Experience gives us knowledge. Unfortunately, this knowledge can come at a very hefty price. In the case of my Partners and me, it resulted in the bankruptcy of our office furniture business. We did a lot of things right and enjoyed great successes for most of the time I was an owner. We were never afraid of change. In fact, our staff would grow tired of us always implementing new ideas. We were always innovating. We had some brilliant creations and some spectacular failures. Today, I coach business owners on how to financially thrive, protect, and build wealth using their businesses by avoiding some of our mistakes. These are the 6 things I would’ve done differently with my first business.
Really Know Your Company’s Financials
I’m not talking about learning how to read your Financial Statements, but rather really dig into your financials and let them be the basis for your decisions. I knew how to read financial statements, but to be able to dissect them and understand them better than our accountants. We made some financial decisions with our company based upon recommendations that came from our Accountants. They suggested some strategies that would’ve recommended a different path to take, given my level of knowledge today.
Never Hire in Anticipation of Business
Being an entrepreneur requires being optimistic but not at the sacrifice of reality. Often, we used “The Field of Dreams” philosophy, “Build it, and they will come”. In other words, create the infrastructure and the support, and the sales would follow. It is better to push through the discomfort of too much workload for a while before you decide to throw more staffing at it. Unless you have a projected workflow for a sustained period of time, better to hear a few complaints of working too much than having people sitting around twiddling their thumbs after the work crunch has passed. Besides, you can always give bonuses or time off down the road.
Pay Down Your Personal Debt Too
The Partners and I took very modest salaries. We weren’t starving by any means, but we didn’t take lavage bonuses either. We made money, and we left the profits in the business. As I always indicated, the retained earnings in the business made me more money than if I would’ve invested elsewhere. If the retained earnings in the business continued to multiply, then I wouldn’t be making this point. Eventually, our personal debt would’ve been paid off. But that’s not how things turned out. So not only did we walk away with nothing when we closed down the business, but I still had a significant amount of my mortgage that remained unpaid.
Start with a Profit First Mentality
If you’re not familiar with the book Profit First by Mike Michalowicz, you may want to look at my previous post. It is a practical guide to focusing on profitability from day one. It’s a different philosophy but helps to change your entire business and how you look at things. For example, if the traditional accounting rules say Revenue – Expenses = Profit, Profit First makes a subtle spin on this: Revenue – Profit = Expenses. Mike’s methodology makes you scrutinize your expenses to drive profit. It’s a little thing but incredibly eye-opening. I highly recommend it if you struggle to remain profitable or want to get to profitability from Day-1. If you haven’t listened to Profit First, you may want to expand your way of thinking regarding your company’s finances.
Love What You Do or Get the Hell Out
It’s often been said, “love what you do, and you’ll never work another day in your life”. I got to a point much later on in my business that I became resentful of it. I’d just fallen out of love with what I was doing. Every day the journey to work became more and more difficult, and every day it became harder and harder to get out of bed. I’m sure bleeding cash affects your motivation. I used to bound out of bed at 5 AM every morning, excited to get to work. I’m not sure when that changed, but it did.
Don’t Rely Upon Your Business as your Only Source for Retirement
The number one rule of investing is to diversify your assets. Even though on paper our business was worth several million dollars, that represented the sum of my retirement strategy (I know, it’s ironic given what I coach today). Many business owners are relying upon the eventual sale of their business as a means of financial freedom. If approximately 20% of businesses ever get sold, what are your odds of truly cashing out? As important as diversifying your retirement income strategy, for business owners, it’s equally important to put a succession plan into place as early on as possible and maximizing its value. Read a post by Eric Gilboord that I featured a few weeks ago about the potential perils of selling your business.
To be clear, this is not an embittered post about all the mistakes we made along the way. The truth is, mistakes are our greatest teacher. I’m very proud of all the things that we accomplished at Summerlee Office Solutions. I was blessed to have an incredible business partner and mentor. I’m proud of the many things that we did exceptionally well for all the things we could’ve done differently. We were revered by many for all the innovations we came up with and implemented. Also, the culture and family that we had created in our business were incomparable to any other place I’ve ever worked or been associated with. The things that we could’ve done differently can be chalked up to the ongoing and continuing education of Chris Coulter.
Chris Coulter is the Founder and President of The Finish Line Group. He works with business owners to leverage their businesses to increase their wealth, reduce corporate and personal taxes, create viable succession strategies, enable employee retention strategies and allow them to exit their businesses on their terms.
Chris’ passion for what he does evolve from the mistakes he made in his first business; by not diversifying his risk and not utilizing many opportunities to create significant wealth. Chris found out the difficult way and now educates business owners on avoiding many of his former oversights and ultimately controlling their finish line.