At the time of writing this post, this year is my 13th year as a small business owner. I became an entrepreneur in 2002 when I started my Amway business (I have since owned several businesses). There are times when I wonder how I survived this long, both financially and mentally.
It’s been a crazy road filled with a series of zigs and zags. Take two steps forward and three steps back. Get everything up and running effectively and then Murphy kicks in and something goes wrong. Can you relate?
I must admit that things are much easier for me now than they were when I first got started in business in 2002. I would claim that my first year in business was the hardest year of my life and also the most educational year of my life. It was fun and exciting, but very stressful and challenging at the same time.
I really had no clue what I was doing. I was out of my comfort zone. I knew nothing about sales, marketing, business finances, generating leads, customer service, running a business, growing a business, keeping a balance in my life, and all the other important things that entrepreneurs need to do.
During that year, I learned so many valuable business lessons (and life lessons) that still guide me today. Here are the 5 top lessons I learned during my first year in business:
Lesson # 1: There is a Huge Difference Between Revenue and Profit
I’ve always joked that revenue is the number you share with your in-laws and profit is the number your spouse knows about. In any business, there is usually a huge difference between revenue and profit. Heck, there are some companies that do millions of dollars in revenue and don’t make ANY profit. Just because your business has lots of revenue doesn’t mean it will be profitable. Your goal is to be profitable, not just to make sales.
I challenge ANYONE to start a business of their own and earn $1 in net profit at the end of 12 months. It sounds real easy to do, but it isn’t. Building a profitable and successful business is really tough to do, especially with the rising costs of gas, rent, utilities, insurance, food, labor, etc. I have lots or respect for people who build a profitable business.
I challenge you to drive through any town in America and look at all the closed down businesses. Look at all the vacant buildings. Most of the people who ran these businesses invested tens of thousands or hundreds of thousands of dollars just to start their business! Plus they invested TONS of their time. All of these things they will never get back.
Lesson # 2: Not All Tasks Are Created Equal
Everyone is busy. Talk to any small business owner and they are busier than you can imagine. That being said, there is a HUGE difference between being busy and being productive, effective and efficient. Most of the work that small business owners do is busy work. In other words, they find things to do to fill their time. However, most of these tasks are not money producing tasks.
As a small business owner, you must be smart with your time, especially if you are building your business part-time! You should spend at least 80 to 90 percent of your working hours on the money producing activities. In other words, you should focus on tasks that generate sales, revenue and profit for your business.
This includes tasks such as lead generation, marketing, making sales, closing prospects, forming strategic relationships with other business owners, and follow-up. If the task doesn’t result in increased revenue, it’s busy work, not a money producing activity.
By all means, you still have to do the other things, but those tasks should be done after you make the cash register ring. Or, they should be outsourced.
Lesson # 3: The Technician Syndrome
Most people who start a business do so because they are good at the technical work that they do. For instance, a barber decides to start his own barbershop because he is good at cutting hair. A cook starts her own restaurant because she is a great cook. A computer technician opens their own computer repair shop because they are good at what they do.
What most of these people don’t realize is that there is a HUGE difference between the technical work that your business does and what your job is as the entrepreneur. Once again, your job as the entrepreneur is to make sales and make the cash register ring.
A barber’s responsibility is to get customers, not cut hair. A restaurant owner’s real job is to find customers, not cook. A computer technician business owner’s real job is to get customers and make sales, not do the technical work.
Simply put, the technical work of your business is not your real business. Your job is to market, run and grow your business. Most people don’t ever figure this out.
Lesson # 4: You Have Many Skills You Never Knew About
When I first got started in business I had many skills that I had never used or developed before. I learned that I was good with accounting, really good at connecting with people and good at managing projects. As time progressed, I learned or developed even more skills.
Chances are in your current job or line of work, you aren’t using more than 20% of the skills you have. Either you know your job well, and are good at it, or it just isn’t very challenging. When you start a business, you will have to do so much more. And you might just find out that you have lots of untapped skills.
Lesson # 5: Your Value Dictates Your Income
This lesson might be hard for some people to swallow. The truth is, we all get paid based upon the value that we bring to the marketplace. The more people you serve the more money you make. The more skills you have the more money you make.
The quickest way to improve your income and profit is to improve your skills AND serve more people. As an entrepreneur you need to invest in your personal and professional development. Read books. Find a mentor. Listen to tapes. Attend seminars and workshops. Learn something new each day and get better every single day.
When you have little value, or don’t know what you are doing, you won’t make much money. On the other hand, when you have a big value and are an expert at what you do, your wages, income and profit will increase rapidly.
I encourage all entrepreneurs to have a personal development plan and never stop learning. Learn what you can about your products, your competitors, yourself, your customers, your company, and your industry.
In review, these were the top 5 lessons I learned during my first 12 months in business. My first year in business was very tough. I made lots of mistakes and barely survived. I thought about quitting and giving up and returning to my comfort zone many times. Fortunately, I had the courage and guts to keep pressing forward and learn from my mistakes. Now, some 13 years later I can only look back and laugh.
If you want a true business education, you can go to college like most people do, or you can do the smart thing and start your own business. You’ll learn more in 12 months of launching and running your own business than you will at any university’s MBA program.
What are your thoughts? What did you learn during your first 12 months as a small business owner? Leave a comment below to let me know what you think.