Everyone wishes they could time travel. I sure do. If I could go back in time, even for just a second to hand myself some post-it notes, they'd contain some serious, down-to-the-bones advice. "Fathi - do this shit. Don't do that shit. NO EXCEPTIONS."
This is something you MUST pay attention to. If I had these post-it notes, it would have saved me at least 10 years of my 15-year entrepreneurial journey. Instead of a fifteen million dollar company, I'd have a one hundred million dollar enterprise, and probably more.
Since I can't go back in time, the best I can do is tell my story so that you can avoid the huge messes I've gotten myself into. Think of it like your own post-it notes from the future.
1. Don't have a business partner, but if you do, make them earn it.
I made this mistake twice. The first time around, I was desperate for a partner. Young and naive, I was looking for someone who shared my passion and drive, and wanted to grow a business together. Foolishly, I gave this person 50% of my (then tiny) business. Stupid? Yes, of course. But, I've met an untold amount of people who did the same thing.
Fast forward two years, I had grown my business to almost $8,000,000 in annual revenues using only Pay Per Click marketing.
Long story short - my partner ends up going crazy, locks me out of my own business, and I lose everything. I swore to myself that I'd never have a partner again.
During my second business venture, I was somehow convinced by my parents to share the business with my two younger siblings. I listened to them. After all, I had lost a lot of confidence in my decision-making ability after losing my first business. And of course, after growing the company to well over $10,000,000 in annual revenues in just a few years (again using pay per click and affiliate marketing strategies), things began to get shaky.
My siblings demanded more control. They didn't like how I was running things. They wanted me to leave my own business. And, quite frankly, at that point I was so sick of the situation, I considered it. Thanks to my team, who very strongly insisted that I not leave the business I started, I wound up finding a "solution". It involved the infliction of serious family wounds, and cost me millions of dollars. Thankfully, today both of my siblings started their own businesses and I was able to keep mine.
But I couldn't help but think - how did this happen to me again? Am I an idiot?
The answer is that I didn't really get the purpose of having a business partner. I also didn't know how to properly pick one, what to demand of them, what boundaries to set and where to draw the line.
This is how to do it right:
I'm not going to tell you to listen to your gut, or some nonsense like that. Chances are your gut is right. Chances are your gut is wrong. It's really a crap shoot. So as you deliberate, here are some facts you should consider, and options that are at your disposal:
1. Don't make a family member a business partner, EVER. Period.
If you already did, and it's working well, then yes - maybe you're an exception. But chances are, you're just lucky so far, and you'll find the wisdom in my statement soon.
If you have to elevate a family member for various issues (let's say your spouse does not stop suggesting that his/her sibling "really shouldn't be just an employee" and "would work so hard" if only they were a partner)... then fine, do it. But do it in a way where you create some new entity that really doesn't matter to the ultimate course of your business, and definitely not to your decision making authority and power. Give them the feel-good stake they so clamor for (but make them earn it!), and keep it separate from your main business, and your power. That way, when (not if) disagreements arise in the future, it doesn't matter. You don't need to take anything away, because all decisions of consequence are still made by you, as they always have.
2. The same as above applies to your friends, too. It's just less impactful.
Friends are a plenty. You can make new ones. You can't make new parents, or siblings, or children.
3. You don't need a technical partner. Don't give them a stake in your company.
Unless your "CTO" or "CIO" or whatever you want to call him actually has a big business mind, entrepreneurial drive, and helps you grow your business, don't give them a part of it. Just because they can code doesn't make them an entrepreneur.
The technical stuff - that's stuff you outsource, or hire people for. Forego your own salary and income as much as you can, and pay to get the tech stuff done. It'll pay off in the end when you don't have a technical, non-business minded person as a partner.
4. Make sure they earn it.
If you do decide to let someone share in the success of your business, make sure they earn it. REALLY, REALLY MAKE SURE they earn it.
Make sure they bled in sweat and tears and fights at home with their spouse over endless nights of work. Make sure they sacrificed as much as you did, and would continue to do so, to help your business grow. If you're sure of that, you can consider sharing. Only then will your future partner know to appreciate what they're given. Only then will they have put in the same hard work you did. Only then will they have a chance at treating your baby with the same care and attention as you do.
To be clear - if you have a one million dollar business, they had better generated half of it themselves (or a significant portion), to get any significant part of your business.
If they did not, try to let them participate in your business' success in other ways. Introduce profit sharing, which they can earn by contributing to real revenue and profit growth. No growth, no sharing. And if you give a stake in your business, design it in a way that you can buy it back from them any time, at a fair price.
And no matter what you do, try to stay in control. Leave the decision making capabilities and power primarily with you.
2. Offer more to your existing customers. They WANT to buy from you.
This is a GOLD MINE right in front of you and you're missing out.
I made this mistake for YEARS. I fell into the trap of throwing all of my resources into bringing in new customers. Yeah, getting new customers is addicting, but I was ignoring a glaringly obvious source of revenue - my existing customer base.
You know, the people I have an existing relationship with? The people who already had enough trust in my company to buy from me in the first place?
So, I started offering parallel products, upsells, cross-sells, down-sells, special deals, loyalty benefits… and holy crap did I get a good response! Turns out my customers WANTED more stuff from me!
The bottom line is, if you're looking for new sources of revenue, you should NOT to put all of your energy into getting MORE customers. Instead, set aside a large amount of your resources to make your existing customers even happier, and figure out how to sell them more things.
- Look at your product or your most popular products. Figure out what would naturally go with those products? What else would your customers buy if they had the opportunity?
- Figure out a way of how to provide those items for a low cost, or at a great bargain to your customers. Let them add it to their order while they sign-up, or right after they sign-up, or every time they interact or communicate with you.
This is huge:
Build out a whole funnel of upsells, cross-sells, down-sells, auxiliary subscription products etc for every interaction point you have with your customers. These should be a natural part of the conversation and non-invasive.
Selling more to your customers doesn't work so well when you haven't built the right relationship, but that's a conversation we've covered elsewhere because it's huge and it's important and it deserves it's own place.
3. Demand a LOT. Don't let your team scare you. Don't rush your decisions.
Your team, your employees, and even your customers will come to you with all sorts of things.
They'll ask for better equipment, more expensive software, raises for certain people or all people (=bad idea), a prettier lobby, fancy chairs, redesigned business cards, an overhaul of your billing system - or any variety of things that I call "company things" that don't help your business one bit.
Ask yourself these critical questions: Does this thing they want bring me more customers? Does this make my product substantially better? And I mean substantially, not just a little bit. Does it make me MUCH more competitive? Does it let me charge more, or lower my prices and remain profitable? And of course, does it make me more profitable?
Most of the suggestions are wishes from fairyland that will only do one thing: make you less competitive (because they don't primarily, and positively, address the critical questions above), and they will make you less profitable. Both are really bad.
Your team WILL come to you with those wishes. It's not a question of if. Depending on how tough you are, meaning if you are tough, they'll have a lot of good reasons you need to do these things. Oftentimes, they'll tell you those things are critical. They'll say "oh this equipment is End Of Life", or how much faster or better things will be if you developed XYZ. They'll say you might go out of business if you don't do it. They might say "if we don't give these raises persons XYZ will leave." They might paint doomsday scenarios...
But trust me, it's all bullshit. They don't know anything. You run and own this business because you can tell bullshit from fact. It's because you want to put your money where it matters, and not where it makes your team feel all jiggly inside because they have newest equipment to play with, or fancier business cards.
So, if you're not 100% convinced it's a GREAT idea… better than anything else that YOU can come up with, DO NOT DO IT. Tell them to come up with something that gets you more customers. That truly, substantially makes your product better. And that produces more profits. Have them prove it to you.
If you even have one shred of doubt in their evidence, or your gut tells you that something doesn't seem right, don't do it. Better pocket your money. Let them whine, and be upset, and complain. Let them leave. You don't want or need these people anyway.
You need people who make perfect sense to you. Who fulfill your every demand of producing evidence that what they suggest is good. Who you can demand that evidence from, no matter how painstaking it is to create it. Who don't whine about it, but get on with it and produce. It's YOUR money. Let them prove why you should part with it.
Don't ever lose that out of sight. One of the main purposes of your business is to route more money into your pocket. Don't lose sight of this, ever.
The idea is to extract more from everything you can. Don't hesitate to challenge your team. Push them to their limits. Don't push too far, but definitely push. THAT is your job.
No one else is going to do this for you. No one else cares as much as you do.
4. FOCUS to Scale and Grow. Running a "lifestyle business" is BS...
When you're small, focusing on the wrong things, or on too many things, will result in at least a waste of time, and in the worst case, in you not succeeding.
But when you're bigger and already have an established business, it's even worse. Your decisions will have a real cash-flow consequence… if your plans don't succeed, all you invested in your new strategy, tactic, or venture will be wasted. And then there are massive costs of lost opportunity: not having done something that could have worked, and all the benefits you're missing out on.
This happened to me countless of times in my business.
For example, a few years ago I spent $2,000,000 on creating a new control panel for our hosting customers that we never ended up using. Not even for a day. And it doesn't matter what went wrong... what matters, is that it was never even necessary to begin with. My business continued to operate fine without it. I don't think it would have made a significant difference to my company's state of affairs today, even if we had implemented it successfully. The only difference is, I'd have two million more dollars, or a much nicer house.
This could be you, right now.
Really assess whether or not what you're spending your money on is the right thing.
Even if you already sunk a ton into something, if your gut is telling you something isn't right, REALLY dig into it, or cut off funding. No matter the cost, you're likely better off not spending any more on it.
Another issue is doing too many things, especially unimportant things. We all suffer from this.
In How I Get Stuff Done, I share a lot of tactics with you on how to generate focus, and more importantly, how to focus on the right things in your business. It really gets into detail about what I would do differently today. Watch it, and learn from it. You'll save years in your journey. I know I would have.
So if you focus your money on doing the right things, and cut out the wasteful projects (and all the bullshit people who are not earning their fair share, give you headaches, or are even lazy), you'll have new, previously unattained financial wiggle-room to play with.
Now, I want you to do one of two things:
1) Pocket it and profit. Give it to yourself. You deserve it.
2) Invest it to grow. Growing your business and making your products better, creating more value for your customers, so that you will grow even further and profit even more, that is the purpose of your business. There is no other purpose.
If your goal isn't either of the above, then you don't run a business, but your business runs you. Congratulations, you've created a job for yourself. You run what you probably refer to as a lifestyle business. It's bullshit.
Either you don't know how to grow your business, you're scared of doing it and losing out, or you just don't want to admit yourself that your business really is a job, because you can't scale it in a way that is proportionally disconnected from the investment of your own time. You're a job-trepreneur. And that is fine, if that's what you want to do. But if you really want to make a dent, create innovative products, and become wealthy in the process, keep reading.
If you're stuck like that, you have to do everything you can to get out of it. The first step is to admit that this is the position you're in, and that it's not OK. You're an entrepreneur, and you took on all that risk, because you want to have rewards that go way beyond giving yourself employment and having no boss that can fire you (other than your customers, of course).
You have the potential to do so much more. Don't let fear of failure, or a misguided belief that it's part of your lifestyle to have to keep working forever so you can have a "lifestyle business", prevent you from achieving more. It's clearly better to work harder today, and have real, complete financial independence a few years or even decades down the road, than be stuck for good in lifestyle business land until the retirement fairy comes to save you.
To me, I've always been investing and growing, but mostly on wasted projects. It's sad to admit, but I've very little savings today compared to what I should have, and only recently have started to heed my own advice. Since then, profits have started coming in - and that's only because of a relentless focus on profits, and elimination of people and projects that are not clearly going to either grow the business (by making a better product), or grow the profit.
Assess everything you do by its potential return value it has to you, and your profit. Eliminate everything and anybody who does not meet your standard of return… which goes without saying, should be very high.
See, profit doesn't come on its own. It needs to be a very conscious decision - YES, I want high profits. My business will be profitable. And highly so. I will not accept any less. I will aggressively implement to that end.
5. Cash is king. It's the oxygen for your business.
Let's talk a little more about profit because it's so important, it deserves a whole section of its own.
Profit is like oxygen for your business
1. It tells the whole world that you know your stuff. 2. … and that you're doing it better than most of your competitors… that is, if you've got better profits than they do. 3. For this reason, investors, banks, lenders of all kinds, will be glad to lend you money or invest in your business whenever it pleases YOU, at terms that please YOU. 4. It gives you breathing space in bad times. 5. It eliminates time-wasters in your organization and helps hard workers receive the recognition they deserve, without being dragged down by the lazy or incompetent 6. Being profitable forces you to carefully and aggressively evaluate the worth of each one of your projects and only let those survive that are valuable to your customers.
This is only a small list of profit's benefits. There really are no negative side effects.
Then why do so many entrepreneurs allow themselves to run a business with little to no profits? Frankly, I don't know. I know I was one of them. I just didn't care. All I cared about was trying out the next fancy idea I had. Getting a nice enough salary. Growing at mediocre speeds. Which was so stupid. I built teams of people left and right. They produced nothing at worst, and loosely connected pieces of new features, content, or never-to-be-used code at best. All it did was eat up our profits, and it did NOTHING for our customers.
But with a focused, disciplined approach to running your business profitably, you will simply not allow this to happen. You will not leave a single stone unturned to increase your profit, and make your business stronger.
How to become profitable
We'll have another post on this one up soon… but here are a few thoughts to get you started:
1. Make it your mission to become profitable. Profit must be a conscious effort. Communicate it to everybody in your organization. Tie everybody's raises and bonus to how much your business grows, and how profitable you are.
2. What's the most profitable company in your industry? Aim that high.
3. What projects do you have running right now that can be cut that aren't really going to produce more revenue to you pretty soon, or more profits? Cut them.
4. Every organization has tons of deadweight. I'm talking about your employees, contractors, or vendors, that you keep around for various ill-conceived reasons: you like them, or your team likes them. They improve office morale or spirit, but do little to your bottom line, and aren't getting work done that matters. They suck but they're your family or friends. You like to have them on staff because they've stature, authority, or kiss your ass. Get rid of all those people.
They are simply a drag on your profits. Keeping them around is telling the world that you're incompetent in running an effective, strong business.
They're even worse: they're a drag on all those parts of your people who actually work hard and make a difference, causing them to perform a lot worse than they are capable.
5. Can you outsource some of your team? If so, do not hesitate.
Listen, I have a very strict rule in my western "expensive country" operations (which has made us a lot more profitable).
a. If you're not a superstar that performs every day and really impresses me, then you're out.
b. If you don't do something that I can't absolutely outsource to India, Romania or Ukraine, you're out.
c. If you don't do it in a way that truly impresses my customers that I can't get in India or Ukraine, you're out.
d. If you don't come with a great attitude, or you give me a funny face more than once a year, you're out.
The gist of it is, if it's not absolutely necessary that you work here next to me in the US or Europe by you proving to me how great you are, then I will not employ you for very long.
This may seem harsh, or unpatriotic. It's totally the opposite.
You're just making your business stronger and more profitable against any form of competitor, whether they're here or there, it matters not.
Only a strong, profitable business can fight back. Only a strong business can create new valuable products.
By keeping bullshit jobs in this country that are unworthy, you're really not doing anyone any favors. Instead, demand excellent performance and output from your people here. You'll make everybody work smarter (not necessarily harder!), and your higher profits and more streamlined operations will allow you to really reward those people who make a difference, who use their mind and brain every day to create value for your customers.
It goes without saying that we apply the same rigor to our offices in Ukraine, Romania and India. If you don't perform, you're out.
This doesn't mean you should be cruel or overwork people. This also doesn't mean there can't be exceptions… but those better be rare, and better be well-communicated so everybody in your organization understands and is not affected.
How much to take out of your business
This one's easy - whatever is reasonable. It really depends on your size of business. And it depends on what you need. The rule of thumb is that if your money would go further invested in your business, don't put it in your pocket.
What I Did
When you first get started, try to leave as much in your business as you can. Can you get by not taking out anything? Don't. Take out a few hundred dollars a month, if you must.
As you grow to a few hundred thousand dollars a year in revenue, take out the minimum amount, still. Take out some $30k-50k/yr. No more. However, this really depends on your profit margin, and whether re-investing in your business lets it grow. But keep your salary low, and your profit higher. It creates confidence with any lenders or investors you may want to partner with.
And keep in mind, at the end of the day, as your company grows, your salary will become totally irrelevant - all profits are yours to keep. So make sure you have them.
6. Only do stuff you're GREAT at and reduce everything else.
This is so important. For the longest time, I was trying to do things that I sucked at. It sucked my energy out of me, and I came home every day exhausted. I was certainly not enjoying what I was doing, and the results weren't there either. One issue predicates the other.
Had I sat down periodically to assess what I am doing that I either hate, or not good at, and figured out a way to have it done for me, my company would be an a whole other planet.
TEENAGE FATHI SKILL CHART
|Sucked At||Good At|
|Speaking English (I'm Austrian!)||Writing English|
|Taking Money Out/Rewarding Self||Growing Business|
|Ensuring Profitability||Finding Affiliates|
|Cashflow Forecasting||PPC Marketing|
|Web Design||Understanding Conversion & Aesthetics|
|People Management & Accountability||Vision & Strategy|
|Actually getting girls||Thinking about girls|
Figure out what you suck at. For some of us, this is copywriting. Others are unbelievably great at getting customers but suck at taking care of those customers.
For each area, either get help and have someone do it for you, or get better if you think it's important enough.
I already told you, I was not profit and results focused. So I brought on leaders who are very strictly profit focused, and want to be rewarded primarily in such a way. They helped me re-shape how I think about our business, and opened up a whole new world of possibilities.
I was always good at coming up with what's next for our organization, and how that stuff should look and feel like. I was poor at managing a team to that end, and holding its members accountable to producing results. Gladly, Lisa Peterson stepped in, and our COO now takes care of all that. But it took a while to find her!
Bottom line is, if you're not actually good at an important part of your work, find someone else who is. In the beginning, you have to do a lot yourself; this is just part of growing up as a business. BUT, if you find yourself stagnating after you've reached your first few goals, it's time to reach out. Doing things we're bad at is bad for your "business mojo." It slows you down and de-motivates you.
Every single time I've tried to make my own iced coffee, I wonder why I didn't just go to Starbucks.
How to know if you suck at something
- It's not getting done
Let's just say it's a very good thing I found the right accountant. I was not doing a budget that was more involved than a two column spreadsheet and I definitely wasn't doing forecasts. I couldn't predict my income and I couldn't figure out the best way to invest what I did. This wasn't important in the beginning, but it REALLY was when I needed to apply for any kind of business loans to improve our hardware infrastructure in a big way, or for managing to profitability metrics.
- It's not showing results
Despite your best creative efforts and persistence, you're not having results. Tried improving your site design? Did all you could do with that Wordpress template? Get help. Other people will do it cheaper, faster, and better than you.
- It's making you want to give up
Some hills are harder to get up alone. Entrepreneurial groups exist everywhere. I joined a great one that keeps me motivated year round, so that when I have serious "how do I fix this?" questions, I have a network to ask. If you want a few suggestions, ask in the comments!
7. Failing is learning.
What I said earlier about my iced coffee? It was partially a lie. The iced coffee really has been getting better each time I make it. Though it's still not quite Starbucks, one day, it might just be passable.
You see, failing sucks, but it's no big deal. It's just a necessary lesson you needed to learn on your way to success.
Quitting has a lot to do with ego. When you fail, it hurts. Your self-confidence takes a hit, and a lot of people would rather just not try than risk trying and failing again. I know, I've been there. Before my business took off, I failed at least 10 times. Each time all my money gone.
And I'm by far not the only one this happened to, and definitely not the most famous:
1. Bill Gates' first business, Traf-O-Data, completely failed.2. Stephen King's first book was rejected 30 times before someone finally bit.3. It took Thomas Edison 1,000 tries at the light bulb before it worked.4. Henry Ford was pretty much written off by the automotive industry before finally redeeming himself with the Model A.
So, you're in good company. Put all those feelings aside. There's nothing wrong with trial and error. Understand what caused the problem, get better, and charge back in, head first.
Persistence is why people succeed. Very few people succeed on the first try.
You know the story of the guy who keeps mining for diamonds, digs dozens of feet and then gives up mere inches from the motherlode? You're that guy. Never forget that.
By now you know my story. How I lost my first company and how I came back.
These 7 things are what I've learned on my journey so far, and I hope reading about them here helped avoid getting you into the same situations.
Learning from these mistakes allowed me to get the team I have today. It let me get rid of the wrong business partners. And it got me the thick-as-f*** skin that I have today.
Now go get your own kevlar skin. It'll be your best, life-long competitive advantage.
Fathi CEO at Ecommerce