Serial entrepreneurs like me typically retain strong memories of our first big entrepreneurial venture, sometimes great, sometimes not so great. Whatever the outcome, we are best served by learning from what we did, so in future ventures we avoid what did not serve us well.
My first big venture was launching a consumer magazine serving the large, thriving suburban county in which I lived (and still live). I wrote a comprehensive business plan; raised $750,000 from 27 private investors; recruited a corporate attorney, CPA firm, the board of directors, 12 employees, and suppliers; launched the publication; and managed the corporation. We created a great high-quality monthly magazine of substance, generated 365 paid advertising pages from 250 firms, and acquired 9,000 paid subscribers. But after 15 issues we ceased publication and closed the business.
So what did I learn from this experience that has benefited me and my clients since then, that I have since taught to aspiring entrepreneurs in seminars and that may be of benefit to you?
1. Counting paperclips.
The business plan was extremely thorough. I did not want to miss anything. I even itemized the number of boxes of paperclips we needed to start. LESSON: This level of detail was unnecessary and took time away from focusing on more important success factors.
2. Insufficient delegation.
When you are starting a new business, everything needs to be done at once. I tried to do or at least oversee too much. LESSON: In retrospect, I needed to delegate even more than I did, to employees, family, friends, suppliers, volunteers, whomever, so I could focus on what I could bring greatest value to, starting with revenue generation and raising more capital.
3. Thinking the plan shows the amount of start-up capital needed.
The plan contained detailed financial modeling based on a variety of assumptions. We raised the amount of funding that the "most likely" case showed. LESSON: From this venture and other subsequent ventures in which I or others have been involved, I've learned that you NEVER have enough capital or cash. You need to be prepared to raise more, figure out how to live with what you have, or not to proceed with the venture.
4. Choosing not to work on the next round of investment until later.
Out of the gate it became clear that our initial round of funding would not be enough to get us through break-even operations. But we did not really start to address raising another round until well into the first year of publication. LESSON: Work on the next round of investment even as you are closing the first. Odds are very high you will need it sooner than you think.
5. Not lining up customers first.
The market research done for the business plan showed an extensive list of likely potential advertisers. This was a great comfort factor as we moved to publication. But it took many months to entice some of these advertisers to use our vehicle and many still were not on board in year two. LESSON: Allocate a lengthy period of time before start-up (much more than the quarter or so before launch that we allowed) to build relationships with and woo clients.
6. Failing to measure intensity of interest.
The market research done before launch showed a need for the publication from both readers and advertisers. But the research did not sufficiently address the intensity of interest by various segments, the "want" for the publication. Especially from potential advertisers we subsequently heard, "Great publication! Glad we have it as a new option. But it's just not high on our list of potential vehicles compared to other options." LESSON: Just because people say your product or service would be "great to have" does not mean they will rush to buy it when you offer it to them. (Note: That does not mean you should not proceed to create and offer it. It means that you should be prepared to work to show potential customers how they will benefit from using your product or service.)
7. Not creating a thunderclap at launch.
We issued media releases, courted reporters, touted our preview issue, put county leaders on the cover of the premier issue and held a big launch party at a swanky local club. This got us some attention, but not enough to start. LESSON: Get really creative and work very hard to bring broad attention among your target markets when you start spending your precious capital to bring the product or service to market. You need revenue fast and having it only slowly dawn on the marketplace that you are around will not serve you well.
8. Not making "the worse case" the worst case.
Our "worse case" in modeling was not a good one, but what we actually wound up facing soon after launch was an unexpected recession that cut deeply into the potential high-end advertising that we had counted on and the sudden appearance of new competitive publication that cut into our lower end retail/classified advertising. LESSON: When modeling, don't even think about dressing up the worst case. Put it in the plan and then either don't launch because you can't survive it or figure out how to get through it if it emerges.
9. Waiting too long to cut losses.
As the recession took hold and revenue growth slowed to well below necessary targets, our efforts to sell advertising and raise more capital redoubled. But we ran out of funds before we could turn the tide. LESSON: Had we stopped and taken a hard, cold look at our situation when it became clear that we were in a recession and had unexpected competition, the low likelihood of securing sizeable new funding and more advertising before we hit the wall likely would have been clear. We may have been able to suspend and perhaps reconstitute the business rather than have it be nuked.
10. Not trying again.
With an unsuccessful outcome, we did what we could for our suppliers, commiserated with our investors, put the business behind us and moved on to new chapters in our lives. But there remains a regret that we had a great product that won wide praise and following and yet we could not put it over the top. LESSON: In retrospect, I think the marketplace would have been forgiving of our missteps, bad timing and ill fortune. Had we restarted again with a new formulation, using what we learned from the first time around to avoid making the same mistakes, today we might have a successful publishing company, a great publication and happy investors.