A masterclass in business failure: 5 lessons from my struggles
I felt so proud… It was a few years back and I was about to attend my first ever business mastermind. It would be filled with successful business owners. And, in my mind, that meant I’d finally made it…
You see, I was a former high school teacher. And I had been through a massive loss of self-esteem, when I lost my job.
I took a big risk leaving the ‘safety’ of a teaching career. I sold my beautiful home in London. And I moved to the United States, with a crazy dream to be a professional coach.
And now here I was, a few years later, running a real business!
Ok, on the inside, I still secretly felt like an imposter. I’d never written a business plan. I got confused by a balance sheet. And I didn’t understand the distinction between revenue and profit.
But my business was growing, I was making great money on a regular basis, and I was finally feeling successful as a coach.
The Scaling Trap
Every book I read back then talked about the importance of scaling your business. Every documentary I watched told stories of entrepreneurs who were scaling their business. And every entrepreneur I talked to was scaling. Or they were planning to.
So, it seemed like the obvious thing to do and I started to play the scaling game.
I put all my energy, attention and focus on scaling and I grew from just me and an assistant, to a team of 10 people, including 3 coaches working for me.
It sounded good. It looked good. But I was bored because I had to spend at least an entire day – every single week – in meetings, or on admin tasks or managing people. I was frustrated because I was coaching less and less, yet coaching was what I loved the most. And I was exhausted by all the work that was no longer fun.
On top of that, everyone kept telling me how much more money I ‘should’ be making. You should have a dozen coaches working for you, Rich… You should purchase an event space to rent to other coaches, Rich… You should launch and run 4PC in 5 different countries, Rich…
At the end of that year, I realized how exhausted I was, when I lost it with my bookkeeper who was telling me – yet again – that I needed a relentless focus on profit. I broke down crying at the end of the meeting.
And that was when I knew.
I had to do something different.
Focusing on scaling above all else was killing me. I was spending less and less time with my kids and my relationship with my wife was drifting away because I wasn’t fully in it.
Scaling back vs Scaling up
So, I took a risk…
I gradually let go of everyone on the team, except for Sarah, Wendy and Laura.
And then I closed the Deep Coaching Salons I’d run for over a decade. They were the most profitable part of our business. They generated $600K a year and had almost no expenses. But I had no energy left.
We eventually ended up with $100K in credit card debt, as a result of that decision. And credit card debt can snowball…
The big shift in direction – plus the lack of money – made it a hard year emotionally. It was tough on my relationship, too. It’s particularly hard for your spouse when you’re the one who creates most of the income and then you stop creating…
And because I needed the money, I recall one month where I tried really hard to sell coaching to everyone I spoke to. Of course, I was practicing the opposite of what I teach and – no surprise – I sold less that month than I had ever done!
For a year, I went through a tough time financially and emotionally but inside I knew that scaling back was a far better choice for me than scaling up. Deep down I continued to fan the flames to keep a little spark of confidence alive – that when I was ready – things would come back…
A kick-ass team vs a business plan
What came back first was my energy. And then I got back into pure service. I told my team to fill my calendar with calls with people who weren’t my clients but who needed support. And that energized me more.
I got into the best shape of my life. I committed to doing 55 burpees a day and within 6 months, I had done 10,000 burpees.
With renewed health and energy came renewed creativity. And with renewed creativity came new clients. And I gradually paid off all of my credit card debt.
I borrowed an idea from my friend, Michael Neill and I created a new mission. It wouldn’t make sense in a business school. But I live in the real world, so I get to choose what works for me:
“We don’t have a business plan, we have a team. And we can do f**king anything! Our team is amazingly responsive – when an idea or an opportunity comes to us, we can make it happen within 2 weeks…”
Lessons from screwups…
In the past few years, I’ve learned a lot about business that I wish I knew when I began. But sometimes the most important lessons are the ones that you experience.
On the chance that you can learn from my mistakes, let me offer you 5 ideas that I wish I’d known when I started my business:
1. Don’t try to scale too early. Maybe don’t scale at all
Beware of Confirmation Bias. I fell into the trap of “Scaling Up” because I believed that you’re supposed to scale up. I read books about scaling up that confirmed this belief. And I surrounded myself with friends and mentors who were scaling up, so I believed I should, too.
Question: Do you want to scale your business? And if so, why? And if so, what are you willing to sacrifice, in order to do so?
2. Build your company around your life, not the other way around
If you have a high value on fun, or freedom, or family, or travel, or relationships – build them into your business plan.
You’re not a Fortune 500 company. You get to do things your way.
I begin every team meeting with a check-in. But because I believe the purpose of a great business is to live a great life, we don’t check in on our business goals or accomplishments. We share the most fun thing we’ve done that week. And then, in response, the entire team says, “Yipppeeee!!!” And we all laugh. Every time!
Question: What are your top 3-5 values? How can you build them into your business model?
Bonus: Read How Will You Measure Your Life by Clayton Christenson
3. Set upper limits
We all know the importance of setting lower limits. I’m sure you know the least amount of money you want to earn this year.
What if you set an upper limit? My friend Sean doesn’t want to make more than $500K of profit each year. After that he’s done. My friend James has been coaching for 20 years but he never signs a client for more than 3 months because he has a high value on freedom. And I take 3-4 months off each year because I love to travel with my family.
Question: What are your upper limits? What’s the maximum amount of time you want to work this year? What’s the maximum amount of money you need to make this year?
Bonus: Read the book Company of One by Paul Jarvis
4. Less but better
As you begin to grow, hire the most expensive assistant you can afford, not the cheapest one you can find. Make sure your assistants are always older or more experienced than you.
Your job is to hire overlings, not underlings. But before you hire anyone, make sure you know the hidden costs of every employee (salary, bonuses, payroll taxes, HR compliance costs, paid time off, insurance, contribution to pensions, health insurance…)
And never hire people just because you like them. (That’s not the same as saying hire people you don’t like!) Hire people because they think differently to you and because they can do things that you can’t.
“CEOs often brag about their employee headcount. Companies should start bragging about how MUCH they do with so FEW people.” – Noah Kagan
Bonus: Read 7 Amazing Assessments To Create A Team of Top Performers
5. Profit First
Don’t do what I did and fall into the trap of spending more just because you’re making more.
The more money I made, the more money I spent. With really high expenses, all it took was a couple of slow months, for us to go into the red.
Revenue is very different to profit. And for a while, we were making a lot of money but slowly sliding into debt because our expenses were so high.
Put aside money for taxes, savings and living expenses, first. Only spend what is left on the business.
Focus on cashflow and profit, not revenue. Who cares how much money you’re making, if you’re not actually making a profit.
Action: Take your profit each month and move it to a different bank account, so you’re not tempted to spend it. With less cash, you’ll need to be more creative. And you’ll only spend what you can afford.
Bonus: Read the book Profit First by Mike Michalowicz.
What’s your biggest take away from my failures?
PS. It’s not too late to join Confidence In Action, you’ll receive the recording of the first live call, plus three bonus recordings: (1) How to Raise Your Fees. (2) The 5 Coaching Sales. (3) The Power of Commitment.
PPS. Take my Elite Coaching quiz today and uncover the #1 barrier to your coaching success.
PLUS, whenever you’re ready – here are 4 more ways you can become a world-class coach:
- Read 3 chapters of my next book, now and you’ll be first on the list to read it when it’s published.
- Become a Prosperous Coach. Join me in our flagship program, Project Kairos.
- Become a Thought Leader, sought out by dream clients, at The 4PC Accelerator.
- Master the power of Influence and build your own ultra-strong brand on my Deep Dive.