In this episode I go over a handful of mistakes to avoid when starting a business or running a startup. I also talk about the things that you should do in order to succeed.
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Here’s the transcript from this podcast episode, please excuse any typos!
In today’s episode I’m going to tell you how to learn from your mistakes. In order to succeed in your startup or your business. The best way to start this would be to go back in time about 10 years when I just finished my first feature film. And I was working with somebody, after the film, who wanted to work on other projects. The person that I was working with was mostly an artist. He had very little business acumen, no technology experience, but yet here we were in 2010. And we were going to build our first tech startup. So we worked on this idea together, but he quickly wanted to start hiring lawyers, because he had watched the movie The Social Network, and he didn’t want to fall into that trap he said where we would argue about the percentage, who in the company later if it succeeded and all that.
Now keep in mind, we didn’t have any designs, mockups functionality, we had no team, we didn’t have anything, but yet he wanted to pay 1000s of dollars to these lawyers to help move things along to teach him how to run a business. Now I was totally against this. But I felt like I was kind of in it, because he wanted to work with me and I didn’t want to work with somebody I wanted to have a co-founder. And so I decided to go ahead and pay whatever he was saying the lawyers wanted and he was paying the lawyers as well we were splitting the bill. But I felt like I was doing all the work, because I am technology oriented so I was doing designs and mock ups. I found programmers that we had outsourced to India. And we were using them to build a prototype, and eventually we did find local developers, but since we couldn’t get funding. Of course, they didn’t want to work with us either because we couldn’t pay them. But I was spending so many hours on things like workflow documents and PowerPoint presentations practicing the pitch for investors. And I was meeting with all these different mentors and CEOs to get feedback and ideas for our startup. I even made a promotional video, I mean, I was doing all these things non stop, and my co-founder was just paying lawyers and asking me to pay lawyers. And I kept wondering why we pay these lawyers to show us how to run a business when I already know how to run a business.
At that point I already run successful businesses. But he said it was the only way he would work with me. And I felt like I was kind of cornered like I had no choice. But after about a year of doing this, the co founder realized there wasn’t going anywhere. And I could have told him that and we could have saved 1000s of dollars. But anyway, he gracefully bowed out of the company, and I let go of the company too; we just let it dissolve. And then, I was working with two other friends of mine, who then we decided to start another startup, and I just jumped right into another startup with two more co founders and again I found myself doing most of the work, but at least this time the word panned out, and we were able to launch a tech startup we were able to launch a platform. We were able to pitch a lot of investors. But we found that when we launched and when we built this, it was a saturated market, there were a lot of other websites and apps that were coming out at the same time. This was an e commerce platform, and a lot of companies were coming out at the time that were competing with eBay and Craigslist and whatnot so it was the wrong timing, but it was it was definitely a good idea for a platform so I learned along the way on how to do things with that one as well. And I found out that I shouldn’t be working with co founders, that I should be working on myself on my own projects by myself. And that’s what led me to my third platform, which I ended up doing by myself. And to this day. My third tech startup has been my most successful and mostly, this might not be the case for everybody, but mostly because I did most of it by myself until I got to a certain point, and then I brought co founders on board, and then I started to pitch investors, and then I was able to build a team of programmers and marketing people and business people and get a lot of people on board basically because I’d already done a lot of the work. Here are some of the things that I jotted down over the years that I noticed worked for me in terms of what you should not do. When you are running a new tech startup or a new business. Number one, don’t hire lawyers right away, avoid them. you don’t need them. They are a waste of money, lawyers are great for certain things, and you should use lawyers when you need them for certain things, but not when you’re starting a business, it’s a waste of money.
The next thing is to not rush. When you pick a co founder, take your time, just because somebody says they want to work with you. Don’t just immediately work with them. When you pick a co-founder, and you start a company with them. It’s kind of like a marriage, it’s a relationship you’re going to be with this person all the time. You’re going to talk to this person all the time, interact with them, argue with them, and agree with them. It’s like a partner, so you have to choose really wisely. And be careful, because once you get into a relationship or a partnership or co-founder status with someone, you’re going to be stuck with them for a long time. So I’d say, do as much as you can on your own which is my next point, do as much as you can by yourself before going to a co-founder so mockups prototypes workflow documents investor presentations, build a website, you know, social media marketing pages, do as much as you can. And if you don’t know how to do it, learn how to do it. That’s why I have a course in a book that teaches you how to do these things.
So we’re going to spend a couple hours every day learning how to do certain things instead of relying on other people. The more you learn the better you’re going to be at building a business and running a business. The next thing you should not do, is pitch investors don’t pitch investors until you have at least a million bucks in revenue or a million users, most investors are going to say no to your idea. If you have not mitigated the risk that they’re going to be looking for. So, if you just launched your website, you’re not gonna have any users with no revenue. They don’t care. They want to see that you have users and revenue. If you haven’t even built a website yet and you’re pitching investors. Well, you’re just wasting your time. That’s called a paper napkin pitch where you don’t have anything built you’re just showing them what you have on a napkin or a PowerPoint, they’re not going to invest in you especially not nowadays, maybe 10 years ago, maybe they would have invested or 20 years ago but now in 2020 and in the future. They need to see that you can execute your idea and mitigate their risk.
The next thing is trying to avoid paying people with cash in the beginning. I know a lot of people want to get paid cash but there’s no incentive for them, they’re just getting paid cash to do a job, they don’t really care about your business. You have to pick team members or co founders based on equity, so that they want the company to succeed, so that the equity becomes valuable. That’s how you know someone cares about your ideas; they don’t want cash. They want a piece of the company, so that they can earn a lot more money than just spend a little bit of cash in the future when the company succeeds. My next point, I’ve had podcast episodes about this, but don’t wait until your product or your platform is finished before you release it. Some people might think this is crazy to say but you want to release it before it’s even barely finished, you need to get customer feedback during the MVP stage, the minimum viable product. Too many people are perfectionists out there trying to make the perfect platform, guess what, there’s no such thing, because even when your platform is perfect, you’re still gonna have bugs, it’s still going to crash and you still have to constantly update the software. Same goes for products you launch a product. It works really great in the public, but then you realize you’re getting feedback about oh this this product is great but it would work better if it did this or if it did that. So now you get to change your product version to version three.
So, release as quickly as possible, get feedback as fully as possible. Don’t waste your time perfecting it because you really are gonna be wasting time and money. And my last point is going to be to not be stubborn, so many entrepreneurs I work with are just stubborn they’re not open minded. They say it’s their way or the highway, they are right and everybody else is wrong. And that certain methodologies and tactics and strategies don’t work in their business like they think that they, they’re above all the tried and true rules and guidelines out there. If you’re willing to listen to people’s opinions and experience and expert skills they have and the facts based on all the years they’ve worked in companies, you’re probably going to do better than just listening to yourself. Because, more often than not, you’re going to make a lot of mistakes. Right. And the whole point of running a business, at least today because of all the resources available out there, you should be making as little mistakes as possible, and be able to succeed much quicker in a business. The whole point of people like me helping you is to help you avoid those mistakes. So, be open minded. Stop being so stubborn and listen to the experts that’s why they’re there.
Okay, now that I’ve gotten all the don’ts out of the way. Here are the things that you should do. The first being definitely design your product before going to programmers, or prototype ORS for like physical products. This means drawing mockups, wireframes, even whiteboard pieces of paper. Anything you can do that you’re able to do if you’re good at Photoshop, great if you’re not great at Photoshop, get a pen out. The more you can draw out the more you can type up like a technical document, the more you can give programmers, or prototype or people who physically build 3d printed objects, for example, you need to visualize what it is you want. So do as much as you can before you go to people and they’ll be able to see your vision, and they’ll be willing to work with you because they see that you put in a little effort. And part of that is what I call a workflow document or a technical document is, if you’re building a website or a mobile app you should always type out at least one or two pages of a bullet list in numbered order of what it is you want the functionality to be so that you can explain to somebody here’s what I want the website or the mobile app to do step by step. That way, not only do you get it out of your head, but also so you can explain to somebody much easier, they’re going to read that and say, Okay, I have an idea what you want to build.
And my next point goes hand in hand with this, it’s to release your MVP as a soft launch to 1000s of users, right away. Don’t wait until your app is finished. Later on, you need to get feedback, quick, as quickly as possible. Hopefully you get good feedback but if you get bad feedback, guess what, it’s better to get that bad feedback early on versus a year from now when you launch and then you get all this bad feedback and you got to change everything. Whoa, whoa, you just wasted a whole year. You really shared that feedback within the first month or two, like right away. So, don’t be afraid to launch. It’s a soft launch which means you’re not marketing it to people right, you’re not putting it on Instagram, you’re not putting it on Facebook, you’re not putting it on Twitter. You’re just telling friends and family and college students in finding local groups of people who are willing to test your app, or your product in a closed beta. So it’s not open to the public, and this way you can get feedback from people before you launch to the public. The next point has to do with the financial piece when it comes to paying people right so no you don’t want to pay lawyers in the beginning and no you don’t want to pay employees in the beginning because you’re a startup, you have to bootstrap right but even my podcast is strap on your boots so you have to bootstrap.
This means you can find resources. Okay, most local universities have a law department, and those law departments usually have students and their teachers who are willing to give you advice or help you. And of course there’s always sites like Rocket Lawyer, or other legal sites where you can get forms really cheap. Okay. And I’m not saying you don’t need legal forms because that’s not true. You do need legal forms when you start a company, you at least have to start an LLC or a C Corp. You need some sort of independent contractor agreements, you need non disclosure agreements you need like equity disbursement for your co founders you need all sorts of operating agreements and things like that so these legal forms, you definitely need them. I’m just saying, you don’t need to pay a lawyer to get those because you’re going to pay 1000s of dollars for these forms, when you could just pay you know 20 to 50 or 100 or even a couple $100 for these forms, right, but seats 1000s, and since you get these form and you have to read them and you have to tweak them to serve your needs. You’ll learn a little bit about running a business because you have to read the forums and you have to learn them and I say that, spend a couple days doing it. The problem I think is that people are very lazy, and they want to just pay people to do things for them, but they’re not learning anything. Stop paying people to do things and learn how to do it yourself. And you can also find local universities, interns, people who need credits for school, especially with the pandemic. Everyone’s at home, and they don’t have anything that they can do because School’s out and you know doing online classes but they probably have a lot more free time.
This is your opportunity to get people to help you run your business. Well they’re learning from you or they’re learning from the business as an intern, and you can give them stock options so that they’re being compensated. Same goes with employees who were co founders, this is your moment to give them equity or stock options to help you with your business. Remember, when you give people stock options or equity shares and your business, you have to figure out what kind of value they add to the business and how much money they would have been paid at a job similar to it and figure out some math right so if they’re very highly skilled programmer and they can build your entire platform, and they plan on being there for the long haul. You might make them your CTO, or Chief Technical Officer, you might offer them 30% of your business, maybe more, maybe less, it depends on how much time they’re going to put into it. If an intern is going to be giving you a couple hours a week, you might only give them like 1% and stock options over the course of a year. Right, so it really varies widely what you give people, but you have to give them something fair for the time they’re putting in the value they add to your business and how much money they would have earned in a company, such as the one you’re offering them. And this last point, kind of ties into that is the fact that you should be listening to your employees, and your co founders, you should have discussions weekly, and you should have a board of directors where you’re having monthly or quarterly discussions and take their feedback and suggestions to heart, actually listen to them. Don’t just say, whatever I say goes, you need to collaborate, you need to listen to people.
The biggest failure I have found from entrepreneurs is that they don’t listen to others. They’re very very stubborn. They only want to do what they say they only want to do what they think is right. And they very rarely take into account what people are telling them they should do. And what I find ironic and kind of funny sometimes is those entrepreneurs, they end up doing those things later on down the road. It’s like, you should have done that a year ago, but you didn’t want to listen to me, but then when you realize that it was the right move now you do well you wasted all that time and all that money and it’s a shame but it’s the fact of life. I’m here to tell you to listen to people, early on. There’s a reason why they’re giving you that feedback. Take the feedback, figure out if it’s what you want to do, get that feedback from other people to get second opinions. Get as much feedback as you can, that’s the biggest thing that you have to do is get feedback and suggestions from investors, mentors , CEOs , business owners, interns , employees, family members, friends, everybody. And the key takeaway here is to make less mistakes when you’re building your business by avoiding the things I said to not do, and to focus on the things I said to do. And you’ll do much better than most entrepreneurs out there, you’ll save a lot of time and a lot of money. Hopefully, this helps you make a lot less mistakes and fail faster and succeed quicker.
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