Category Archives: Business Mistakes

My Dumb MBA Mistake

I’ve made a lot of mistakes. You can’t build a business from scratch without making mistakes. It’s an entire category on this blog, more than 150 posts. This dumb MBA mistake wasn’t my worst, but it’s one of the easiest to explain afterwards, and I hope one that might help others avoid making it too. There is a moral to this story.

Mexico-City-Kainet-Flickr-ccIt was August of 1981, early morning, in the office of John Lutz, managing partner of McKinsey Management Consulting in Mexico City. I was three months out of Stanford with an MBA degree, working for McKinsey Management Consulting in Mexico City.

The McKinsey offices sat in a very stylish high-profile office building overlooking a critical freeway junction over Chapultepec Park, linking the fancy Las Lomas residential area with Polanco and the Paseo de Reforma main business district. The streets were wet from rain overnight, and the freeway was, as almost always, jammed. The sky was dense, a mixture of rainclouds and smog.

I needed to quit. It was so embarrassing. I didn’t like to see myself as the archetypical fancy MBA blowing off the first job. I was 33 years old, married, and my wife was expecting our fourth child. I was way too mature for this stuff. But still …

I had arranged a job waiting for me with Creative Strategies International in San Jose. From where I was, returning back to the San Francisco peninsula, Silicon Valley, seemed like returning from exile back to paradise. I liked Creative Strategies, and liked living back in the states. I wanted out of McKinsey.

I really didn’t like the job with McKinsey. It was stupid to have taken it. It was a job meant for a 26-year-old single person blinded by ambition and unencoumbered by relationships. Like most professional firms, success involved putting up with a corporate culture that spent 12 to 14 hours a day in the office, whether or not there was work to be done. The firm actively discouraged families by encouraging long-term business travel but without families, and by running 5-day strategy meetings at beach resorts and forbidding families coming along, even at the family’s own expense. I was not supposed to disagree with partners on … well, you get the idea.

I certainly didn’t belong. I’d been entrepreneurial for 10 straight years, making my own way with freelance journalism and, later, my own consulting, and I wasn’t up to faking awe for the partners. And as a family, we didn’t belong in Mexico City. I had loved that place for nine years in the 70s, it had been good to me, but I was done. My wife is Mexican, she grew up in Mexico City, and had family there, but she was tired of it too. The city was too big, too hard to deal with. We had left in 1979 and shouldn’t have gone back in 1981. I fell for the money and prestige, stupidly, because it wasn’t enough to keep me.

So, back in the office with John Lutz, did I tell him why I was leaving? That I didn’t like the job, had made a bad decision, didn’t like Mexico, I’m sorry, it won’t work.

No. I didn’t. I told him I needed a lot more money.

This is one of the best arguments ever for telling the damn truth, even when it’s embarrassing. I’m still embarrassed, but I’m older now, and, well, I think this is a good lesson to share.

So they gave me more money, and then how dumb did I look?

I still left, and I left looking really stupid. Why didn’t I just tell the truth in the first place?

So there’s the moral to the story. You’ll be in a situation where you’re tempted to slant away from the truth to make it easier, but remember before you do how bad you’ll look if the other side answers the wrong issue, forcing you to admit it was never the real problem. So here there is. It bothered me for a long time but that was 25 years ago or so, and hey, I’ve made a lot of other mistakes since, the sting has worn off on this one. I hope you find the story useful.

(Image: Mexico City via Kainet Flickr CC)

Displacement Principle in Startups and Small Business

It’s really pretty simple. Intuitive. I didn’t learn about it in business school; I learned about it while building and running a real business. I decided to call it the displacement principle.

Displacement Principle: In the real world of small business, everything you do rules out something else you can’t do.

Displacement

My favorite metaphor is dropping a brick into a full bucket of water. What happens? Displacement happens. Water splashes out of the bucket.

I’ve seen the same thing happen as people try to grow their businesses. It’s easy to add lots of new items to the lists of what else ought to be done. As you do, ask yourself:

Do we have the resources? Will this idea generate those resources? And, if not, what are we not doing when we start doing this.

Everything you do displaces something else that you can’t do. Learn to live with this and you’ll do better planning your business, and, particularly, growing your business.

3 Things Never to Tell an Entrepreneur About her/his Spouse

I just read 7 Things Never to Tell Your Spouse About Business Finances, posted by Barry Molz on Amex OPEN forum. I like Barry and I like his work.  I’ve been on his podcast before and it was great. But his tone of voice in this post makes me uncomfortable. Dont tell your spouse

If you’re curious, compare Barry’s tone in that post to mine in some of my (somewhat confessional) posts on me and my wife and entrepreneurship: My biggest startup boost, for example; or this true story on relationships vs. new business. And yes, my wife and I have been married 44 years, in a relationship that has survived years of scraping to support a startup, and sending five kids through college; so maybe I maybe I know something about this.

It’s not that Barry doesn’t offer some good advice within his post. He does. For example, if you’re dealing with cash flow problems, Barry advises:

Don’t give your spouse a daily cash report, since it’s always changing. Instead say, “Money will be tight for the rest of the year.” You will be right most of the time.

But there is no excuse for the multiple references to the spouse as “she” in that post. I know Barry and he knows better. This is nasty stereotyping. The whole “don’t worry your pretty head” motif is 1.) offensive and 2.) obsolete. Ironically, all of Barry’s advice here has nothing to do with gender so there is no reason whatsoever to make the spouse female. Making the advice gender specific dilutes it.

And secondly, regardless of gender, keeping a spouse in the dark about serious business issues is a really bad idea. Specifically, Barry’s suggestion about what to tell a spouse when a major investor pulls out …

Don’t say anything, and work privately to learn to project your cash flow better so you can survive the bumps in the road.

… is really bad advice. What a terrible thing to suggest. First of all, that idea makes for an incredibly lonely entrepreneur. Nobody normal can help fretting over that kind of situation. Not to share it with the most important person in your life, who is by definition a person who is going to share the consequences if you go under is horrendously bad advice.

And here’s another piece of really bad (well, maybe just insulting) advice on what to say when you have a buyer for the company:

If you do tell her about any pending deals, make sure she understands that nothing is set in stone until the money is in the bank. Also, don’t give her the dollar details; when the deal closes and the money is in the bank you can say: “Honey, what can we do with an extra $100 million?

The first part of that advice is not bad, but condescending, and unfortunately also gender specific. The second part is insulting.

My apologies to Barry for a bit of a rant, but I’m the father of four daughters and this stuff really gets my goat.

I’ve discussed this topic in other posts and in my opinion it’s best to be open and honest with your partner. In fact, being candid has immense benefits. Here’s an extract from one of my previous posts that illustrates how essential my partner has been in helping me to succeed:

[This was the] biggest boost to starting a business: My wife said “go for it; you can do it.” And she meant it. At several key points along the way, she made it clear that we would take the risk together. There was never the threat of “I told you so, why did you leave a good job, you idiot!” What she said was “if you fail, we’ll fail together, and then we’ll figure it out. We’ll be okay.”

10 Mistakes Big Businesses Make with Small Business Owners

crowd-question-mark-shutterstock_191948960

For several decades now I’ve been back and forth between working on and building my own business, helping others build theirs, helping people manage small business, and, occasionally, helping larger businesses understand and presumably sell to smaller businesses.

So I watch and listen. And I see how big businesses try to reach the solopreneur, home office, and small businesses. And the mistakes they make. So here’s my list of 10 mistakes big businesses make with small business.

  1. We’re not a market segment. Sorry, that would be nice, but no. Go back to your fundamentals and consider what makes a market segment useful for your marketing. Some factors in common, right? Same gender, same economic level, same town, same activities, same something. And what business owners have in common is only that we own a business; which probably means we’re more likely to be different than the same. Treating us as a group is like trying to organize anarchists. We’re solopreneurs, entrepreneurs, accidental or pushed entrepreneurs, and millions of us don’t even think of themselves as entrepreneurs; they’re just self employed.
  2. We’re short on time and patience. We have a business to run. We don’t have time to research and study, much less to listen to you. Get to the point fast.
  3. We care about quick and easy. Convenience really matters. See point #2.
  4. We’re unpredictable about reading, media, and political preferences. Somebody told me once, in pontificating mode, that “to reach small business you have to advertise in the Wall Street Journal.” That’s not what I see. I think only a few of us read about business. Our politics is as diverse (and polarized) as the rest of the country.
  5. We hate red tape except when we love it. Give us a chance and we’ll complain like hell about government red tape and restrictions. There are large lobbying groups that supposedly represent us that constantly whine about red tape and regulations (I think they actually represent various political interests mostly, and use small business as a platform). But give us a chance to jump onto red tape to prevent competition, and we will. And give us easy ways to deal with red tape (like payroll services, for example) and we’ll love you.
  6. We don’t sweat tax rates, but we really care what’s deductible. The whole tax rate thing is politics, lobbyists, and whining. Tax rates affect profits only, and profits are what’s left over after the deductions. So well love deductible expenses. If you want to unite us, put in more red tape on deductions, like they did with meal expenses a few years ago. Or crack down on travel expenses and conferences and cars. We’ll hate you.
  7. We’re unpredictable about technology. Some of us love computers, smart phones, tablets, and office equipment. Some of us haven’t discovered social media and barely email. We’re about as diverse on that point as any random group of adults.
  8. We don’t divide by generations. You can’t effectively divide us into millennials vs. generation x vs. baby boomers. I’m a baby boomer and I know some millennials who think more like I do about business than some baby boomers.
  9. We like variable costs way better than fixed. Charge us more later after we’ve made the sale and have the money and we’ll pay it. Charge us fixed costs up front, whether we sell or not, and we’ll hate it.
  10. We’re online. Point #7 notwithstanding, business owners want more revenue and that’s mostly online. Some of us love it, some of us hate it, but business owners who aren’t online are endangered species.

Do you want to go to the research and check out my data, to see if it’s valid. Don’t bother. I’m a business owner. I don’t need to show you no stink’n data.

Strategist? No, Please; not Me

I don’t want to be a strategist. Yeah, like you, I like to be a thinker. I like analysis. And strategy sounds cool. But the term strategist is too much pomp, arrogance, a relative of using utilize instead of use, or at that point of time instead of then

Social Media Strategy, business social media

What reminded me was The Difference Between a Social Media Strategist and a Person Who is Just Good on Social, over on on Business 2 Community blog. I like the post and it’s core content, but I hate the way they label strategist as good and just good on social media as bad. They’ve got their labels reversed.  They say: 

A social media person will get your ball rolling, a strategist figures out how that ball plays into every aspect of your business and gives you tools and training to deliver. They lay the groundwork to be ready to respond, and deliver. A social strategist doesn’t just focus on marketing, they focus on the big picture and help you put actionable items into place to support your long term goals.

I disagree. They’re using the words wrong. Here’s what I tweeted after I read that post. 

What’s up with that? What’s my problem? I don’t like the way people push up the vocabulary that makes  business seem more remote, higher up the ivory tower. 

One of the nicest perks of having a fancy MBA degree is being able to call out the business speak for what it is. And my advice is beware of people calling themselves strategists. Look for people promising to get things  done, not to analyze and define. 

And I suppose I have to explain that the phrase “just good on social media” might be the underlying problem. What does that mean to you? To me “good on social media” in business context means understanding that business social media needs business purpose, target market, and curation that serves the business purpose by offering what the target market wants. To me, “getting the ball rolling” doesn’t mean social media clutter. It means building a business presence. It’s extending the strategy that should be obvious. 

Required Reading on Business Owners Making Critical Mistakes

For a good time take a look at the answers to this question on Quora: What are some classic examples of a founder letting his or her ego get in the way of making the right decision for a company? 

owner mistakes business mistakes

Now yes, that’s one stellar example of a loaded question. But — loaded or not — it’s attracted some very interesting answers. It makes for good business reading, for sure.  

One particularly-well-written answer (this one) narrates a painful story of a successful pivot turned to failure by a stubborn founder insisting on doing things the old way 

We tried this before … We failed. Miserably. … our sales staff, followed by myself, along with the other partner all advised against the move … Then, all of the sudden, two months later, he made some executive vote to change everything overnight.  … Our revenue streams dropped immediately. 
I stressed for months on end, … but he didn’t listen. 
He just made the move, and everyone eventually lost their jobs. 

That’s a small piece of a long answer, and I’ve clipped it significantly. It makes a good story and good reading. That answer goes on with some other examples too, which makes me wonder. Maybe its biased and just sour grapes. 

Another interesting quote from another answer:

The thing with egos is they cause a distortion of reality which means they’re either too fragile to accept the truth (self-esteem) or they’re so starved for attention that their bullying gets in the way of real progress (narcissism). … Jobs was so broken inside and so desperate for recognition that he worked his staff mercilessly hard and caused rifts between the Macintosh and Apple II (I think) teams. His narcissism caused him to bully and press on others. He damaged morale in the company and hurt sales.  

Maybe these are twisted answers from people bitter about things having gone wrong. Maybe they are exaggerated. But regardless of historical accuracy, every business owner should read through these. And I write that as a business owner.  

The Worst Business Pitch I’ve Seen in Years

Yesterday I received one of those hilarious examples of selling tactics that exactly contradict the pitch. This one was somebody selling business coaching and online marketing, hoping to target business owners. He was using an annoying website comment bot with generic praise, and links to a very ugly website full of absurd promises in bright red large fonts spiced with all caps and exclamation points, with audio that just starts talking at you when you get there. 

really bad business pitch

I felt bad for the guy.  Maybe he’s a nice guy, the victim of schlocky marketing services himself. Maybe he doesn’t realize how bad his pitch is. And I don’t like to criticize strangers, even strangers who send me really obnoxious sleazy marketing. 

Besides, he has almost no web footprint. A google search yields almost nothing about him, and he’s barely present, hard to find, in social media. So he can’t know online marketing. 

So all I have to show for this, with this post, is the underlying irony of it — horrible marketing selling marketing services — and some simple, obvious advice:

  1. Flattery might work; you do get my attention citing something you’ve read that I wrote; but stupid generic praise is insulting, not flattering.  
  2. Don’t ever have a website that starts talking immediately. That’s rude and annoying. Have a click to start the talking. 
  3. Large brightly-colored fonts and all caps look so last century. Avoid the look of 1980s direct mail. 
  4. Big promises don’t work. They aren’t credible. Today is the age of transparency and authenticity. 
  5. Don’t advertise your ignorance. If you sell copy editing don’t have typos. If you sell design, don’t be ugly. If you sell websites, don’t have 404 errors. If you sell food, don’t give away foul-tasting samples. If you sell business coaching, or online marketing, do it right or not at all. 
  6. Oh, and if you don’t have a reasonably good web footprint, don’t try to sell online marketing expertise. You really have to show up well in standard searches, like Google, Yahoo, and Bing; and in Twitter, Facebook, LinkedIn, and Google+. It’s a brave new world, now, in that respect. You can’t fake an online past. 

Just Turned Down a Consulting Job and I’m Glad

I just answered a social media consulting inquiry with this…

No, I’m sorry, that’s not what we really do well. We’re a business, so we’d have to charge you; and we wouldn’t be giving you your money’s worth.

… and I went on to recommend somebody else. The person I recommended as a consultant does do what my inquirer wanted. 

square peg round hole rosipaw flickr cc

I won’t bore you with details, but to me this transaction is a great example of the right attitude about sales. I don’t believe in selling as tricking somebody into buying something other than what they want. Selling is matching wants and needs, figuring out whether what you do is what that person needs or wants, and making a good match. 

Jumping on this kind of inquiry with a yes, making a pitch, while hoping to beef up your capabilities midstream, is tempting. But leads to a lot of problems. 

Ending up with “we don’t do that” is great for credibility, gives you a chance of future business, avoids the danger of a bad consulting engagement with unhappy clients, and keeps your self and your spirit whole. 

(photo credit: rosipaw via photopin cc)

Is It Stupid to Ask for a Better Email Address?

He asked me about my business plan review, something I like doing, and that I charge for. I should be happy, right? And forthcoming? 

bigstock paranoia boy in tin hat

But his email address is three letters having nothing to do with his name, plus three numbers, at yahoo.com (like nnn###@yahoo.com). So I asked him, before sending a work sample, to give me a better email address or identify himself better. 

Am I off base? Is that stupid? Like blowing off a potential client? 

On one hand, maybe this person just doesn’t want to use real email because he (or she) doesn’t want me to spam back. I get that. Nobody I know likes to give an email address to the wrong person.

On the other hand, from my side, it feels like I’m corresponding with, even sending information to, somebody who has a generic name and generic email address, a complete throwaway address. There’s no web footprint at all. 

What do you think? 

And too bad, too. Right? That it’s dumb to just trust? And who trusts first: Him (or her) or me?