Three Mistakes I've Made That You Shouldn't
November 1, 2009
James Joyce said, "A man of genius makes no mistakes. His errors are the portals of discovery." During my long business career, I've made errors, and, as a result, discoveries that I've learned from. Here are three whoppers:
1. Choosing the wrong partners
People go into a business venture with others because there is a belief that each person can bring something to the table -- talent, money, connections. That is the extent of thought I had given my choice of partners when I went into a new venture several years ago. It was my belief at the time that my partners would bring talent and connections to make our venture a success; I added the money and some talent to the pot. The result: I put in the money, but they did not come through with the talent and connections, so the venture flopped.
Lesson: Don't team up with anyone who does not have a financial stake in the activity (there may be exceptions, but I wouldn't do it again). If there's no skin in the game, there may not be sufficient incentive for people to invest their time and talents as expected.
It's always best when starting out together to assume that the worst (not the best) will happen and that nothing will go according to plan. This way, you can work out strategies in advance for how to handle the problems you've anticipated (e.g., what to do if the person promising talent doesn't deliver).
2. Getting the timing wrong
Great ideas are only great if they work, and one of the things that makes them work is timing ("timing is everything"). Come to market too late and your competitors have already established themselves. Come to market too early and there may be no interest in what you're selling. That's what happened to me. I was part of a company called Meds by Mail, Inc., offering mail order prescriptions. This is a common practice today; insurers encourage policyholders to buy three-month supplies of regularly-used medications through the mail to save money. Unfortunately, Meds by Mail was ahead of its time; in the early 90's consumers weren't interested in buying their medications from anywhere other than their neighborhood pharmacy.
Lesson: Do the necessary market research to be sure that your timing is right. Test market a product or service before investing considerable time and effort in launching a business.
3. Not having the right insurance
Many people learn the hard way that they don't have adequate coverage for the catastrophes they face. Imagine that a flood destroys a company's inventory and their business owner's policy for property and liability does not cover flood damage. Or, perhaps, an employee sues a former employer for wrongful termination and the company does not carry employment practices liability coverage because the employer has never heard of this type of coverage. While it's not pleasant to think about such catastrophic events, it is necessary to prepare for them.
I learned firsthand the importance of having the right insurance. I mistakenly believed that my homeowners' policy covered more than it actually did. I run my business from home and assumed that my office property was protected up to the limits of the policy. I also assumed that if any clients were injured in my home, my homeowner's policy would cover the situation. I was wrong.
Homeowners' policies usually limit property coverage to personal items, not business items. Inventory stored at home probably isn't covered, for example. However, homeowners' policies can be supplemented with a rider to provide coverage for business property and liability for so-called "business guests;" the cost is usually under a $100 a year. Alternatively, it may make sense for a home-based business to carry a separate business owner's policy (in the past, these policies were difficult to find, but now most major carriers offer them).
Lesson: Don't assume anything when it comes to insurance. Instead, work with a knowledgeable agent to review existing coverage and carry additional coverage where necessary.