4 business mistakes I made in 2017 and what I learned from them

2017 was probably the most eye opening, educational and challenging year I have ever had in my entire life. When I say I had to learn some lessons the hard way, it's no joke. That year for me was full of debt, tough decisions, errors of judgement, stress, letting people down, being threatened by people and all sorts of drama that most business owners are too embarrassed to talk to you about.

In hindsight, even though not much about 2017 was positive for me I did learn some extremely valuable lessons. I grew wiser, stronger, more intelligent and more capable, and to be fair, it was the first time I'd hit six figure revenues in my life. I was good at making money, but not the best at keeping it. Revenue is vanity, profit is sanity, and making poor decisions and judgements can lead to a whole lot of insanity and chaos if you're not careful.

So let's dive in. Here are four business mistakes I made and what I learned from them. Take heed. If you're on your own entrepreneurial journey, learning from these save you a lot of pain.

1. Not knowing my numbers

By far the biggest mistake I could have made. When I started my first company in 2013, I had an accountant that helped me to register the business and get the accounts set-up. I was a 19 year old second year graphic design student paying £30.00 per month for a BookKeeper/ Tax advisor. It didn't seem bad at the time. She was reconciling my accounts in Xero, running the payroll and entering invoices and bills into the accounts.

After a while I noticed something was wrong. I learned more about accounting and I realised my accounts weren't being kept properly, or at least not how I needed them to be. Mistakes were being made, different software was used for Payroll, invoicing and keeping records. It was all a mess quite frankly so I stopped using this accountant and tried to learn BookKeeping myself.

Eventually I fell behind with some of the record keeping which meant I didn't have an accurate picture of the business' financial affairs and I wasn't able to effectively forecast and make financial decisions based on the facts. This led to late-filing penalties, cash flow crunches, and other abysmal circumstances.  Making big financial decisions without the concrete facts and figures at my fingertips was the kiss of death which I would attribute to the biggest reason why things eventually went left for me in 2017.

Lessons Learned

1. Understand everything about business accounts and finance. Educate yourself and don't rely on accountants and bookkeepers to do this for you. Learn about double entry accounting, how taxes are calculated, how to pay yourself, the legal forms of a business, what a balance sheet is, the VAT threshold, how to read a P&L statement. It doesn't matter what business you're in – you need to understand this or you are doomed.

2. Setup your own record keeping systems from the start – your chart of accounts, payroll systems, bank rec processes. Make sure you can see in your financials where and who the money is coming from and where it's going, and analyse this periodically. Bi-weekly/ monthly. If you don't know about any of this, you better get curious fast.

3. Forecast your cashflow regularly. You need to have your books up-to-date and have accurate historical financial data to be able to predict what will happen in the future. If you have this, you'll know the impact of your financial decisions before you commit to them and you'll be able to make more intelligent decisions.

Thankfully, I know how to do these things really well now to a level that impresses even seasoned accountants and accounting and finance graduates. It took time to learn, but it'll never go away.

2. Buying expensive equipment

By summer 2016 the business was cashflow positive and revenues tripled nearly overnight. I had a client that came through and flooded the operation putting me well on the trajectory for my first six figure year at the age of 23. I was still studying my Masters degree so this was all exciting.

This customer was ordering so much that the partners I was outsourcing to couldn't cope with the demand, so I decided to get an expensive machine and bring the work in-house. Based on the revenues we were earning from that particular service it made sense. His orders would cover the cost of inks and a full time employee so I could bring someone in to run jobs on the machine for me whilst I finished my second year of my part-time masters degree.

Well, I bought the machine and guess what. The client left. Revenues plummeted and I was in the shit, so I had to get creative. I just employed two full-time members of staff (another big mistake) and I needed to make sure there was enough work for them.

Lessons Learned

1. Outsource as much as possible, even if your sales from a particular service increase rapidly. Outsourcing keeps your risk low and your operations lean. The amount I spent in inks, rent, salaries and misprints went up and I spent so much time working in my business firefighting that I didn't have time for much else. What I should have done is find more competent and cost effective partners to deal with these orders (which I've done now) instead of trying to do it all myself.

2. Before buying any equipment, especially if it's tens of thousands of pounds, research reviews on forums. Ask the vendors difficult questions. Work out the real cost of running this equipment – how much maintenance will you have to do? How much will the consumables cost you? Have you done a cost/ profit analysis on job scenarios? How much time will it take? How easy is it to operate the machine and train an operator? How much work can the machine handle in a day/ week/ month? Don't spend a penny before rigorously analysing this. This is a procurement process.

Fortunately I managed to bring the revenue back up but this wasn't the end of my problems. Next time I buy any equipment I'll be looking at what impact it will have on my bottom line more closely and get a clearer picture of how my operations will look. Buying machines should always lead to increased efficiency and profits.

3. Hiring too much, too soon

This was actually something I did in 2016 but it had repercussions that affected me right throughout 2017. In hindsight, it's not that I didn't need those jobs to be done, but I definitely didn't need two full-time staff. This put unnecessary pressure on me whilst I was studying my Masters Degree. My team members were great, but I didn't need to put that level of responsibility on myself when I wasn't ready for it and I didn't prepare well enough for this.

Just like purchasing expensive equipment, hiring staff needs to be a very rigorous and careful financial consideration especially if you're a start-up/ micro business. Payroll creates financial liabilities, so when my revenue dropped I should have either fired these staff members or reduced their hours while figuring out how to become more efficient and increase our income. Yes, it would have been tough to do, but when you're running a business you need to act in the best interest of the business whilst being compliant. Emotions need not enter into the decision making process.

Lessons Learned

1. Plan for hiring way in advance. Create an organisation chart and identify which jobs you will do in your organisation, which jobs you will outsource and which ones you will employ for first. The jobs you should employ for first should be the easiest to do but extremely time consuming, what I call the minimum wage tasks.

2. Before hiring, document the procedures and everything about that job. Identify duties and responsibilities carried out by that role and write a job description. Also document each of the functions that job is responsible for in an SOP document (Standard Operating Procedures).

3. Work out if you can afford the job and whether you should hire part-time or full time. If you're a small/ micro-business the I recommend hiring part-time roles to do time consuming but simple tasks that you can teach even a 16 year old to do. This way, you will save time and be able to spend it doing more valuable tasks, like making sales or generating leads.

4. Fire people. If you can't afford your staff, let go of them or reduce their hours. It's hard to do, but it's the right thing to do. It's not fair to drag your staff along a badly paved road with you if you can't look after them. They have bills to pay just like you.

4. Taking on too much work

As entrepreneurs, we often have an optimistic view of the world. Some of us are even susceptible to the Superman complex (look it up). Whilst optimism can be a positive characteristic to have, it can also be a dangerous one. We can play out the best case scenarios in our mind without giving much consideration to what might happen if things go wrong. We can also over-estimate our capacity easily. Students, you know what I'm talking about. "Yeah I can do that two-thousand word assignment 5 weeks is plenty of time". Next thing you know, you're drinking red-bull in the library at 3am with 6 hours til your deadline and exactly 1,298 words to go with three references in your bibliography. Don't lie. I know you can relate.

I've been guilty of this. In my line of business, deadlines are everything. People need their stuff on time otherwise it can have a massive impact on their plans, reputation and bottom line. Not fully designing my operation and removing all of the bottlenecks lead to production nightmares that cost me a whole lot more than the money I made – both in actual money and in reputation and credibility. More often than not jobs went fine, but I had some really big fuck ups last year (sorry kids). Parcels going missing, ink not showing up on time so that we could start on a job.

One time, I had 50 items embroidered and printed incorrectly and I had to refund the whole job. Another time, I had a job on for 200 T-shirts with a 70% gross margin. I was over the moon only for my machine to malfunction and start printing black ink lines through the yellow parts of my customers artwork. Cost me more time and money than what it was worth in the end, as it was a fast turnaround job for an important customer.

As a business owner you pay for your own mistakes, and pay for them I did.

Lessons Learned

1. Be pragmatic. Know your capacity and carefully design your business' operations. Decide when to outsource and when to keep things in-house, and factor in worst case scenarios - staff sickness/ lateness, missed deliveries, production errors, machines breaking down. Break down the process of fulfilling your services in to step-by-step processes. This will help you to develop better judgement when it comes to fulfilling clients demands and give you a smoother ride.

2. ONLY do the things you are the best at. Anything else, you must delegate or dump it. I was offering a print on demand service, but I cut it off. It wasn't giving me enough revenue and I wasn't equipped to deliver the service well enough. I also started outsourcing more of our services again and only do in-house work that we're the best at. These decisions lead to more profits and less stress. Let go and let grow.

3. Focus on your best clients. Identify the markets you can be the most valuable to and go all-in on those people. I increased my prices for low-volume orders as I wanted to discourage people from coming to me with the sorts of orders I don't want to spend time on and focus on the type of clients and work that is best for my business. Worked a charm.

If you ask me, it all comes down to knowing your capacity. How many cakes can you bake per day? How long does it really take you to design a logo? Do you actually have time to go to three people's birthdays this weekend when you still haven't fulfilled those orders you promised to your customers? This takes time to learn, but it's essential if you want to keep your promises to your customers and build a good reputation. Under-promise and over deliver.

In summary

These were only some of the mistakes I made throughout that year, but they also served as valuable lessons. If it can be helped, I wouldn't recommend you take the hard path of learning that I took. Get a mentor, partner with someone capable, do your research and apply what you learn practically. Stay on top of your finances and understand them. Learn more about how to actually run a business and all that comes with it. With the right tools, knowledge, guidance and skills, you can realise your vision without making a mess.

Feel like I can help?

I like to help other budding entrepreneurs in any way I can. If you have any questions you'd like to ask me directly or just want some general advice then get in touch.