Some of our more dedicated readers may remember me as that promising and talented new writer who disappeared after only a couple of months last fall. Or, alternatively, that moronic new writer who had no idea what he was talking about. But, I’m just going to go ahead and assume it was the former in order to protect my ego. In either case, if you remember me at all, you may have wondered why I left. Was it cholera? Was I drafted into a top-secret CIA program? Did I join a circus as a fledgling trapeze artist?
No, it was none of that. That would be absurd. What would make you think I had any trapeze skills at all, much less circus-worthy ones? The truth is a lot more straightforward, but was also a lot scarier (and more exciting) for me — I started a business. The astute readers among you have probably already put the dots together and figured out that I failed. The title was a pretty strong hint, right? This isn’t a story of bootstraps-pulling success, or a heartwarming underdog tale. This is an opportunity for me to talk about the lessons I learned as I failed, and to give the entrepreneurs out there something to consider when they start their businesses. We’ll laugh together, we’ll cry together, and maybe we’ll even learn something together. Ready? Alright, let’s dive right into the heart of it, starting when I was seven years old…
Entrepreneurial Spirit and The Hustle
The first time I remember embarking on a money-making endeavor, I was seven years old. It was the mid-nineties in California, and roller blades were finally on their way out. Everyone had a pair or two sitting unused in their garage. A friend and I, in a fit of boredom, decided to take a pair apart, and found that it was fun to see how far we could get the “blade” portion to roll with the boot removed. For some reason, we thought other kids at our school might want to do this too. So, we offered to provide a roller blade boot removal service for the nominal fee of $5. Somehow, I think we even managed to sell our services to a few of our friends.
Obviously, our silly little business venture went nowhere. But, I’m willing to bet a large portion of you have similar stories. Maybe you had one of those quintessentially American lemonade stands (maple syrup stand for you Canadians?). Maybe you mowed your neighbors’ lawns in the summertime for some spending money. Or, maybe you had a more adventurous business plan. Whatever the case, if you’re reading this there is a very good chance that you chuckled at my roller blade conversion business in commiseration, because you’ve got a similar story yourself.
Like me, as you got older your ideas grew more sophisticated and took increasingly more knowledge and skill. As a Hackaday reader, you probably looked to your tech skills. I’ve started more websites than I can remember, offered computer repair services via Craigslist, and tried my hand at making computer games and apps. And, once again, I’m confident a lot of you have to.
I bring all of this up to illustrate the point that entrepreneurial spirit seems to be an innate trait in a lot of us. It’s constantly in the back of our minds, flooding our thoughts with potential business ideas, products, and inventions. More importantly though, it drives us to action. We may do it out of necessity, but sitting in a cubicle making someone else money can never satisfy us. And so, we act.
It was this situation that I found myself in last October. I was in the middle of a divorce, and was finding myself increasingly disinterested in the daily grind of office work. I had a good job and was well into a secure career. But, I couldn’t concentrate on my daily tasks – I was simply burned out. I yearned to go out into the world and see what I could accomplish. I wasn’t quite sure what I was going to do, but knew I couldn’t continue with the 8 to 5 office life.
And so, without really having a plan, I told my boss that I was sorry, but I couldn’t continue to work there. I wasn’t satisfied with my own productivity, and that was the best choice for myself and the company. Luckily, it was right after I made that decision that I received an email from Hackaday’s Mike Szczys, offering me a job as a contributor here. I immediately jumped at the opportunity, and got to writing.
The house my ex-wife and I had lived in was put on the market and quickly sold (thanks to Denver’s insane real estate market). She and I were each able to walk with a little bit of money, and no debts. Of course, I did what all entrepreneurs do when they find themselves with some money: I started tossing around business ideas. I formed an LLC, threw together a business plan and a website, and on New Years Day of 2016, I started a lease on an office and shop space.
This was my first “real” business, one that wasn’t just run from my home. And, the mistakes started immediately — beginning with the lease on my office. In future articles on this subject, I’ll go into more detail about what you should look for in a business lease, and what you should avoid. But, suffice it to say that I really had no idea what a good and fair lease looks like, and so I signed a lease without really knowing what I was getting into. As it turns out, not all business leases are created equal, and mine essentially gave away all of my rights as a tenant.
Aside from not understanding the legalese of what I was signing, I also leveraged myself too far. In the beginning, I had a decent chunk of money, and felt that I could afford a decent size space (1,800 sq. ft.). I thought I’d need the space eventually, and figured it’d be best to just go ahead and get it. In retrospect, I should have kept my overhead as low as possible and leased a space that was as small as I could get away with.
Which bring us to my next mistake, and this one is a doozy — I really didn’t have a clear idea of how I was going to be creating revenue. I had a business plan, and a vague idea about providing design and prototyping services. My background, after all, was in mechanical design, CNC programming and operation, and 3D printing. It seemed like a good fit, and I figured the details would fall into place once I actually got started.
That plan, however, ended up being short-lived. Prototyping services are generally only contracted by large companies who want to outsource that work, and those companies want to work with proven companies and not startups. My goal was to target other small companies and startups, but that plan was flawed (those companies generally can’t afford services like that). So, I shifted my focus to what I dubbed “designer fabrication,” which to me meant fabrication services that went further than normal “job shops,” and into the territory of custom one-off design and fabrication.
In an effort to jumpstart that plan, I purchased a lot of equipment and tools I thought I was going to need, which ended up being my next mistake. This one probably seems obvious, but there is really no reason to buy a tool or piece of equipment before you have a proven need for it. Even if a customer’s project demands a certain tool, you’ve still got to weigh the return on purchasing that tool. It might make more fiscal sense to simply subcontract that part of the job, rent the tool, or turn down the project altogether. But, of course, tools are toys for grownups, and I wanted some new toys to play with!
So, I found myself in a big shop, full of shiny new tools, and no client contracts to use them for. I was three months in before I even had my first paying contract, and had already burned through all the cash I had started with. I was already taking on debt — after all I had rent to pay at my apartment, food to buy, car payments to make, bills to pay, a business lease to cover, and materials to buy for the projects.
As time when on, this problem just got worse. I had contracts coming in here and there, but they weren’t enough to cover my business and personal expenses, and my debt was mounting. Of course, I didn’t want to give up. A combination of the sunk-cost fallacy and simple stubbornness kept me going, even when I should have either cut my losses or re-evaluated my business plan. I was still clinging to the hope that I’d turn a corner, get more contracts or come up with a lucrative product to sell, and that I could still succeed.
Taking the Hint
This was the situation I found myself in about a month ago: I was completely out of cash, I had maxed out every credit card I had and couldn’t get more, no one would approve a business loan for a business with negative cash flow, and I had borrowed what I could from family. I was broke, in a mountain of debt, and in a constant state of panic. How could I have let it get that bad? Why hadn’t I just worked harder? Why had I made so many stupid decisions?
I spent the first two weeks of this month trying to figure out some sort of solution. I found someone to split my shop space with me, cutting my rent in half. I sold everything I could that I didn’t actually need. I started looking for part-time work to supplement the meager income from clients. But, with even more expenses mounting, I knew I had to call it quits.
A week ago, I decided I’d have to close the doors on my business. And, at least temporarily, on the idea of being a business owner. That brings us to today. I’ve been scrambling to sell off my equipment by the end of the month (taking heavy losses, of course), in order to pay back open client contracts and other financial commitments. And, in general, just to figure out how to move on.
Luckily, the fine folks here at Hackaday have welcomed me back as a contributor. I’ve got a long road ahead of me, with a pile of debt to start chipping away at, ruined credit to rebuild, and security to regain. But, I’ll tell you a secret: that entrepreneurial spirit hasn’t left me. I don’t regret trying to make this business happen. Sure, I wish I had gone about it differently, but I know I never would have been satisfied with not trying. I’ll almost certainly try again at some point.
If you’ve read this far, you probably have that same spirit, and that need to start something. You may have even related with my story, and nodded along as you read about my mistakes. Or, maybe you’re simply thinking about starting your own business, and want to read about what not to do. So, stick around and keep a look out for future articles, where I’ll go into more depth on how to avoid the pitfalls I fell into. I’ll talk about what I did right, and what I did wrong. And, most importantly, I’ll let you laugh at my mistakes, as you breathe a sigh of relief knowing that we entrepreneurs may screw up a lot, but at least we try.