Lessons from the other side of bankruptcy.
I am able to recommend that people understand the following 10 lessons which are invaluable in business and I hope they are helpful to others.
1) Leverage and compounding are two edged swords which can cycle downwards in a fast and magnified manner, as effectively as they do cycle and magnify upwards.
2) No matter how positive, optimistic or indestructible one feels, they shouldn't take on too much and then try to grow the infrastructure to support it, that is like putting the foundations in after you build a house.
Spinning too many plates can prove to be problematic when you need to sneeze and we cant predict when we may need to sneeze.
Put the infrastructure in place first and grow sustainably and in a controlled manner, keeping your eye on possible banana skins, back doors and leaks.
3) Generosity can be taken to extremes and if that is a personality trait it needs to be reigned in.
People do not always appreciate things and take matters for granted in many cases.
An example is if you know that your neighbour is struggling so you pop over with £100 to help them out, they are so grateful and overwhelmed, their children write thank you cards and hugs are flowing.
Next week you pop over and do the same, they are very grateful and tell you that they have a lot of bills to pay and that the money will be put to good use.
On Thursday next week they ask you if you are able to come over with £100 again because they need to pay for their children's school uniform, so you do and they say thanks, then rush out to the cinema.
The following week you don't help them, suddenly you are not the nice generous person anymore, but a mean baaxxxx, it's alright for him.
All because you have interfered with their survival mechanism.
An extreme example, but I was guilty of many similar cases of unusual (and ridiculous with hindsight) generosity like this.
4) Do not allow people to contribute less than they extract from the business and manage their performance well.
Do not keep people on payroll who are underperforming or if the business has moved on, this is not going to help them long term and they will resent you just as much when you need to let them go.
The same applies to loss making projects, let them go asap.
5) Do not personally guarantee limited company products and services, unless you can afford to lose the equivalent of what you have guaranteed.
6) Do not commit to long term contracts with dependencies outside you control such as clients mortgage-ability.
Do not allow people to withdraw from contracts unilaterally without pre-agreed contributions to time and infrastructure costs.
7) Operate client accounting for disbursements on all service agreements, to avoid vat being due on all service fees, but without the ability to offset vat on not vat invoiced sub contractor services and expenses. (This alone would have saved us about 130k in vat in 2010)
8) Do not operate any kind of publishing outlet or platform without indemnity insurance against libel, whether yours or by a third party. Expand this point to insure anything which is insurable and which could without insurance create a claim substantial enough to break a project or business.
9) Run 3 cashflow projections, worst case scenario, predicted scenario and best case (very optimistic) scenario, base all of your financial and contract length projections on worst case scenario but live you life positively expecting best case scenario.
10) If an accountant or professional adviser recommends a course of action which is extreme and will have massive repercussions on your life and/or business then get a second opinion before you follow the advice.
In addition to these 10, I learnt the value of true friendship, how easily people surround you when you are successful and how fast you can be abandoned when tarnished with failure.
I call this the facebook myth, in that we think we have hundreds or thousands of friends, yet when I needed someone for moral support due to multiple bereavements and business failures, when I had such rubbish cars that I scrapped 5 cars in 7 months and knew the name of every AA patrol man in the area, when I needed friends for numerous other personal reasons, I could count my true friends on one hand.
Phil brings passion, creativity and a great knowledge of property and contract law to all his dealings. Phil comments at MortgageStrategy and blogs detailed articles on Blogger
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Remember that failure is an event, not a person.
It is impossible to live without failing at something, unless you live so cautiously that you might has well not have lived at all, in which case you have failed by default.
J. K. Rowling
Any fact facing us is not as important as our attitude toward it, for that determines our success or failure. The way you think about a fact may defeat you before you ever do anything about it. You are overcome by the fact because you think you are.
Norman Vincent Peale
Many of life's failures are people who did not realize how close they were to success when they gave up.
Thomas A. Edison
Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent.
I can accept failure, everyone fails at something. But I can't accept not trying.
If you're not failing every now and again, it's a sign you're not doing anything very innovative.
Success is not built on success. It's built on failure. It's built on frustration. Sometimes its built on catastrophe.
Do not be embarrassed by your failures, learn from them and start again.
There is no such thing as failure. There are only results.
Success represents the 1% of your work which results from the 99% that is called failure.