What Should You Never Do When You Start A Business?

business mistakes

My wife and I were going through old videos the other day, and we stumbled upon this video of Avery’s fourth birthday party at our house. I invited Nancy and her son Ethan to the party. Nancy used to work for me a couple years before that.

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The video consists of me talking excitedly to Nancy about starting my company. At the time I was an EIR (Entrepreneur in Residence) for a VC fund in San Francisco, and the video is painful for me to watch.

I’m telling Nancy, in this very authoritative way, about how things would play out over the next year. Everything I said to Nancy was pretty much wrong.

I was on a pretty steep learning curve in those days about starting a company. You probably are too if this is your first startup.

So here are my painful learnings of things you should never do starting a company from that time and beyond:


A. You should never hire cofounders that aren’t passionate about your business.


You are going to run into so many problems you can’t imagine. From running out of money, to customers not paying on time, to products not working right, to investors pulling their support that anyone that isn’t a true believer in you and your company will leave.

That’s why you need your cofounders to be passionate about what you’re doing. In fact you want your cofounders to be fanatical about what you’re doing. (read: Why You Need Fanatical Cofounders)


B. You should never hire anyone that doesn’t have integrity.


It doesn’t matter how smart your prospective cofounder. And it doesn’t matter that you’ve been looking for months for a cofounder. And it doesn’t matter that this prospective cofounder checks all the boxes except the integrity box.

You can not work with anyone, let alone a cofounder, that doesn’t have integrity.

Without integrity, there’s no trust. And without trust there’s no relationship.


C. You should never hire a VP Sales when you’re starting a business.


The most effective sales person you will have in the early days of your company is you. It doesn’t matter if you’re a shy engineer that’s never sold before, your passion and knowledge of your company will shine through.

Also, you just will not find anyone good until you get a sustainable process for sales, and you have enough revenue to attract someone really good to the job.

For better or worse, the burden falls on you. (Read: How You Can Avoid Nine Startup Sales Killers )


D. You should never hire a CFO when your starting a business.


You’re not going to need a full-time CFO for a long, long time. You can probably get away with Quickbooks at the start.

Or you can do what I did. I hired a part time Controller, Tina, who eventually became our full-time controller.

At the start, Tina was working with us one day per week. The amount of time she needed to work with gradually progressed to where it became a full-time role.

There are plenty of really good part time Controllers and part time CFOs out there. Just run a LinkedIn search, and you should find several good options.


E. You should never buy new office furniture when you’re starting a business.


What a waste of money. Why on earth would you spend money on new furniture when there is plenty of used furniture you can get?

We got our first set of cubicles for $100. We got our second set of cubicles for free. They were fine.

We extended this frugal thought process to buy all of our lab equipment used as well. This saved us a lot of money.

Remember, you never know if that extra dollar you save might give you that extra bit of runway you need to get to the next level. It did for us.


F. You should never fly first class or business class when you’re starting a business.


Okay, more on frugality.

Yes, getting crammed in coach sucks. But what a horrible example you set when you’re flying business class and the rest of your team is flying coach.

So, suck it up, save the money, and fly coach.


G. You should never buy schwag. Ever.


Okay, one more on frugality.

You don’t need to spend money on schwag. It’s money that’s not spent well. It’s money that you could use for other things that your team really needs.


H. Never mix your personal finances with your business finances.


I was working with a CEO a few years ago. The CEO had successfully bootstrapped his business to over $1M/year.

The CEO had taken out a second mortgage on his home to finance the business. There’s nothing wrong with this.

However, the CEO decided he needed to pay off his second mortgage with funds from the company. The problem was there was no loan on the books.

In other words, the CEO was using the company as his own personal piggy bank. Our relationship immediately ended.


I. You should never hire brilliant jerks.


Back to hiring.

You know that brilliant engineer you want to hire with the skills your company desperately needs. Yeah, the one that’s a complete head-case too?

You can’t hire that brilliant engineer because all the extra baggage this brilliant engineer will outweigh any positive contribution. It always works this way.

I’ve made the mistake of hiring a few brilliant jerks along the way in my career. Every single one of these hires turned out to be a mistake. Don’t kid yourself into believing you can handle this person’s problems. You can’t.


J. You should never pay your employees at the top of the salary scale.


If you find yourself having to overpay for talent, there’s something wrong. It likely means that the people you are bringing into the company aren’t passionate about what you do.

That means they will leave the second someone offers them more for you. You can’t build a great team and a great company culture when you have a bunch of mercenaries working for you. (For more, read: Why Your Startup Culture Is The Key To Your Company's Success)


K. You should never hire anyone without a financial plan.


The worst thing in the world is having to lay people off. You’ll feel like crap when you have to do this because these people have done nothing wrong.

They trusted you, and now you’ve put them out on the street because you didn’t have the money to pay them. One way to avoid unnecessary mistakes is to have a financial plan.

It’s worth the time and the effort to have a financial plan. Your plan will be your compass. Even though your plan will not be right, it will at least point you in the right direction. For more, read: How Do You Know It's Time To Hire Your First Employee?)


L. You should never give up. Ever.


Finally, never give up. Ever.

The one thing great entrepreneurs have is grit. You’re going to need grit to succeed as a CEO.

Grit is what will get you through the tough times. And I guarantee there will be times when you are questioning everything you are doing.

You’ll question whether you made the right decision to start your company. You’ll wonder whether the sacrifice is worth it. Grit is what will get you through.

Just never, ever give up.


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