Looking back on my 20-year career, here's what I wish I knew from the beginning.
By Kristopher B. Jones, a serial entrepreneur and investor who recently launched Special Guest App with comedian/actor Damon Wayans, Jr.
I have recently been mulling over the various missteps I have taken in my career thus far. You know the philosophy on mistakes: that you learn more from them than you do from your successes. Every word of that is true.
I am not talking about mistakes of the mind or heart so much as I am about literal miscalculations I have made in my business management. Here are three of those.
The Single-Person LLC
I know now how important corporate structure is, especially if you intend to raise capital or sell your business one day. I ran my first company as a single-person LLC and had all the assets rolled into that LLC. The problem with that, among other things, was that when I had an opportunity to sell, it was easier for the buyer to "devalue" the assets they did not really want.
What is the solution, then? Had those entities been set up under different corporations, it would have provided me with more power to unlock value or keep the assets in my portfolio instead of them becoming part of a larger acquisition. For instance, I had a portfolio of more than 500 domains, including one for which I had paid more than $10,000. Because those domains were far less valuable than our core technology, I received pennies on the dollar for them.
Instead of mingling funds from my various entities, I should have split up separate assets from the start, treating each as an individual business with unique resources, including IP, revenue and expenses.
Cash Flow Management
A second business mistake worth noting is my past mishandling of my business's cash flow. It initially sounds like a good problem to have: There came a point when my first company was growing so fast that we had to hire more people than we could pay. However, once you get past the excitement of all that growth, you still have employees to compensate.
This quickly became an even bigger problem for us because so many clients were violating the net 30 model of accounts receivable, which stipulates that you pay your bills to a vendor within 30 days of receipt. The result? Pepperjam was larger than ever but could not operate at times.
I learned several valuable lessons from this. First, that the likelihood of getting paid decreases every day that bills are not paid on time. Therefore, every business owner should have a working capital line of credit ready to go as a cushion to cover operating expenses when things go awry.
A second lesson here is to rely on collections for payment, because those agencies will impose penalties for defaulting. We later set up an automated clearing house to make paying more efficient.
Too Many Brands
I don't have to tell this audience that your brand is everything in business. It represents all your company is and all you want it to be.
While I was running Pepperjam, we created many brands for the company, each covering a different aspect of the business. For instance, we had Pepperjam Media and Pepperjam Search, among others. The problem with that, I now know, is that having so many in-house brands requires more operating expenses for all the standard management differentials and the other, smaller issues, such as the creation of different logos.
Having multiple brands can also confuse the public. What's the message of this company as a whole? Which identity is the true one?
These days, I understand that one brand is better than many. Entrepreneurs should create a single strong brand and run with it. You work out its core values, messaging and logo, and that is what you communicate to the world.
That simplicity should ideally do wonders for your business, at least compared to how things might be if you bloated your company with disparate brands and philosophies. Ultimately, one focused brand should instantly allow your customers to get a clear picture of who they are doing business with, and that counts for everything.
As I recalled the last 20-plus years of my business career to write this article, I got to thinking about what my mistakes have meant to me personally. It was interesting to chart the arc from my earliest days to where I am now.
As with most areas of life, my hindsight on those mistakes is 20/20. But those errors I once made were simply examples of the hard lessons that all entrepreneurs must learn at some point as they gain experience and develop.
It is important not to view past missteps as stories to hide or about which to feel ashamed. Mistakes have taught me much of what I know today, and I am forever grateful for their instruction.
Read more from INC