How I lost a million dollar business before it began

I used to work for a service provision company in Europe in an industry which suddenly boomed because of world events almost a decade ago. For some very good reasons, I won't identify the company or industry, but it's not important for this example anyway.

I worked for about $25 an hour doing important work with very long hours. Each staff member needed at least 6 months on-the-job training in addition to formal training before they could really do anything, and as I found out a year ago, the boss was busy embezzling money, which we didn't know at the time, but explains why he wouldn't pay for more staff.

Anyway, we worked up to 20 hours a day, 28 days in a row after world events made demand for our services skyrocket. Combined with the long lead time to train new staff, my employer found it impossible to satisfy demand, and couldn't service current customers correctly.

I regularly spoke with the head of one of the companies we served, and it was often about business. He told me one day I should start a company instead of working for my employer. I told him I already had started planning to start a rival company to serve the extra market demand, and asked him, should I do this, if he would give me the contract for his firm. He immediately said yes, and seemed delighted that I would be serving him instead of my employer. He knew me personally, knew of my skills, my work ethic and business ethic. One conversation, one question, and it resulted in a contract worth about a million dollars. That's for a single customer. I already had visions of dancing in front of my employer's desk when handing in my resignation and telling him that he was fired from the contract he had with the other company.

I was overjoyed, and the eight months I spent planning the company seemed like it was bearing fruit. I asked a trusted colleague if he would be the head of operations for me. He accepted, and I got down to more planning.

I worked, and in my down time and limited time off, I worked even harder. I even looked for office space, appropriate permits, vehicles for staff use, staff, and more.

I shopped around for money. I needed about $100K to start (so I thought) and asked around. I found a small business owner, a pop star, a middle eastern business man, and a fourth one I can no longer recall. They were all eager to finance the business and take a small piece of equity. I presented my 128 page business plan, complete with financial statements, diagrams, and detailed analysis to the small business owner who lived down the street from me. During the presentation, he was constantly interrupted. He then blew me away by saying he'll have to ask his wife. Up until now, he always said I could have as much money as I needed, guaranteed. His wife hadn't even seen the plan.

I couldn't present the plan to the others. The middle eastern business owner was overseas in a country which had some substantial troubles, and was uncontactable. The pop star I knew was overseas and uncontactable by phone. The fourth guy... I can't even remember who that was now...

So, I had plans, a contract, and my potential investors were all MIA, with the exception of the one whose wife controlled his wallet.

I now had one more complication: my visa was running out, renewal was too difficult, and I had just been fired from the job for turning up to work late once too many times (imagine that, we got 3-4 hours to go home and sleep, and I lived an hour's train ride from work). Maybe someone heard about my plans. Either way, my major cash source had abruptly ended, and now I would be using my savings/investments to live. I started making plans to return to Australia.

I still wouldn't give up on the plan, though. I found another competitor, and went to talk to their key account manager. I told him I had a million dollar deal, and offered to sell the contract to him. I thought they could provide the services using my brand (like a private label deal). They were interested. He said he'll talk to management and we'll go from there.

That was the last I heard from them. The account manager vanished into thin air, and it seemed like he was fired/died/was abducted by aliens.

I got on a plane and even while I was transferring in another city, I went to find the company's head office to try and find out what happened, but it didn't work. I went home.

Even before I had unpacked or had got the phone connected, I would use the nearest public phone to call the company who wanted the contract from me. I wouldn't let it die. After about 20 phone calls over the next few weeks, I saw no other options, and I gave up.

End result: contract for a million-odd dollars, visa complications, time pressure, no funding and a contract sale which failed totally. Last I heard, the company I was to be serving was still with my old employer.

What went wrong:

• I did the planning by myself.
• I spent too much time planning.
• I didn't have a good team.
• The fundraising process failed.
• Time pressures killed my ability to create alternatives

Why it went wrong

• I had a slowlane business mentality - planning by myself, raising funds by myself, running the whole show/
• I failed to manage time properly.
• I failed to get people on my team who are more skilled than I am
• I failed to consider all contingencies
• I failed to secure myself from financial stress, which in turn added risk to the business
• I failed to plan the fundraising correctly
• I lost heart in the end, and gave up.

The lessons I got out of this

• Time is also an asset/resource and must be managed
• Decide on a business concept, write out the basics, then go shopping for a good team who'll do the planning for you.
• Talk is cheap. A lot of people talk, but it's the ones who'll back up their talk with their wallets that need to be focused on. Many people like a good business idea and would like to invest. Don't mistake this for people who will invest.
• Dealing with professional investors might be hard, but it's far better. They'll find flaws in your plan, which is like free advice which will pay you millions, and they'll be efficient with time. They can make a decision based on business thinking, not emotion.
• Secure your own financial situation before attempting anything like this. My idiocy jeopardised the entire business. I now had to spend capital I was to use to open the business, and it severely limited the time frame to open it.

Now that I've failed at that, I consider the two years and the million dollars I didn't make as an investment in my business skills.

I can directly attribute some of my skills to that business.

Mistakes are awesome, just don't make the same mistake again once you've learned from it.

[EDIT]: REGARDLESS OF YOUR FAILURES, DO NOT GIVE UP. You may need to find a different way, or even a different goal, but never give up on striving for what you want.

Tip: For good advice on strategic quitting, read Seth Godin's "The Dip"

Daniel.

Speeeeeeed +!

definitely speed ++

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"If I have seen further than others, it is by standing upon the shoulders of giants." - Sir Isaac Newton

Wise words..........

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Imhotep

Thank you for sharing. Definitely appreciated. Speed. +++

These are the same problems I had with my business failure!

Great post, rep+++

I have to second this, it was after reading The Dip a few weeks ago that I finally was able to break the last emotional ties to my failing business and accept that it was time to move on. It is also a short book, so a very quick read.

I like those points. You could have forward sold the promise of salary to people. Using the agreement as a backing. But I know exactly what you are talking about in almost all of the points above.

Talk is cheap? Yes, indeed. This goes with customers too and proving the concept. Unless the customer signs the agreement or actually pay you money, they are not proving your concept. So many people have presented deals for me to invest in and almost 90% of them has not proven the concept at all. Almost all of them say "I think people will buy" or "I have this and this many people who say they will buy when we have the business up and running". No good, a joke.

Institutional investors. They are tuff to deal with, but as you say: They see the faults and downfalls. Good walls to bounce your ideas against (even in times when you want to strangle them...).

The last point is also important. The first rule in start-up business is: "Don't spend money until you make them". Test small and if it works on that level you might have something to build something on. Use the revenue from the first customers to fund the rest (for marketing etc).

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"Start something and keep innovating" - Me

I missed this great post somehow, thx Daniel!! Speed++

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Thanks everyone :-)