Thursday, August 13, 2009

Thinking Of "Starting Your Own Thing?" Here's Why I Failed.

My first business failed in 2005. It failed the night of my last fashion show (my business did guerrilla marketing and fashion events) which I thought was the best one I'd ever done. It was artistic, beautiful people were showing up, and I had thought of every detail. Still, that night a model had her purse stolen from the hotel room we had rented for models to change in, the hotel was demanding that I pay for the entire contents of a couple of mini-bars (which was consumed by a combo of models and make-up artists), and the spray tan people had clearly ruined the bathroom which I knew I would probably have to pay for too. I went home that night with a rave review of the show and knew I was going to close my business.

Since then, I've had a lot of time to think about why that business didn't succeed, especially since I have "gone and done my own thing" again this year. (This is either a classic case of perseverance or classic case "doesn't learn from mistakes"). Here are a few lessons I learned from that business that I think could help you if you are thinking of starting your own thing too.

1) Don't Try To Be Nice. This was, I think, the biggest reason my first business failed. Most of the people that you will work with when you first "start your own thing" will be friends and members of your network. You will want to give them a great deal for working with you and won't bother sending them an invoice since you are friends and you know they will pay you on time. When they don't pay you on time you will send them a friendly e-mail asking them to please remit payment. You will continue to work on the project so that you are at least working on something and they will eventually pay you a month late just as they owe you for another billing cycle. Now they are a month behind. You are angry and they are avoiding you.
Lesson: Write a contract. For everything. With everyone. It might feel awkward but it will make things easier for both parties. I am surprised how many small businesses still don't write contracts for services.

2) Don't Underprice. When you "start your own thing" you will be tempted to put yourself out there at a huge bargain because your confidence level will probably be a little low about how great your new business is. This is a huge mistake that I made. I allowed a client to pay me around a quarter of what they should have in my eagerness to work with them and they were very high maintenance. I don't mind high maintenance as long as I'm being compensated for that. If you must give someone a great deal, write the contract for a short time (3 or 6 months) so that you have the option to raise your price later.
Because of the high maintenance client, I didn't have time to search for new business. Not only did they underpay me but they also removed opportunity for new income streams. This was completely my fault because I did not figure out what my bottom line income needed to be.
Lesson: Do the Research. Find out what other professionals are charging and be competitive but not way under market value. If you bill too low, you will be working your butt off and not making ends meet and you won't have time to pick up better projects because you are overwhelmed with business that's not paying you enough.

3) Choose Your Alliances Carefully. Eventually, you will meet other people that want to collaborate or team up. This is tricky because you want to do this. For a while, I insisted that I do everything on my own but my network remained small and everything I learned I had to search out myself.
Then I teamed up with a company that had a cool product but a terrible reputation. I thought their reputation was harsh and decided to work with them anyway which was a huge mistake because I spent a ton of time defending their honor and not enough time working. This cost me a lot of money and people associated me with these people.
Then I teamed up with an even smaller company that I wanted to "help out". Mistake number 2. You can't help another company until you are successful enough to help them.
Lesson: Go With Your Gut. This is a touchy-feely answer I know but it works. If you meet someone a few times and they come off as sleazy, sales-y, insincere, or rude and they want to work with you: don't. Even if they have a huge business that is thriving. Even if the deal seems great. If it seems like they screw other people over a lot believe me, you will not be the exception. Collaborate with people you trust and who can help you. Do not collaborate with people you trust but cannot help you.


Anonymous Betsy Wuebker said...

Outstanding advice. Business is business. Off-topic - how is it that models can consume the entire contents of a mini-bar and still not look fat? Rhetorical. Thanks.

August 13, 2009 at 10:59 AM  
Blogger Caitlin said...

Agreed on the model thing - I would bring in huge appetizer spreads that they would consume like locusts right before a show..... who knows?

August 13, 2009 at 12:50 PM  
Anonymous Devin Reams said...

Great lessons! Thanks for sharing...

August 17, 2009 at 10:12 AM  
Anonymous kate mats said...

Thanks so much for sharing your thoughtful advice. Not sure what you are working on now but I wish you the very best of luck!

September 15, 2009 at 4:09 PM  

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