The Worst Advice I Ever Received as an Entrepreneur
When I began starting companies in 1990, I received a lot of bad advice from popular books and self-proclaimed business experts. As a result, I suffered by making a lot of fatal mistakes. Here is the worst advice I ever received and what to do instead:
- “That idea will never work.” When I started my third business, everyone around me said it would never work. Five years later, we sold it for millions of dollars. Instead: Look to feedback only from your paying customers to determine exactly what is working and what needs to be changed.
- “You have a sure thing.” At one of my companies, everyone around me said that the idea could not fail. We went out of business after only a few years. Instead: While a business can be a great idea, focus on the critical components of execution that really determine success or failure.
- “Hard work will guarantee success.” Entrepreneurs are praised for working hard, but there is no straight correlation between hard work and financial success. Instead: Focus on being productive instead of just working hard. Determine which completed tasks will really take the business to the next level.
- “You just need to get that first customer.” The first customer is magical, but getting them or the next ten does not mean that a lot of others will buy. There will always be those early adopters, but business leverage only comes when the product goes mainstream. Instead: Examine the path for leveraging mass customer adoption. This is typically related to value, price or distribution.
- “Don’t worry about making money, just grow sales.” Many fast growing companies think that if they grow fast enough, profit and investors will eventually follow. This is a risky strategy since sales is vanity and cash flow is sanity. Many growing companies go out of business because they run out if cash. Instead: A much safer strategy is to grow profitably. Learn to read the cash flow statement monthly to manage the company. Jealously guard all monthly cash profits.
- “Sales will get better next month.” This is the hope of many entrepreneurs that are trying to build a successful business, but who are really just scraping by. As Albert Einstein said, the definition of insanity is doing the same thing over and over again and expecting different results. Unless something significant changes, sales will probably not grow next month. Instead: To boost revenue and profit, companies need to be there when customers want to buy. Only a systematic sales and marketing effort will accomplish this on an ongoing basis. Determine what will change in your strategy so sales increases.
- “That key hire will change everything.” I always thought that the next experienced person I hired would fundamentally change the business. They were always my proverbial “knight in shining armor”. Unfortunately, one person can help a company, but can’t fundamentally affect the business’s model or culture. Typically, the status quo swallows them up. Instead: Be realistic about the changes one person can make. Set incremental goals and constantly monitor their results.
- “You have to be willing to take the risk and bet it all to succeed.” In all the famous success stories, it appears the entrepreneurs took all sorts of crazy risks. They probably didn’t. Big risks mean an even bigger chance of going out of business. Instead: Take small risks. Judge the results and then take an action to give another chance at success.
- “You’re going to sell this for millions in a few years”. Most entrepreneurs’ dreams are to catch “lightning in a bottle” and sell out after a short period of time. The fact is the “overnight” success typically takes ten years. Instead: Learn patience. If you build a profitable and valuable company, you won’t need someone to buy it.
- (Bonus advice): “You should have been a doctor” This one is probably true. It would have made my mother very happy.
What advice did you get that turned out to be wrong?
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