This year is my 13th year as a small business owner. There are times when I wonder how I survived this long. I must admit that things are much easier for me now than they were when I first got started in business in 2002. My first business was as an Amway distributor.
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.
During that year, I learned so many valuable business lessons that still guide me today. Here are the 8 top lessons I learned during my first year in business:
Lesson # 1: Your Job Is to Make the Cash Register Ring
I know, I know, you don’t think of yourself as a salesperson. The truth is if you are an entrepreneur, you need to know how to make the cash register ring. Entrepreneurs don’t have job security and a steady paycheck. They must produce if they want to eat. As an entrepreneur, you are only paid for production and sales. If the cash register doesn’t ring, you don’t eat! You have to learn how to find prospects and close deals.
Lesson # 2: 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 billions 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 have a large amount of revenue.
I challenge ANYONE to start a business of their own today and even earn $1 in net profit at the end of 12 months. It sounds real easy to do, but it isn’t. Building a profitable business is very challenging, especially with the rising costs of gas, rent, utilities, labor, insurance, etc. I have lots or respect for people who build a profitable business of any kind.
Lesson # 3: Cash Flow is the Secret to Success
Cash flow is the secret to success in any business. You need a constant flow of cash coming in daily and weekly in order to pay the bills and meet payroll. Lots of businesses fail because of poor cash flow. Even if you have a large revenue sources, you still need good cash flow so you can pay your expenses on time. This is one of the reasons I recommend most people keep their day job and start a part-time business.
Lesson # 4: You Can’t Do Everything by Yourself
Entrepreneurs wear many hats. They run the marketing, generate sales, answer the phone, keep the books, clean the office, etc. What I learned is “you can’t do everything by yourself.” You need employees, or better yet, independent contractors, to help you out.
Additionally, not all tasks are created equal. As the small business owner you should spend most of your time on sales and marketing and you should delegate just about everything else. If you don’t have that luxury, you should do your non-productive tasks (anything that doesn’t generate revenue) during your non-productive hours. Never spend your $100 per hour time on $10 per hour tasks.
Lesson # 5: You Have Many Skills You Never Knew About
When I got started in business I had many skills that I had never used or developed before. I learned that I was good with accounting, real good at networking 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 # 6: Most Businesses Take a Few Years Just to Get Profitable
I wish someone would have taught me this lesson BEFORE I started a business. Every business that I know of takes a few years just to get profitable and close to five years to get established and running smoothly. Building a business is hard work. You’re not going to get rich overnight. It takes time, effort, and hard work to build up your reputation and client base. You have to have some vision and faith. Having patience also helps.
Lesson # 7: It’s Highly Likely You Will Fail with Your First Business
Most successful entrepreneurs have failed in several business ventures before they became successful. Very few people make it big with their first business. It takes time to develop the right skill-set and right mind-set so you can be a successful entrepreneur. Just because you fail with your first business doesn’t make you a failure. Simply learn from it, make some adjustments, and try again.
Lesson # 8: You Need a Mentor
Having a mentor is vital, especially if you are a brand new entrepreneur. Try to find someone who has already accomplished what you are trying to accomplish and seek their advice. This can save you a lot of money from avoiding unnecessary mistakes. One of the reasons franchises do so well is because the owners get mentorship from the corporate office.
These were the top 8 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 wanted to return to my comfort zone many times. Fortunately, I had the courage and guts to keep pressing forward and learn from my mistakes. Now, some 12 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.
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.