[00:00] Mike Taber: This is Startups for the Rest of Us: Episode 9.
[00:11] Mike: Welcome to Startups For the Rest of Us, the podcast that helps developers be awesome at launching software products, whether you have built your first product or are just thinking about. I’m Mike.
[00:20] Rob Waling: And I’m Rob.
[00:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes that we’ve made. How you doing today, Rob?
[00:26] Rob: Doing all right. I’ve been staying busy over the last week. I acquired a new SaaS product, Software as a Service product a few weeks ago and I am in the process of kind of revamping that and trying to get it up in the search engine rankings and get some revenue going. I will be talking more about that in the coming months. I am not going to talk publicly about it right now. But it is always a fun experience learning new things about a new niche. How about you?
[00:51] Mike: You’re not going to talk about it?
[00:52] Rob: No.
[00:53] Mike: We need like one of those little soundboard things so I can just cue the audience going, “Ahhh!”
[00:58] Rob: Yeah, exactly. Yeah, this is our cliffhanger, audience. If you really want to know, then keep listening to our podcast because eventually I am going to talk about it. But at this point, it is just not in great shape and I just want to improve it some more and kind of get it into a more respectable state before I really go public with it.
[01:15] Mike: Cool.
[01:16] Rob: So how about you?
[01:17] Mike: I’ve spent the past couple of days learning about Mercurial, actually. Not terribly exciting stuff, just distributed source control, and it is uncomfortable. I will tell you that! Because I am used to working in a model where, for the most part, I mean I am really the only one who works on a lot of my code. And the thing about Mercurial that I think is sort of a problem for me is the fact that when I am doing most of my development, I check in everything because I want to be able to, one, have a backup of it and two, I want to be able to use that or work on that code when I switch machines to another machine.
[01:52] And that’s kind of the real thing with Mercurial. It seems like it doesn’t quite fit that model very well. And I could be wrong. Maybe I am just not entirely understanding it just yet. But it just seems to me like it doesn’t really work well for that, because your changes aren’t even submitted until you kind of push them forward per everybody.
[02:10] But I suppose you could set up a repository that just says, “Here is my ‘central development repository’,” and then when I am done on one machine, I check it in, grab the changes from another machine, etc. So, I dunno. We’ll see.
[02:23] Rob: Right. Well, I’ll be interested to here, because I’ve never used distributed source control. I did VSS years ago, then I moved to Vault, and then I use Subversion now. But that does seem like this distributed model is probably where we are all headed over the next few years.
[02:38] Mike: Yeah, and I like the concept. I really do. But I am just trying to figure out how to kind of fit it into the model of the way that I work. And, you know, I am sure that somebody out there is going to say, “Well, Mike, you are doing it wrong. You should fit what you’re doing to the model of how Mercurial works.” And it is like, “Well, you know what? The tool should suit the way that I need to use it, not the other way around.”
[02:58] So, I dunno. Like I said, we’ll see. The primary reason that I’m looking at it is because I’ve got a Software as a Service product that I’m going to be launching later this year, probably not until at least September or October, and I basically need to figure out how I’m going to do the development for it. And using Mercurial for the first time, it seems like it is an appropriate place to start using it. I don’t know. We’ll see.
[03:26] Rob: So today we’re talking about our biggest startup mistakes. And Mike, you probably heard some of the podcasts and blogs. There is a bit of a debate over whether people learn from successes or whether they learn from failures. The camp that says, “Oh, failure is not an option and succeeding, you learn far more from that.” And that’s actually like 37 Signals. I’ve heard them really get behind that. And I’ve heard a couple other startup guys in interviews get behind that.
[03:54] And then the other camp says, “No, you have to fail a few times.” Ultimately, you need to succeed to figure out the right way to do it, but if you never fail, then it is really hard to learn from something if all you ever do is succeed.
[04:06] And I’m going to state for the record that I fall squarely in the “you need to have both” camp. You need to fail before you succeed in order to really understand what you did right and what you did wrong. Which camp are you in? What do you think?
[04:20] Mike: It’s something of a rhetorical question. It’s like, “Which is more important, learning from success or learning from failure?” Well, if you succeeded, then who cares who you would have learned if you failed?
[04:31] Rob: Well, you only care if you are trying to teach others. You know, if you are trying to write a book or stand on your soapbox where they talk to people and they are like, “This is what you need to do,” and they are writing books about it.
[04:41] Well, then you better know that it’s not luck, and you better not be relying on your knowledge base if you’ve never failed! Because other people are going to fail. It is kind of like trying to help people who are addicts. You know, if someone is an addict and you’ve never been an addict, it’s really hard to help them because you just don’t know what it’s like.
[04:58] Similar analogy. It’s like if these guys have never failed, how are they going to guide someone? All they can do is, “Follow the exact path that I followed.” But it doesn’t always apply. We don’t all have these blogs with huge readership, and don’t all have SaaS apps, and don’t all have, you know, all this stuff that they had in place. We aren’t all getting started in 2001 [laughs] when the field was wide open.
[05:19] So that’s where I think having the knowledge of “why” matters, if you are trying to educate others.
[05:24] Mike: Actually, what you just said there was, I think, the critical piece of the whole thing — having the knowledge of “why”. It’s very similar to programming. If you’ve got a developer who does something, and call the code a Black Box or the backend system, if you do something and it works exactly the same way every single time, you are going to be able to do that, and you are going to be able to be great at it, and you are going to be able to reproduce yourself some results and be successful every time.
[05:49] But if that black box changes inside, and again, it’s because of your lack of understanding of what it’s actually doing, then the next time you try to do it, you are not going to do very well. And you simply don’t have the knowledge of why things failed.
[06:06] So that means that you can’t adjust for their external parameters. If you’ve never failed, it’s very difficult to be able to reproduce those successes.
[06:15] Rob: Have you ever heard of software development by accident? I think it was a Steve McConnell book that I read, and the book wasn’t titled that, it was just one section of one chapter, and it was exactly what you just described.
[06:26] Mike: Really?
[06:26] Rob: Yep. It was like, “If you are a developer and you write code and it works the first time and you have no idea why, and you just do that for several years, you never learn how to troubleshoot, and you never learn, really, why things are working the way they are.” And the first time something breaks in that code, you are screwed, because you really don’t understand how it works. And I think the analogy really does apply to entrepreneurship.
[06:48] Mike: No, I’ve never heard of him. He must have stole my idea. [laughs]
[06:51] Rob: Yeah. I think so! I think so. I mean, in this book I read 15 years ago. So with that, you and I are going to talk a bit about the biggest startup mistakes we’ve made over the years.
[07:01] One of the mistakes that I made a few years ago was launching a website with an ad-based revenue model as a micropreneur. Obviously, if you are a venture-backed startup, you can launch a website that is ad-based, and you get enough volume and you can have an ad sales force that talks to people and gets great advertising rates.
[07:22] But as a one person show, it is a pretty risky business. And it is something I recommend against these days when micropreneurs contact me. The website was called flogs.com, and it is now very much defunct. But I spent, basically, all my nights and weekends for about six months launching the site and trying to get people to use it. It was like kind of a Digg for personal finance.
[07:47] The idea sounds completely ridiculous, but I was really into personal finance and the AdSense ads have a good rate or return. And so I launched this site on a whim and I didn’t test the market, I didn’t test the niche, I didn’t research demand, and I just went full force, which was so much fun. It was, like, impulsive. And it was a lot of fun.
[08:08] But, man, I just made no money and I spent a lot of time. And I didn’t learn a ton. I learned a bit, but certainly not worth all the time I spent doing it. So the lesson I learned it so leave this kind of revenue model to venture-backed companies, and as a micropreneur, as a single entrepreneur, to focus much more on websites and software products that have a viable business model but have some type of product or service that you could sell and actually make money from.
[08:34] Even freemium models. I actually launched a freemium website as well and ran into a similar issue. You just don’t have the scale as a one person company to really deal with that, so I discourage people from freemium as well.
[08:46] Mike: I think it sounds more like you should probably pay attention more to what your revenue model actually is as opposed to what it is that you are trying to build, because it seems to me like your primary goal should be to make money from the service. And if you can’t figure out a way to monetize it, then you shouldn’t bother, unless, as you said, if you are a venture-backed startup or an Angel invested startup, at which point you’ve already got money coming in the door and you basically need to build something that somebody else can figure out how to make money from.
[09:15] That seems to be one of the models that actually bugs me about Angel investment and venture-backed startups, because the fact is that they are trying to build something, they are trying to build this critical mass, and they don’t really look to see what the business model behind it is. They just figure, “Oh, well, if we can get enough people using this service or this startup, we will figure out how to make money from it later.” If you never figure that out upfront, you are kinda screwed.
[09:39] Rob: It is definitely the rare exception that starts with a freemium model and turns into a really successful company. I mean you can look at FeedBurner as an example; they were acquired by Google. But most of the sites that I know that used to do freemium models, and HitTail is one, Crazy Egg is another — they had free trial accounts and then you could upgrade, they’ve all done away with their free trial accounts because it is too hard to make money. You can’t scale very well. And once you start charging, you conversion rate goes up and you start making a lot more money per person who uses your website, and you can actually make a viable income at it.
[10:11] Mike: I guess that’s my point, though, is that unless you’re actually making money from it, it doesn’t necessarily matter at the end of the day. Look at a service like YouTube, for example. They have millions and millions of videos that they serve up on a yearly basis. But they also burn through $700 million a year. I mean, they’re not profitable by any stretch of the imagination.
[10:31] But the founder sold it off for, I don’t even know how much money, but it was a lot. So that’s kind of the problem that I see with these venture backed start ups is that if they’re trying to build something and their only source of future revenue is going to be bought out, I mean that’s in my mind a pretty risky move.
[10:51] Rob: Yeah. I think that’s a good reminder of who we are as entrepreneurs and who we expect our audience to be. We’re not venture-backed entrepreneurs; we never have been and perhaps never will be. And we’re intending to speak to the small software startup world and micropreneurs, one man shops, rather than someone who takes several million dollars.
[11:11] Mike: One of the biggest mistakes that I made was when I first got started with one of my first products and I started doing AdWords advertising for it. I had no idea how AdWords worked and I just blew…I’ll be perfectly honest and say I don’t remember exactly how much money it was, but I blew a lot of money on AdWords. And I was doing basically all the wrong things.
[11:32] I wasn’t really monitoring exactly how well things were going. I didn’t take enough measurements to measure what my conversion rates were based on the ad words. And I thought that traffic was going to drive the sales. And it matters where that traffic comes from, because if you’re getting traffic from AdWords, you better be monetizing that traffic; you better be making money off of that traffic.
[11:55] If you’re already making $2,000 a month, then you turn on AdWords and pay $1,000 a month there, but you’re still only making $2,000 a month, then you’re basically blowing $1,000 a month towards Google and padding their bottom line and not doing anything for yourself. So you really need to pay attention to a lot of the details around a lot of that stuff. And if you’re going to undertake advertising, you need to carefully measure just about everything.
[12:20] Rob: Yeah. I also blew through quite a bit of money early on. If I recall, I blew through about 1,200 bucks in just under six weeks. This is probably six or seven years ago. And I, too, I just didn’t know how to use AdWords. I didn’t monitor it closely enough. I’d bid on the number one spot for all the ads. Total rookie mistakes.
[12:40] And I, like you, I wasn’t tracking my conversions, so I really didn’t know how many sales it was driving. It turns out it was around $100 in sales in the end, so I lost 1,100 bucks. A couple years later when I ramped up AdWords again, I read a book and I did a bunch of trial and error, and now if I’m not getting an ROI on a keyword, then that keyword gets paused. And yeah, there’s an entire science to doing AdWords. So until you understand that science, AdWords is not something to toy around with. Do your research first. Learn the ropes.
[13:12] Mike: The mistake that I made with AdWords was that I turned on the content network thinking that, “Oh, well, this gets it out to more people at a lower price. Why wouldn’t I want to do that?” And the problem is that because it’s untargeted, it just does not convert nearly as well, and it actually makes it harder to figure out what’s going on.
[13:33] Rob: One of the other mistakes that I made in years past was hiring a friend to work for me. And this one’s a tough issue because I can’t say, as a blanket statement, that you should never hire your friend. But the problem is, is that if anything goes wrong that you can’t foresee, it becomes really uncomfortable to let them go. And in the end, I did have to let this friend go. It kind of sucked, basically.
[13:58] She is super smart and I just figured she would pick up pretty quickly on the code we were working on. But she didn’t have experience with the technology. She was a few years behind in her knowledge and I just wasn’t able to spend the time to train her and she wasn’t learning it fast enough.
[14:14] But my expectations, it turns out, were unrealistic because, again, she’s very smart and picks things up quickly. So it wasn’t a thing of like her not being fully competent to do it. It wasn’t that at all. It was more my unrealistic expectations. It’s neither here nor there because the bottom line is, at one point, I had to let her go and it just sucked. And luckily, we’re still friends today. Just going through that has really made me shy away from trying to hire friends to help them out, so to speak. It’s awkward.
[14:44] Mike: Yeah, I mean I’ve been in the same situation where I’ve hired a friend and he actually worked for me for more than a year. It was probably close to a year and a half. And business got rough and I had to let him go. It sucked. It was an awful experience. But what are you going to do? There’s only so much you can do when the business isn’t making ends meet and you’ve got to be able to cut expenses.
[15:05] So I’ve been through the same thing. And I certainly wouldn’t say, “Never hire a friend” but definitely think about the implications of doing it. And we’re still really good friends, and we still talk and hang out on occasion, but he’s actually in a much better working environment at this point than he was then because he was kind of transitioning from one industry to another. And at the time, I basically gave him his shot in the computer industry, which he didn’t have before. So I think in the long run it’s probably going to work out great for him.
[15:33] But the situation itself, certainly not fun, because you have to think about those things. It was something I had always had in the back of my mind, too, just shying away from hiring friends or people you know because it can be tough. I mean, you know, what happens if things go wrong? In a way, it’s kind of like getting married, but not. [laughs]
[15:51] Rob: You’re right. It brings kind of personal issues into an environment where you don’t want to make things any more complicated than they already are.
[16:00] Mike: Another mistake that I had made was offering perks that essentially follow the Fog Creek model of employment where you provide all these perks and benefits for the employees and try and offer them the best working environment, and buy the best tools, and buy the best everything. And the problem with that is that if your business can’t justify those expenses, if you simply can’t support those perks, then you’re making a mistake.
[16:27] And the way it seems like when Joel talks about it on his blog that you buy the best tools, you hire the best programmers, best software equals profit. Well, it doesn’t always follow that path, I’ll say, and it can be really tough, especially if you don’t have the money to sustain the burn rate until you get to the point where you are making money, where you are extremely profitable.
[16:50] Because, let’s be honest, I mean Fog Creek is an extremely profitable company, but not all companies are out of the gate. And if you don’t pay attention to those things, you can really put yourself in the hole very quickly. So just be aware that just because somebody else is doing something in a specific way and they’re making it work, doesn’t mean that you necessarily can.
[17:10] Rob: I think that’s a really good point. A lot of the advice that you read on these ultra-successful software company blogs are from, essentially, outliers. I mean you look at Fog Creek, and Source Gear, and 37 Signals, and on and on and on and some of it will absolutely apply across the board, and then pieces like this, it really seems like it should work, like there should just be an equation, and Joel has harped on it for years.
[17:37] But Joel has several distinct advantages, such as a blog with a million readers a year, and all types of crazy just outlying fame that none of us have. And so his company is far from the standard software company. So we have to be careful as software entrepreneurs. We have to be careful about who we listen to. Not to say that Joel or those other guys are wrong, because it certainly worked for them, or it works form them. But you just have to look at your own situation and think, “Is this going to work for me to offer free lunches to everyone?”
[18:12] Mike: I just think that the point about the outliers is extremely important. Because let’s say that there’s 100,000 software companies out there, and Fog Creek, I would argue, is probably in those top 100., probably even top 10 that people look up to — people who read blogs and are aware of a lot of those software companies that are out there.
[18:30] So what happens is that they’ve got this built this in marketing engine and they don’t necessarily have to worry about where their sales are coming from. They don’t have to measure and say, “Well, we can spend $300 on a monitor instead of $200 or $250 and it doesn’t make a difference to our bottom line.” Actually, it does make a difference to their bottom line, but the percentage difference that it makes to their bottom line is a much smaller percentage than it is for yours.
[18:55] Because if you’re making $1,000 a month then you just blew $300 on a monitor, well, what if you blew $200 on a monitor? That right there, it shifts it from $700 of profit to $800 of profit, and that’s a pretty big percentage. Whereas, a company like Fog Creek, they make that in like three seconds. So you really just have to understand where you business is before you start making purchases like that.
[19:20] Rob: Another mistake that I made a couple of years ago was buying a website without doing my due diligence. And for those who don’t know, due diligence is when you investigate all the claims that a seller is making. You’ll often do due diligence with a real estate purchase, and you absolutely should do it when you buy a software product or a website.
[19:41] And I’ve always had a checklist of things that I do that I verify about a website before I acquire it, but sometimes I get sloppy. And especially when I’m in a hurry, when I’m busy, or when a purchase price is pretty low, I often will just ignore a few things because it’s easier. Or the seller will say, “Well, I don’t have that information because…”, and he will give a really good explanation. “Because my server crashed and I lost all the traffic and referring logs.” And you kind of just say, “Oh well.”
[20:09] But sure enough, nine times out of 10, when you move forward with a transaction like that, you’re going to wind up with a few surprises after acquisition.
[20:17] Mike: You’re sure it was a few years ago? [laughs]
[20:20] Rob: Yeah, easy there, easy. The one I’m talking about now was a few years ago, and there happens to also be one from a couple months ago that Mike’s pointing out.
[20:32] Mike: Sorry, I didn’t mean to rain on your parade or anything.
[20:35] Rob: Oh, no. Not at all. You know what, Mike? I learn more from my failures than I do from my successes…No, I’m just kidding.
[20:42] Mike: [laughs] What is this, like a self-help podcast now?
[20:45] Rob: Yeah, exactly.
[20:46] Mike: I know you said that your mistakes aren’t in any particular order. I put mine in order of increasing monetary value. So the first ones, I didn’t lose too much money on, to be perfectly honest, but they get progressively more expensive, and this one’s pretty nasty.
[21:00] At one point, I decided that I was going to sponsor a booth at a conference. The conference was in Las Vegas. I took all my employees out there and we manned the booth for three or four days, or something like that. You know, spent the week in Vegas, and between airfare, travel, hotel, the conference booth fees, and shipping everything out there, shipping everything back, all the signage and everything else that goes with it, I blew about $20,000.
[21:29] As a result of this $20,000, I came away with about 120 leads, which… There was a group that was in the booth next to us, and we were told that they basically ended up with around 30 leads or so. So, we were thinking to ourselves,’ “Yeah, we did great on this. We really cleaned house.”
[21:48] Well, we came to find out, about two or three months later, after we had gone through the process of following up on all of these leads, we got not one single sale out of it. Not one dollar did we make back from this effort and the $20,000 investment in this conference. It was just completely not worth it. I don’t want to call it a total waste of time, but I certainly learned a lot. That was an expensive lesson, I’ll say.
[22:14] Rob: Ouch. Yeah, I was doing some quick math, and it turns out you paid about $166 a lead, which doesn’t sound outrageous to me, but if you do some quick math and you look at Google AdWords, if you’re paying $3 a click, and you send 100 people to your website, and you even get a… For the low conversion rate of getting their email addresses, then you’re only playing $15 per “lead.” All you have is an email, but you were paying about 10 times that. And not only that, but you couldn’t just turn it on and off. You had to drop this huge $20,000 chunk at once. So, that’s a tough one.
[22:48] What would you say your lesson learned is? Is it “Don’t spend $20,000 to try to get a lot of leads at once,” or is it, “Don’t do booths at conferences”? What did you take away from that?
[22:58] Mike: I think that it was more, “Understand exactly what it is that you’re trying to do.” We knew, walking into that conference, that our goal was to talk to as many people as we could possibly could, collect as many business cards as we could, and we had a system that was actually, I think, pretty well. It’s not like we did a lot of things wrong.
[23:19] When we would talk to people, we would sit there, and because there were three of us manning the booth, we would usually have at least two people trying to talk to people, and then the third person would… As soon as you got done talking to somebody, you would take somebody’s business card. You’d flip it over. You’d write something on it. Just a couple of very quick notes so that during lunch, or after the conference, or during a break, you could expand on that and write down some things that you remembered. And that way, when we got back to the office, we could put them all in our CRM system and start following up on those leads.
[23:51] The problem that I think that we actually ran into was the fact that at this type of conference, most of the customers who were there, they were brought in because they were already using products from the vendor. So, they had already, for the most part, purchased the products that they needed. So, our presence there was helpful from a visibility perspective for those customers, because it let them know that, “Hey, there are other alternatives out there, and you can talk to other vendors, and they can help you out”, but the problem is that we didn’t have anything that they didn’t already own.
[24:26] Rob: The other interesting thing about this lesson is if you had just scored one consulting gig out of this, it could totally been flopped on its head, because to drop $20,000 and get a $100,000 contract, you know, even something substantially more than that would have made this a great success for you. So, it’s interesting to see how close you were to maybe this not being a failure.
[24:47] Mike: You’re absolutely right. The fact is that if we had landed one consulting engagement, the entire scenario could have gone from a $20,000 loss to an $80,000 or $100,000 gain.
[24:57] Rob: I think that shows that this may have been a mistake in retrospect, but I don’t know that it was a bad decision. Some of these other things that we’ve talked about, they’re all mistakes, certainly, but some of them were bad decisions up front, and some of them were only mistakes in hindsight. This one, I think, could have turned very easily. I don’t think it was a bad decision. You very well may make the same decision again.
[25:17] Mike: I don’t think that I would, because I think that there are a lot of ways to go to a conference, and meet people, and talk to them without necessarily setting up a booth. I think that you can go to a conference, and you can talk to those people, and you can have a more in-depth one-on-one conversation with somebody, and if you recognize during the course of that conversation that they are not going to be a good candidate for future services, or sales, or anything like that…
[25:45] I certainly think having a booth can be valuable, but I really think that the lesson that I learned is that you really have to know exactly how a conference works before you go to a conference and try have a booth there and promote your company.
[25:59] Rob: The final startup mistake I’m going to be talking about today is I regret that I didn’t get started as an entrepreneur sooner. I was trying all types of different ventures all through college, even back down into junior high, but in my professional development career…I’ve been an entrepreneur for about ten years, give or take, and I had a couple salaried positions during that time, and I was a consultant for several years.
[26:24] I regret that I didn’t focus more of my energies early on. I regret that I didn’t focus them really well on some of the ideas that have brought me success over the past few years. I feel like, where I am today, I wish I was here about five years earlier, because then I would be in a totally different place.
So, I guess the lesson that I’ve learned is, really, there are always going to be excuses and distractions, but if you want to do this ultimately, and this is something that you know about yourself, and I’ve always known this about myself, that I’m an entrepreneur at my core, I really would tell you to get started as soon as you can.
[26:56] I wish I could tell myself 10 years ago… I wish I could tell myself to start, and focus, and pay attention to these specific ideas, and pursue these things rather than following some other paths that obviously I learned from, but they mean that it took about 10 years to get where I am today.
[27:10] Mike: I think that you’re always going to run into cases where you wish that you knew 10 years ago what it is that you know today. It sounds to me kind of like this is almost more of a regret that you didn’t start doing that sooner. I think that everybody, once you start down the path and you recognize that it’s the right path to be on, you wish you’d found it sooner. You really understand and truly feel that you are on the path to success; you are on the right track, and that, “Why didn’t you figure this out sooner or why didn’t you get started sooner?”
[27:42] Rob: Yeah, I agree, and not just a big difference in your entrepreneurial journey, but also in your professional happiness, your personal happiness, just a lot of things.
So, yeah. I think you’re summarizing it well. It is more of a regret. It’s not a regret… I mean, I’ve never been a person to just sit around and play video games or watch a bunch of TV. I’ve always worked hard trying to find my niche. I really wish that I had been able to find it sooner, that I had nailed things down and focused on this.
[28:09] I was all enamored with all the whole venture-backed startup scene, and so until I put that aside and realized, “Oh, there’s this room over here for one person software companies to really make a viable business.” Man, I wish I had known that years ago!
[28:22] Mike: I think one of the things that plays into this is something that I thought about in the past. I’ve looked at various businesses that other people have started, and I distinctly remember thinking to myself eight, 10, 15 years ago, looking at these other businesses that were running and thinking to myself, “Man, if I’d only been born three or four years, or five years earlier than I was, I’d be in a position in my life where I could have pursued that same thing and I would be massively successful, too.”
[28:52] The problem with that line of thinking is the fact that it doesn’t matter how old you are. It doesn’t matter what stage of your life you’re in, because what really makes a difference is what it is that you do. If you don’t undertake those journeys, it’s not going to make a difference.
[29:08] So, I saved my most expensive lesson for last, and as you heard earlier, the third one, I blew about $20,000 at a conference, and my last one is worse. And coincidentally, in the same year, so it was a rough year.
[29:25] One of the things that I had done was I expanded my office from about 400 to 500 square feet to an office about the size of 2,000 square feet. And the reason I did that was because I was expecting to be able to grow the company. That was part of why I went to the conference and spent $20,000 on that conference. I was really doing this in anticipation of additional growth.
[29:46] I had made a huge amount of money the previous year and things were going extremely well. I mean I was in the middle of several large contracts that were bringing money in every single week. I was at the point where I was getting double booked and triple booked. And I basically had to push engagements off because, you know, we just did not have the bandwidth to be able to handle them all.
[30:06] So, I expanded the company headquarters, moved it, and get this very, very large space, and had several deals that were kind of floating in. And I expected at least one of them to close. Not one of them closed, and this growth that I anticipated ultimately never materialized.
[30:23] So what ended up happening was I ended up closing this office about, I don’t know, probably four or five months, maybe six, before the end of the lease. I ended up being responsible for most of it. All told, I basically wasted about $50,000 on office space that I didn’t actually need, because, obviously, it was a two year lease. And that’s inclusive of the $10,000 that I would have spent on the previous office. So if I had just stuck with my previous office, I still would have been $50,000 better off.
[30:55] Rough lessons, but, on one hand, the nice part about them is that they are easily quantifiable, especially some of those larger lessons. And that’s kind of the way that I like to look at them and say, “Well, that was a $10,000 mistake, or that was a $20,000 mistake. That one was a $50,000 mistake.”
[31:10] And to be perfectly honest, yeah, it sucks that I blew $70,000 that year and then some. I mean there were a lot of other mistakes that I made as well for various equipment, employee hires — all sorts of different things that are other mistakes that I made that were learning experiences. And they were expensive lessons to learn, but I can pretty much assure you that I would not make those mistakes again, because now I understand what that black box looks like. I understand how it works. And I understand what needs to be done to make it work right.
[31:41] Rob: Yeah. There is a little known saying in guitar playing, and it is one I read years ago in a magazine, and most musicians haven’t heard this, so I tell this to a lot of people. “Make loud mistakes”. You will often find a musician who is new or who is just learning a part, or even if they are pretty good, they tend to be pretty tentative when they get up on stage.
[32:01] And being tentative and playing everything perfect is just…it’s bad. Like, it doesn’t sound good. People can tell you are tentative. So the thought is that when you make loud mistakes, at least you are being gutsy. And if you play loud and you make no mistakes, it is awesome. And if you play loud and you make a mistake or two, people will forgive that. But if you sit back and you don’t do anything, or if you sit back and you play so quietly that no one can hear you, people aren’t going to forgive you for that, especially our band mates.
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