Category Archives: Business Mistakes

3 Different Views on Jobs for Students

Business Education, Business Mistakes

Pop quiz: What can a college student, an entrepreneurial grad student, a working mother escapee from the cubicle job world, and a 60-year-old business owner have in common on the subject of job seeking at a bad time? Read on.

But first, a story: A senior in college is in a job interview with an investment bank.

"Why do you want to work with us?" the interviewer asks.

"Because you still exist," the job seeker answers.

I heard this story during dinner late last month with a group of Stanford Univeristy seniors. It was a joke. It was followed by laughter; nervous laughter.

One of that group was my daughter, and with my daughter in the midst of this job search worst-ever year, it's been on my mind too. And for this post I'd like to make a three-way combination of people saying (sort of) the same thing.

Let's start the three-way with David Miller, of Campus Entrepreneurship, a grad student, entrepreneur, and a blogger I read regularly. In MBAs: Time to Look in the Entrepreneurial Mirror he writes:

If the state of the economy around the time of graduation is the main determinant of career earnings for those who enter the labor market upon graduation — then DO NOT enter the labor market. BECOME AN ENTREPRENEUR. Take control of your own financial trajectory. You won’t show up on the payroll data that Kahn uses when she does her research.

The path may seem more difficult — creating something out of nothing vs. taking a second choice job that pays the bills in the short term, but it will pay off in the long term.

For part two, another blogger I read regularly, Pamela Slim of Escape From Cubicle Nation. I sent her post Stop searching for the perfect job and start finding your life's work from a few weeks ago to my daughter. She said:

Jobs are temporary things, often enticing on paper until you realize that as soon as you get comfortable in your position, it will change, your boss will change, your team will change or your organization will change. That is just the nature of business. Therefore if you go into a job excited by the position or the person you will be working for and not the work itself, you often set yourself up to be disappointed.

Your life's work on the other hand, are activities that you have natural talent for, which energize you and stimulate you and do not change no matter what "job" you happen to be in. I found this for myself when I began to think about my own life's work. I reflected back on all the things I have done in my career and I came to the realization that the core of my life's work is about transformation.

Pam's been through the job mill and looks back on it.

For part three, you have me, the 60-year-old guy. Neither of those two above were writing for seniors in college. They are both right, in the long term, but neither was writing to the college seniors looking for jobs in the midst of financial crisis, massive layoffs, and so on.

Sure, in the long term, the best job is one you make yourself. However, that's not realistic for the 21 or 22-year-old just getting out of college. Many of the best of them will end up building their own new world and their own jobs with it. In the meantime, though, I understand why they want that job. They did well in high school to get into college. Now they want to do well in the next step. And they can't really jump straight out of college into entrepreneurship. Sure there are exceptions to the rule, Bill Gates and Mark Zuckerberg and all, but how many exceptions per million?

I don't blame them for worrying.

The best advice I got at a similar time in my life was from Steve Brandt, who was, at that time, teaching at the Stanford University business school.

He said it might not be practical that we the students would try to go straight out of school into starting our own companies. We probably didn't have the track record or the traction.

But what you can do, he added, is to choose which stream you're going to swim in. What you do now in your first few jobs will determine what you can do later.

More About the Sky Falling

Business Mistakes, Current Affairs

I'm sorry, I can't resist lingering over our economic crisis, though not, perhaps, the main topic of this blog, but hard to avoid. My 'what happened' post of a couple weeks ago produced some good comments and a lot of readership. And so yesterday, as I went over the Sunday New York Times, I hit upon one piece, by Ben Stein, that struck a cord. He called it You Don’t Always Know When the Sky Will Fall.

After apologizing for not having foreseen the crash …

I don’t have any magical powers to foresee the future.

He goes on to highlight the "catastrophic mistake" …

In this case, I did not foresee the catastrophic mistake, as I view it, by Treasury Secretary Henry M. Paulson, Jr. to allow Lehman Brothers to fail. That failure left a gaping hole in the financial services industry, and blew away confidence that the Feds knew what they were doing.

The solvency crisis exploded when, in mid-September, Mr. Paulson allowed Lehman Brothers to die a sudden death. I would never have believed that it could happen, which shows one of my many limitations as an economist and a human being. I assume that the future will be much like the past, but sometimes it isn’t.

After Lehman, I felt sure that the government would realize its mistake and issue blanket solvency guarantees to banks. But that didn’t happen, the stock market fell apart, credit went icy cold and the wheels started to come off the economy. This also took me by surprise.

Stein quotes economist Anna Jacobson Schwartz as noting that this is a solvency crisis. Banks had money, but didn't feel safe lending it.

In fact, bankers have had so many losses and faced so much uncertainty that they dared not lend, for fear of killing their banks with bad loans — so we have actually had a solvency crisis.

He goes on to talk about the failure of debt rating services to accurately rate debt instruments properly, and then concludes (before a defense of big oil, which seems out of place to me) with the following:

This is perhaps the main lesson of this whole experience. It is basic but still unlearned: human beings must have savings. This is not just a good idea. It’s the difference between life and death, terror and calm. So start saving right now, and don’t stop until you die.

Dessert Topping Floor Wax

Business Mistakes, Business Planning, Business Stories

The original skit was on Saturday Night Live, Season 1 Episode 5. Dan Ackroyd was the husband, Gilda Radner the wife, and Chevy Chase the announcer. It’s become a bit of a Silicon Valley icon, standing for something:

Wife: New Shimmer is a floor wax!

Husband: No, new Shimmer is a dessert topping!

Wife: It’s a floor wax!

Husband: It’s a dessert topping!

Wife: It’s a floor wax, I’m telling you!

Husband: It’s a dessert topping, you cow!

Spokesman: [ enters quickly ] Hey, hey, hey, calm down, you two. New Shimmer is both a floor wax and a dessert topping!  Here, I’ll spray some on your mop.. [ sprays Shimmer onto mop ] ..and some on your butterscotch pudding. [ sprays Shimmer onto pudding ]

That was a long time ago, but in fact, Lemon Pledge is still today a floor wax, and it still smells like lemon. And there are multiple lemon dessert toppings. The Pledge in question is an aerosol can with lemon design. You can smell it, almost. And there’s a note of truth in that lemon shows up a lot in floor care and cleaning products, and lemon shows up a lot in dessert things.

I think it was a spoof on the beer commercials in which people would argue whether the beer was good because of low calories or great taste.

It also reminds me of a young person we knew years ago, who was in his late teens, who, when asked what he wanted to be, answered with certainty: "a singer or a doctor."

I’ve searched YouTube to no avail, but I did find a video of the original skit here.

And then there’s the song "Did You Ever Have to Make Up Your Mind," as recorded by the Lovin’ Spoonful during the 1960s.

True, if you press me on it, there are the occasional products like Arm and Hammer Baking Soda, which is a tooth care product, a baking ingredient, and an odor fighting powder, among other things.

But most products, and most businesses, have to decide. You can’t be a dessert toping and a floor wax at the same time. Deal with it. You have to focus.

http://www.jibjab.com/v/101069

Maybe the Customer’s Always Right. The Client Isn’t

Business Mistakes, Business Stories, True Stories

I picked up an interesting comment the other day:

The customer might always be right, but the client isn’t.

Intriguing thought. It came from a bright young woman who’s done a lot of PR work. She has a very good point.

The client relationship implies a professional relationship, like doctor and patient, attorney and client, or consultant and client. 

Customers buy stuff. Clients buy expertise.

Do you want your doctor to humor you when you’re wrong, and your health is at stake? I assume not.

What about a business planning consultant? I did that for about 15 years. One of the hardest things I had to do was (thank goodness not that often) tell the client when I thought he or she was wrong. That’s what I was paid to do.

My best long-term consulting relationship lasted through 12 years of fairly steady repeat business. Part of what kept that going was me having the resolve to tell them when the clients were (always just in my opinion, because nobody owns the truth, but still…) wrong.

Delegate Well or Not at All

Business Mistakes, True Stories

One thing that often happens to founders trying to grow their companies is the need for delegation.

As a founder of a small company, you start by doing everything from unlocking the door in the morning to closing up at night. You grow it by bringing in other people to take on the tasks you originally did yourself, one by one.

I’ve been through that process myself. In the early days of Palo Alto Software I did the programming, the documentation, the marketing, the administration, and the technical support. And I answered the phone.

As we grew, I shed those tasks one by one. My first hire was someone to answer phones, and the second hire was someone to handle tech support. Then came a bookkeeper, which led, over time, to a controller. I hired somebody to handle the documentation, and somebody to manage the programming.

Something I learned along the way: if you delegate a task to somebody else, and then second guess the results, that person won’t accept the next task. Instead, you’ll be stuck with micro managing, whether you like it or not, because that person will ask you all the details so that you decide, rather than risking being second-guessed again.

So, for example, if you ask a marketing person to design and implement a brochure, and you don’t want to deal with the details during the process, then you’d better damn well shut up and like the brochure when it’s done.

If you don’t let it go, and instead of that you wish it had a different headline or a different size or a different color, then you’re not delegating; you’re micro managing. The person you’re second guessing won’t take initiative in the future. Instead, he’ll come back at you over and over asking you to decide every detail along the way.

I’m guessing that this seems obvious when you read it, but I know from experience that it’s very hard to do. I’ve learned the hard way. I had some smart people who helped. But it wasn’t always easy. So, If you’re trying to grow a company, then you probably need to delegate. If that’s the case, then I suggest you take a step back, and test yourself: watch yourself in action.

If people keep coming back to you asking you to decide the details all the time, that’s a good indication that you’re not really delegating or you are second guessing and making your would-be delegates miserable. Get a clue: if people don’t seem to want to make decisions, maybe that’s because you make them suffer when they do.

Goliath’s Revenge Part 2: Promises, Promises

Business Ethics, Business Mistakes, True Stories

In part 1 of this post, I shared a mistake I made mainly by myself, believing what was said by big-company managers instead of what was written in the contract. That, as it turned out, was a big mistake. But that was my last post, so let’s go on to part 2.

A few years back we’d been working off and on with a very big company, publicly traded, a couple of billion dollars of revenue, that had a target market a lot like ours and product line that was potentially complementary. A product manager there (let’s call him Ralph) wanted to bundle our software into their software. That seemed like a big win for us, so we were happy.

Anxious as we were to count our chickens that hadn’t hatched, we asked quickly about the deal. "Don’t worry," Ralph said, "you’ll get a good deal. That comes later."

What felt like proper next steps were taken. Mutual non-disclosure agreements were signed. We sent details about our software to our supposed new ally. Months passed. We had meetings. We had conference calls. The project proceeded. For about eight months, our would-be ally got a nearly complete view of the details of our software, our strategy, business plan software in general, and our specific view of business planning software, and, in particular, my view on business planning.

When we asked about deal terms, which we did several times along the way, Ralph assured us we’d like it. We trusted him.  Big mistake. Another one for the mistake bank, too (John, go ahead).

As we neared the end of the deal, when deal terms finally came, they were extremely disappointing; in fact, they were unacceptable. We said so. Negotiations continued.

Suddenly there was another player: a knockoff of one of our earlier versions. And they, Ralph informed us, were ready to have their software bundled for free. They were prepared to live off the upgrades that they hoped would result.

So we were screwed. Promises, promises. Actually, as the years passed, it didn’t really make much difference. Their implementation sucked. The knockoff software they bundled was as bad as they deserved.

Months later I traveled up to Portland, OR to talk with an attorney about the possibility of a lawsuit. I and my family and my company had never sued anybody, but this seemed like they’d done us wrong. We had a nice lunch with the expert, and he concluded, taking no more time than one good lunch, these points:

  1. They did wrong. Technically, this was called promissory estoppel, he said, gaining an advantage by promising something and then not delivering.
  2. Our likelihood of winning a lawsuit, he estimated was about 95%.
  3. It would cost us several hundred thousand dollars to sue.
  4. Our likelihood of being paid damages was about zero.

So, as you probably already guessed, we did nothing; chalked it up to experience, and went on with our business.

Goliath’s Revenge Part 1

Business Mistakes, True Stories

I had a nice time in Bend (Oregon) last weekend, including a conversation after dinner with some friends, a nice summer night, staying light late; the subject of large companies screwing small companies came up. I had something to add — from experience. More of the "mistakes I’ve made" categories. They’re easier to talk about at the end of a good day, looking at the river, feeling at peace with things.

Before I get into this, I should point out that I’ve also had some very good deals and long-term relationships with large companies. For example, I consulted with Apple Computer almost steadily from 1982 until 1994; it was a large company, but I had no complaints. My company, Palo Alto Software, has had good long-term relationships with Inc Magazine, Prentice Hall, Entrepreneur, and several others. It’s not like all big companies are bad. But here’s a story, and maybe a lesson.

The Contract That Meant What it Said

We (two of us) sat in a conference room with eight managers of a very large company, wrapping up weeks of negotiations on a deal bundling a version of our software with a version of theirs. It was a tough negotiation. When we were very close, all the major points agreed, we flew to their location to do this final session. We had to go through things we thought had already been settled.  Finally, at the end, with everything supposedly settled, we signed a contract with a couple clauses we didn’t like.

One of them seemed to give them far broader rights than what we’d agreed. The word "unlimited" was there on the page.

"Don’t worry," they said, "that paragraph on page two is just for the disk duplicators, we have to have those rights or they won’t manufacture the disks. And you’re covered with the paragraph on page three, that limits our rights to exactly what we’ve agreed."

So we signed. Dumb. This belongs in the mistake bank for sure. But we did.

Three years later, our software appeared in a completely different context, way outside of what was agreed upon. I called the guy we’d negotiated with: no longer with the company. I called his assistant: no longer with the company. I called two others who’d been there: not longer with the company

Finally we took it to their corporate counsel. Actually to a person who was one of their legion of corporate counsels. We told him they didn’t have the right to do that.

"What do you mean," he answered. "Can’t you see it right there on page two? It says unlimited rights."

"But that’s not what we agreed," I said.

Silence.

Q & A: Small Investor Returns

Business Ethics, Business Mistakes

If I were to invest $40,000 to help start a trucking business, what type of return should I expect on that $40,000? I’ve never done this before and want to be fair to everyone involved. As an investor, what kind of return should I anticipate?

Being fair to everyone involved starts by being fair to yourself. You can buy a lot of things for $40K. Before you worry about what’s a fair return, ask whether there will be any return at all.

The problems here begin with the obvious fact that you aren’t a professional investor. You don’t have money set aside for investing in long-term returns; you’re looking to participate in a small company that has very little chance of ever generating the kind of return on investment that arms-length investors look for.

Furthermore, it may also be illegal.  US stock laws regulate investments in new businesses and one of the more common problems it that you have to be a "qualified" investor. The law on this started back in the great depression. It was intended to protect people from getting suckered. You might be exempted under the "friends and family" provisions, but otherwise you have to have serious money or you’re not qualified.

So what’s the problem? Well, underneath it all, a trucking business getting a $40,000 investment isn’t likely to return money at all unless you’re a partner, and an employee, and you have a real voice, documented in writing, on what happens. These businesses normally live until the owner passes them on or gets tired, and they don’t get sold for the kind of money that gives an investor a return.

So here are some things to consider:

  • Professional investors put their money into companies that can take off like rockets, because so many fail that they have to make their money back with the winners.
  • What makes you think you’ll get any return at all? How do you, as an investor, get money back out? If you take ownership, like most investors do, then you get money back only if the business sells itself to another business or goes public, or is profitable and pays dividends.  If you don’t have majority ownership then you can’t force any of those things to happen, you just have to sit aside and wait and hope.
  • How much ownership are you going to take? $40k might be the full investment in a trucking business, or just a tiny percentage. Will you have control? How much?
  • Is there a payback written into the documents, like a loan? Sometimes in these cases the investors get $60K or even $80K back in 3-5 years, plus substantial ownership (maybe even 100% if the business can’t make those payments). This can be done if it’s written up right.
  • The worst payoff is minority ownership in a privately held small company. In that case, you have no say in the business, and no way to get any money back.

So I know this is not the kind of answer you’d like, but that’s what I think.

Passion and Persistance Can Be Overrated

Business Mistakes, Business Stories, Entrepreneurship

I’m worried. I spoke yesterday at SpeakerLunch in Corvallis, an interested and interesting group of people, looking at starting and running businesses. New businesses, small businesses, and so on. They call it speed mentoring. Bring in a speaker once a month, over lunch, talk about it.

My problem this morning is the overuse of the three Ps of passion, persistence, and perseverance.

The question of the economy came up, towards the end of the session. I don’t remember the exact wording, but it was about the wisdom of sticking with it during tough times, or starting a business during an extreme recession, or something like that.

Which reminded me that in the world of entrepreneurship a lot of old guys (like me) give people pep talks about passion, persistence, and perseverance. As if the key to business success were just sticking to it, no matter what. Good times or bad, the entrepreneur, we seem to think, is driven to success. My business above all.

What worries me about this is that it’s too damn easy for the people on the podium to preach about sticking to it, and sometimes passion and those other Ps are misplaced.

I love the idea of starting business and entrepreneurship and all, but not at all costs. I am not advocating passion to the point of obsession; and particularly not getting so far down into the business, bad times or not, that you think of nothing else, and lose relationships.

Life is more important than business. Keep your balance. Keep your priorities straight.

These are tough times. Plan well. Be smart. Think it through. Don’t bet the farm unnecessarily, and certainly not just because some old guy says you have to have passion and be persistent.

Stop. Think. Don’t Send That Email!

Business Mistakes

I can’t resist. I have to share this. It’s about email. Don’t push send. It is from Bob Sutton: A Cautionary Tale: Watch the Email:

"It is unclear if Dr. Kone lost his job just because of the email, there were a lot of other things going on (he did seem to have overly close personal connections to the student he admitted and there are some hints from the news stories that he was breeding a climate of fear at the school). But I confess that, for me, this story had special resonance as I think I am most prone toward becoming temporary as***le on email, and have learned — the hard way — to keep censoring myself. An IT guy I know showed me that he has his email set-up so that it takes a full five minutes for his email to go out after he hits ‘send.’ I think I will go in and set that up.  Also, another part of this story we should all remember — many, or perhaps most, of our employers can go back and read the emails we send." (emphasis is mine.)

I very much second that motion. And I’ve learned this the hard way. There are several critical things to remember about email.

  1. Email isn’t private. Remember that, please. Never write in email something that you don’t want your coworkers, your boss, your spouse, or significant other to see. Sure, most of your emails end up private, but any email you send can become legal evidence and show up in the worst possible places. 
  2. The reader decides what you meant. The reader interprets. You don’t get to hide in nuance, or inflection, or soften it with a smile. The words as written remain forever. No hiding in vague memory, and not recalling. Forever.
  3. The reader owns it. Yes, I know, technically you can put disclaimers and legal notices all you like, but possession is possession, and the reader has your words in his or her email and can send it on as much as he or she likes.  It’s out in the world.
  4. You can’t unsend it. An appropriate cliche here could be – the cat is out of the bag. It’s out there. You can’t get it back. No do-overs. No Mulligans.

Conclusion? Yeah, I have a conclusion. I used to prefer email communication because it didn’t have to be in real time, and it’s easy to type. Nowadays I try to sort and select. Some messages are fine in email, but we have to recognize when it’s better to grab a phone and talk, or, even better yet, walk down the hall and talk.

Bob Sutton is the author of several really good books and teaches at Stanford University. His Bob Sutton – Work Matters blog is a good one.