8 things I wish I knew before starting a business

August 19, 2010 | Don Rainey

(Editor’s note: Don Rainey is a general partner at Grotech Ventures. He submitted this column to VentureBeat.)

In the world of startups, success or failure can be hard to consistently predict. One thing that’s sure, however, is that anyone who starts a business is changed by the process. The continual challenges of meeting the opportunities and issues that arise make it fun and always interesting. I think it is why many people continue to start businesses regardless of the (easier) alternatives presented by employment for somebody else.

Having started a few businesses in my life, I view some of the lessons of the experience as intuitive and others much less so. Given the time and money involved in learning these lessons, none could be characterized as cheap.

They all changed my worldview, though. And they all changed me as a person. I’m glad I learned these lessons, but that doesn’t mean I don’t wish that I knew them originally.

Here are the eight things I wish I knew when I started my first business.

1. Things take longer than you ever imagine – Everything that involves people, resources, tasks and coordination takes longer than you ever think it should take to get done. It isn’t about developing patience, as patience doesn’t really help you keep driving things forward. It is about being realistic in your planning and management.

2. Items that do succeed tend to do so quickly – I have seen more successes — products, projects, employees, etc. — start strongly than slowly. The great salesperson or employee is great from the first day. The strong employees contribute immediately. The product that is going to be a hit gets strong, initial reactions from customers.

3. People will let you down – This will happen in ways you can’t even imagine when you start out. It can range from inattentiveness and laziness to fraud and theft. You’ll see it all from the people you meet along the way. Your faith in people or belief in them can be a dangerous thing. As Pres. Reagan put it, “Trust, but verify.” Blind faith will get your butt kicked again and again. Love and reward your employees, but don’t have too much confidence in them.

4. Good employees are really hard to find – A solid worker isn’t just difficult to find, he or she is really difficult to find. And they’re the first ones to leave. The truth is that 10 percent of the world is competent – and you’re looking for that 10 percent in every hire.

It’s hard to do consistently. And that’s why organizations that do it with frequency have such strong reputations. If you want to build a business predicated largely on finding, getting and keeping quality employees to succeed, you should understand that premise will be your greatest risk. Finding a market and profitably selling to it (usually the greatest risks) will take a back seat. Better yet, pursue a business that needs some reasonable percentage of employees to be really good.

5. Your bad employees rarely quit – For one thing, poor performers aren’t really all that motivated to look, as that might involve actual performance. For another, no one else is likely to recruit them. Your marginal and weak employees are with you for life unless you move proactively. In many years of running businesses, the only time this wasn’t true was during the dot-com bubble. At that time, every idiot could get a 15 percent to 20 percent raise here in Northern Virginia by changing jobs. And they did. Aside from that blessed time, weak employees are your most “loyal.”

6. You will be lucky and unlucky -In the fullness of time, you will be assuredly lucky and unlucky. And sometimes, things that appear to be bad luck will turn out to be good — the weak salesperson who turned down your job offer — or vice versa. You will have ups and downs, and you will win or lose things that you don’t deserve to win or lose. You will be unlucky and lucky, you just may never know when.

7. Avoid the myth and misery of sunk cost – See the item above about succeeding quickly. Don’t chain yourself to the anchors you lovingly create in pursuit of success. If it isn’t working for you or the business, let it go. Understand that it isn’t good money after bad money, it is all bad money. Fire that salesperson, let that manager go, stop selling that product, get used to moving on. You’ll make a lot of decisions in running a business. Accept that not all of them will be right.

8. Fill the pipe, always fill the pipe – The difference between good times and bad times is often reflected in how many of the opportunities, customers, etc. end up closing successfully. In good times, more deals close from a normal opportunity pipeline. In bad times, less deals close from the pipeline. So, fill the pipeline of opportunities, and always look to add to the pipeline. Deals don’t close for a million reasons. Your only defense is to fill the pipe.

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Tags: business lessons, employees

People: Jerry Buhlmann

http://sheynkman.tumblr.com Kirill Sheynkman

Excellent post. Especially #1 and #4. As as “bad but loyal” (#5), I always ask prospective CEOs if they've ever had to fire someone. Good litmus test.
http://www.gawrilla.com/blog pruett

great points. these should definitely resonate with most every entrepreneur. what stands out to me is the focus on internal issues (i.e. team building, trust (lack thereof), internal communication, etc.) that occurs whenever you are building a startup team. unfortunately, for most entrepreneurs, this can only be fully understood after experiencing it.
http://www.fearlessindustry.com Michael Cooney – EngNet

Definitely resonates with my experiences of starting businesses. I remember when I first started out in business and new client said to me “Things usually take 3 times as long and cost twice as much than you first expect”. Very True
Gamerold

There are always something to add in this kind of list.I would add: Never go alone, be able to create your network before to invest your cash…
tivoboy

#4, make that more like 5%, sorry to be a bit negative but in my experience actual competency is few and far between.
http://twitter.com/dubaicanuck alison richards

I'm batting a 1000 cause I hit all 8 on my latest start-up… and we haven't even started yet!
http://pivotpointsolutions.net/ andy_mcf

Wonderful observations. #5 brought back memories from my days in Northern Virginia during the late 90s when anyone could improve their salary. Wonder how many improved their lives?
http://twitter.com/urssur Urs Sur

Business is never easy ! People should understand that the good comes with the bad and vice versa.Business is life, you have to roll with the punches or be very good at #5 .
http://twitter.com/rachnaspace rachnaspace

Great observation! Can relate to most of them.
http://twitter.com/rachnaspace rachnaspace

Great observation! Can relate to most of them.
http://twitter.com/mrschwabe Schwabe

#8 resonates with me because it touches upon a powerful money making dynamic I've been awe struck by in my recent business career. The dynamic is momentum. It's so important. And I really appreciate the other points too; I've bookmarked this for review again in the future.
http://twitter.com/mrschwabe Schwabe

#8 resonates with me because it touches upon a powerful money making dynamic I've been awe struck by in my recent business career. The dynamic is momentum. It's so important. And I really appreciate the other points too; I've bookmarked this for review again in the future.
http://twitter.com/cselland Chris Selland

great post Don – #5 is particularly insightful – so many tend to believe the opposite
http://twitter.com/cselland Chris Selland

great post Don – #5 is particularly insightful – so many tend to believe the opposite
http://twitter.com/mbeaudet mbeaudet

This is so true!
http://ricardodsanchez.com Ricardo

Thanks for the great insights, this is very helpful information to anyone starting a business or thinking about starting one. I specially liked #4, I couldn't agree more. I have worked at companies where they have employees that have worked for them for 10+ years and they see them as “loyal” employees. While maybe that is true for a lot of them, I know that many of them are the reason a lot of good employees leave, looking for better opportunities and better places to work.
http://twitter.com/kowboykoder Cowboy Coder

re #4 What's really interesting to me about this is so many companies claim the good people will just leave, so don't even hire them to begin with. It's seldom to do with money, the 10-20x more productive folks are quite happy to work for a few pennies more than the incompetent as long as their work is respected. The reality is that most go away because they are lied to, cheated, treated abusively and put down over and over until they have no choice but to quit.Is your company as fun to work with as a concentration camp? If so, that's why the good people are leaving. Treat them with a modicum of respect and they won't leave.What is respect? Having a decent monitor, recent computer, and a private office for starters.
http://twitter.com/toolwieldingape Mr. Hayes

mega-dittos.
http://twitter.com/macromedios Mauricio Hernández

Nice article, you impressed me with this prase: Your bad employees rarely quit
ccmovies

Very nice post. Thank you!
http://twitter.com/sidgoyal1 sidgoyal1

Wow. I am a year old entrepreneur and reading all this really made me feel good since I thought I was the only one experiencing all these points in some measure or another. My good old mantra applies even in my situation: “Chances are you are not the only one /to/in/experiencing _________________(fill up your blank)”
http://www.missi.com/ Peter Beddows

These pearls of wisdom espoused by Don apply across the board: Whether you are starting a business, growing one or turning one around; they are universally relevant and very well defined by Don Rainey here. Don's words are well worth taking to heart and having a copy posted where you can continually be reminded and have reference to them as you go.A business is/becomes successful not only because it is one that has found how to serve a particular need, how to solve a pain point that really addresses a major market opportunity, but also because it is a dynamic organism – it constantly evolves to meet changes in its market place and business environment – and thus these 8 pointers are constantly being met and re-met throughout its life under ever developing stages and changing circumstances as the business continually strives to capture additional customers and retain existing ones ~ otherwise it dies.Hence, in particular, points 3, 4 and 5 (People) are a never ending challenge because it is its people, along with excellent leadership, that are any business's single greatest asset.Your people will either make you or break you, hence your selection of people for your team must be well and carefully chosen and must be appropriately rewarded for contributions they make to the success of the venture otherwise your people will become your business's biggest anchor and burden when not thoughtfully selected and rewarded.Years ago the recently passed guru of American Management, Peter Drucker, propounded on the sad fact that (paraphrased) “much had been written about motivation but little was actually understood about it”. We have progressed yet still far too frequently the importance and value of correctly selecting and rewarding our people gets overlooked as the tendency to view them as “just another cost-burden” instead of seeing how they can be a “source of profit generation” and selecting and retaining accordingly. No one is guaranteed a sinecure, least of all in a new venture.As to point 6, while it can be, and does get, used as an excuse, that is all luck ever is: An excuse. Reality is that there is no such thing as “luck”: You are either prepared, aware, capable and have surrounded yourself with the best, brightest, most competent team members and appropriately funded … or not! Recognize also that “Hope” is never a strategy but hope is eliminated by being well prepared, aware, capable, best, brightest, competent, … etc..So while the outcome of any new (ad)venture can never guaranteed, you can at least improve the odds in your favor – assuming you have identified a product or service for which there is a real need and which does solve a real pain point – if you have acquired, maintained and surrounded yourself with a team of the best and brightest and keep the other points in mind as your proceed.
http://pulse.yahoo.com/_ULUMJIRK2TRIXOY7OC43P457OQ Salman

Wonderful insight. Ive just started a small venture and have already experienced No.3 from my own relatives. Its so easy to promise and so hard to delivery. It is all a learning experience though I cant help but feel a bit of resentment. But yes, Im loving the whole experience, the goods and the bads.
http://twitter.com/kiwitags Grant Anderson

Fantastic, and I am sure many of you were nodding your heads like i was saying yes that makes sense (might even be logical)… but we still need someone to turn our heads to the big billboard in the sky and read the signs!
Kelly50

Wow great article for myself #7 really resonates. My BIGGEST challenge now is finding the right partner or mentor. After having an Auto Body biz in MN for almost 20yrs till 1997. Then a few misc businesses' and then going into doing quality extensive rehabs on 44+ homes in 5 1/2 yrs till 2005, again in MN.
I decided to get out of it because I saw the down market coming and was well ahead of getting out without taking any losses. Wondering if anyone has any suggestions? After getting out of the housing I knew the internet biz was where the money was going to be at. So in short being I have always enjoyed helping others and giving back. I ventured into a ground breaking idea after the loss of my mother to cancer and my son being diagnosed with a life changing illness. I found after spending countless hours going through 1000’s of articles and 100’s of sites researching and not finding info that answered the many 100’s of emotional & personal many questions & concerns that those diagnosed with life changing challenges have. Meaning so much is clinical and not personal enough so working with some others have a way to streamline the way people are able to get much more need to know personal info in the form of videos, courses etc. Sadly I have over $50k into this self funded biz . The site is myhivaidsawareness.com and am so close but I need to back off. It was a biz model to help those both infected and affected with the many challenges of the disease and I was looking to perfect this modle and take it into other illness areas to help people stay up to date and informed with valuable answers and solutions in about 1-2hrs w a month verses countless on the net or by going to groups. So Id’ like to find a mentor partner to help develop, plan and help implement some ideas of mine or move into something that will provide me with some income a.s.a.p which I have $200k to invest, not loose and am able to relocate from Arizona where I now reside if needed. But My questions is HOW can someone find a good honest mentor to help analyze a few biz ideas in the areas of helping people… and digital information marketing, a cool clothes accessory item idea I have, or frankly find and analyze a biz to partner up and or buy into that is existing with a solid verifiable track record. Sad but many who need to ask for help don’t. I want help, am asking and can’t find the right successful mentor. Any suggestions?
Feel free to contact me at kcpropertiesllc@hotmail.com if you like? Ejnoy your day, Kelly
http://www.meratvforum.com Waleed Raza

wow , i have never read something written with such detail about ones road to success … im still reading all your posts …. i think it will take the whole night [im not logging to facebook today
http://pulse.yahoo.com/_X7J2JDSFQTRC5QTZSROHNC2ONY Humsubka Tv

Great Your Post Is Very Helpfull For Me . Thanks
http://www.stonedwino.com/?p=1195 8 things I wish I knew before starting a business « Stoned Wino

[...] »8 things I wish I knew before starting a business ShareI read and was enlightened by this column from Don Rainey posted on Venture Beat several months ago and have literally been back to re-read it several times,today inclusive. as a [...]