an avid ‘life lister’ and a founding partner and CEO of My Life List™, an award winning goal achievement website that uses a proven methodology and the power of social networking to help people achieve their goals and inspire others. It’s free and easy to join! There is still time.