10 Lessons That Cost Me $10 Million

This week marks the one year anniversary of a website I created with a former friend and colleague. Normally, this would be a reason to celebrate, drink some champagne, and toast our efforts. However, the site is a total failure and I have not had anything to do with it in many months now. So what happened? How did a great idea turn into a waste of cyberspace? How did I wake up one morning to find myself locked out of a site that was my idea and creation? And most importantly, how did a competitor that came along after us wind up with $10,000,000 in VC cash while I got an inflated credit card bill? Well, I'll spare you the story itself, but share with you 10 tips and lessons that I didn't follow so any other entrepreneurs out there don't lose the million$ their ideas deserve.

1. Get it in writing (and make copies) - Ok, ok, I know that's the first and oldest rule of business and shouldn't be a surprise to anyone. But it's also a rule frequently overlooked by many, especially in a scenario when they start a business with friends. We never bothered signing an operating agreement that stipulated the 50/50 split we had both agreed to. So when I wake up one morning to find all the passwords changed, my access to any of our site's accounts blocked, and ownership of the site transferred to another company's name, what am I to do? Call my lawyer who says I wouldn't have a problem proving my claim in court, but without an operating agreement signed, we can't force any action without going to court. Considering what the site was worth at the time and the time, energy, and expense involved with going to court would involve, it simply wasn't worth it. And had I got a copy of the signed agreement with our software provider the day it was signed, I would have learned lesson #4 weeks in advance.

2. Listen to those you respect - I got into this business with a friend and former colleague. I spoke with several people that knew us both and heard the same message over and over; "You know he's not going to do shit", "He can't close", "He's a lazy s.o.b." etc. This was from people I knew and respected, and I blew them off. Stupid, stupid, stupid.

3. Effort is more important than excellence - I can tolerate work that isn't perfect. I can tolerate personalities that don't necessarily mesh with mine. I can tolerate opposing viewpoints, opinions, and personal habits that I find disgusting (even when they are taking place in my apartment which was serving as a de facto office). What I can't tolerate is lack of effort. When you are starting a company from scratch with virtually no revenue and very little cash on hand, you need to hustle. You need gym rats. You need to be busting your ass from the second you wake up until the second you go to sleep. There is no excuse for lack of effort when you are trying to build a dream.

4. The 1st lie about money is the last one - You want to lie to me about how hot that girl at the bar who you went home with was? Fine. You want to lie to me about your golf score? Fine. You want to lie to me about cash, we got issues. I should have known when he was out at bars pretty much every night until 4am but couldn't come up with a dime for state incorporation fees. I should have thrown his ass out right then. Well, one morning our software provider calls us and says we owe him a payment for the next month. I tell him we paid 6 months up front. He says no. I question my partner and he denies it. When asked for a credit card statement, all of a sudden can't find his credit card. This is unacceptable, and I sent him packing at this point. But I should have seen it coming.

5. No, you don't need to take a meeting or have another conference call - I hate meetings. I hate conference calls. But I understand they are a necessary evil of the business world. However, some people would rather spend their time talking with anyone and everyone that will talk to them than actually carrying out the things they talk about in the meeting. Some people would rather pretend to be a CEO than take the necessary steps to become one. Be the latter.

6. What your customer wants is more important than what you want - When we introduced video to our site, we had a pretty heated debate. He wanted to launch with Elvis doing a Christmas song, I wanted the Beatles doing "Revolution." Considering we were targeting the baby boomers, I think my choice was clearly the way to go. But he was determined to use the Elvis video. Why? He was an Elvis fan. It had nothing to do with our target market, it had to do with his love for Presley. My blog posts included other useful sites for boomers, free ice cream from Ben and Jerry's, and special holiday notices. He copied other people's blogs on collective wisdom and social networking websites. Why? He was more concerned with publicizing his interests than serving the needs of our audience. Me? I think people like free ice cream.

7. The numbers don't lie - When doing our initial marketing we had two different theories on how to go about it. One was a direct email campaign to members on sites that were similar to ours but not designed specifically for our target market. The other was using a web crawler to collect email addresses and then blasting an email newsletter. We had agreed to try both separately for a bit, look at the results using our Google analytics program and then decide how to proceed. Needless to say, sending direct messages to people that were already using a similar service was far more effective than engaging in what amounted to a spam campaign. My partner did not care. The spam campaign took less time and effort, results be damned. Well, the numbers never lie and like most everything else in life, the results you get are a direct effect of the effort you put in. Here we are a year later and after my idea got us an initial rush of members, the site has taken an additional 9 months just to triple what we accomplished in the first month.

8. Market to the market you sell to, not the market you want to be in - We printed up a bunch of fliers and took to the streets on a busy weekend in town. Lots of tourists from all over the world in for a food and wine festival, many in our direct market. After canvassing different areas for a bit we meet up and I ask him how he did. He explains to me how he spoke to a bunch of cute girls and told them to tell their parents about the site. How many of them do you think signed up?

9. Continuously talking about what you'll do when you're rich will ensure you're always poor - When you're spending your time talking about how much money it would take you to sell out, what you want to buy when you're a millionaire, how you want the office decorated, how we can write off buying a yacht if we use it to entertain clients, do you know what you're not doing? Working. You're not improving your product, spreading your message, or selling your product if you're daydreaming about being an instant millionaire. Entrepreneurs have that desire to make something for themselves and we all want to build that business that will make us wealthy, but nobody ever got rich by talking about it. You need to do it, plain and simple. When you're thinking about all the neat toys you want to buy, you're wasting your time. And when you're an unknown company operating on a shoestring, time is the only resource you have.

10. Don't do business with people that have a coke habit - As Rick James said, "Cocaine is a hell of a drug."

So there you have it, 10 free lessons that cost me $10 million to learn. But they're free for you, just throw me a bone when you strike it rich.

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