A Business Lesson Learned The Hard Way

UTDFinanceGuy's picture
Rank: Neanderthal | 3,127

Ok, guys and girls. I'm pretty open about myself on here, but lately I've been super busy and not nearly as active as I like to me because after being laid off at a massive tech company I started my own gig.

It was something I did before for freelance because I have experience as a project manager and estimator. Most owner operated construction and skilled trades handle both the office and the dirty jobs. That means they need to be able to bid (or estimate) the projects they want, while also being the guy trimming the hedges at the current job.

It was easy and simple, and a target market that I knew I could score rent money off of.
So after leaving that job for tech sales, I would use it to make a little bit of money.

Well come being laid off, I needed a lot of money and decided to jump in. I created a website ($100 from WordPress because I know a bit CSS/HTML/JS), a new laptop ($800) and the software I knew I would need for the company ($995 annual license) and I started making phone calls to lots of old contractors I knew.

This was the last bit of my $3000 savings I saved before heading out to Arizona for the sales job. It was going to be feast or famine and I decided I wanted to do my own thing (Silicon Valley got to me).

So the first month I did some freelancing and made about $500 and then landed a client who wanted emergency bids done and paid $1000. Which was WAY more than I expected to have come in. I ended up paying rent and then actually moving back to Texas where I could meet these guys straight up.

This is where I spend 100 hours a week trying to drum up business and hire people.

The next month I was able to bring in a subscription based client I use to work with and another one he knew. Both of them were commercial landscaping companies so the take offs were extremely simple. So I focused on these two clients and only charged them $500 a month for a reasonable amount of bids. At this point the first emergency bid client had already decided it wasn't for him.

Perfect, now I'm making $1000 a month pretty much recurring. Then I hired two college interns (aka college students in the conservative group I am a party of at University) for $9 part time and told them I'd pay them more as soon as we bring in the big guns.

Mind you, during this time I'm still doing all the takeoffs as they come in during the night hours, and training these guys for three weeks. It was fucking miserable. But somehow I woke up every morning wanting to keep it going. I barely broke even every month after paying for my two interns and the fixed costs of renting an office out of a friends current office space. At this point I had two clients who were $1000 fixed, as well as freelancing for $500 and then we picked up two guys who wanted one-offs and could expect ($300-$500 a month off them).

But even though I was close to break-even, I was still writing IOUs to my best friend for rent money and groceries.

This is when I hit my gold mine

So we use to work with a general contractor when I was at the real construction company back in the day (we'll call them ABC Construction) which were extremely professional, but lean and HUGE. They did ten's of millions in contracts a year, but I can't find any real numbers. They wanted to have our become their estimation department on change orders, emergency takeoffs, and smaller projects which their team wouldn't normally touch.

We decided to pay out as a subscription basis at $15,000 a month based on the volume they wanted to have and the 24/7 access (which was only me at the time). This was perfect because my interns become full timers and I paid them $15 an hour when I promised them I would. I focused on hiring one more full timer (ironically they were all conservative members of the group which was nice) and got him up to speed quickly.

Because I was handling after hour takeoffs and emergency take offs I was pretty damn busy all the time. I was still trying to drum up business, but I stopped selling like I was suppose to (because at this point I was pretty comfortable). And then that client who was doing $15,000 of the revenue said that come Oct 1 2017 they'd have room to do over $30,000 a month in volume. Which sounded great to me. So I totally stopped selling and just keep going up for about 2 months paying back my buddy and getting a lease I knew I would barely afford at my current rate, but expected that to go up.

So this is when shit hit the fan, and I fucked up.

Back in September when I came into work, Jordan (one of the first full timers wasn't there) and left an email saying that he had accepted a job at another place. No problem. It happens. I knew that my day was going to be worse.

The week after having Jordan left, I walked into our office space to see that no one was there. Mind you this is like 2 weeks before I have a HUGE amount of work that needs to do. So, what do I do, I start freaking out. Calling all of them, trying to figure out what went on. It was a fucking horror show.

So then I call ABC Construction, to explain that we wouldn't be able to accept the volume they were proposing on Oct 1st. They said that is was no problem...

...because they were pulling their fucking subscription.

So now I was back down to a single sporadic guy for $200 and $1000 in subscriptions. But I was floored. I didn't know what happened or what to do. And mind you this is coming to Winter so I didn't expect sporadic guy to be around or even my other subscriptions to last all winter (did subscription, no cancellation fee, I was a fucking idiot).

Then I was hit with the worst fucking sucker punch I have ever had in my entire life. ABC Construction had poached my workers by offering them full time job (real jobs) after their co-op with them and how much better it'd look on the resume, and benefits (fuck benefits).

Over the last month I've had the worst month of my life. Literally. I have a single subscription, had to take an old job I use to work at (new job title, less than 40K pay) and living in an apartment I can't afford and am looking at eviction or subletting, but it has to be soon.

But the thing is, I learned so much. It was the greatest lesson in business I've ever seen. Business is not clean, surgical, and simple as you see on TV shows or even what I assume as basic business jobs. It's messy, and ugly, and will bite your fucking head off it you don't protect your neck.

I just wanted to share an experience I've been dealing with, and offer myself to anyone who wants advice on startups or what its like to start a business (and fail).

Thanks for listening. And honestly, I'd do it again in a heartbeat.

Mod Note (Andy): Best of 2016, this post ranks #17 for the past year

Comments (39)

Nov 28, 2016

Well shit. Wishing you the best of luck in recovering from that. Kind of shitty that your whole team left without even a whisper of what was going on, but as you said, that's the way it goes. You'll be back at it soon enough. Just keep your head up!

...

    • 3
Nov 28, 2016

Looking back I notice the signs, but in the moment it never crossed my mind.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

Nov 29, 2016

thanks for sharing your story so others can learn from it, wish you the best going forward

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Nov 28, 2016

It's all good! Fixing some things, but have the possibility to maybe launch a web development and copywriting business. Looking into options. But thanks for the comment!

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

    • 2
Nov 30, 2016

I started a similar business to your copywriting idea. Definitely a low-cost idea, but you have to think of how competitive that industry already is. There are thousands of companies offering that service and even more freelancers offering it. If I learned anything from that experience, it was to avoid competition in any future endeavors. Your marketing/advertising expenses will be a pain point (AdWords will charge $20+ per click for top-spot placement).

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Nov 29, 2016

non-compete clause with new employees going forward

    • 2
Nov 28, 2016

non competes would've been literally almost non-enforceable. especially without the resources for suing such a big company.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

    • 2
Nov 30, 2016

I think non-competes are generally hard to enforce, regardless of the situation.

Nov 29, 2016

+1. Takes balls to admit you fucked up publicly, even if its anonymous. Love the attitude

    • 1
Nov 29, 2016

Was it possible to keep your co-workers away from the client?

The owner at my company tries to keep the back office/front office groups separate in cases like this. Also a non-compete so if the sales people leave they can't take the clients with them.

However this could have just as easily ended in "& I made millions..."

Nov 28, 2016

It wasn't sales they actually did the takeoff software. So more product people than sales people.

I learned a lot and so plan to use it in the future. I'm young so this is the beginning of my story.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

Learn More

Side-by-side comparison of top modeling training courses + exclusive discount through WSO here.

Nov 29, 2016

wow, crazy story, thanks for sharing. I think this is a great illustration how thin the margin is between making $1,000/mo vs $40,000/mo as an entrepreneur.

Are there ways you could be building this business back up gradually on the side, but this time in a more sustainable, less risky way?

Maybe you could start stacking smaller clients since it sounds like it's a great recurring revenue business, you just got slammed by growing too fast and having way too much customer concentration...how much time does your $40k/yr job take you during the week?

If you were willing to work 100hrs/week to build this thing up, can you maybe work ~70hrs/week and still build something meaningful over time?

It sounds like you've given up when you showed that the need/potential is there for this type of business....

    • 3
Best Response
Nov 28, 2016

The thing is I am burnt out emotionally. I still have everything I need to operate, but I need to figure out my personal life first. I have another potentially lucrative option to pursue, but I'd love to restart in the spring of 2017 (construction season) and do it right.

I made huge mistakes, and the two biggest were "trying to be too courteous in business procedures" and "relying on one big fish". If I do it again it'll be part time first (current job is 20/25 hours a week working and the rest sitting in shitty meetings) and then build slowly but surely.

So tl;dr do plan on restarting but I'm trying to make my personal life better and more stable first

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

    • 5
Nov 29, 2016

sounds like a plan - keep us updated, was an interesting read!

Dec 1, 2016

Weren't you planning on going the Masters route sometime back?
Though it's heartening to see somebody actually take the big leap into becoming their own boss. I'm sure you would know a lot more about doing business now than I would. I certainly have to grow a pair to do the big leap.
You have my best wishes, kinsman. Good luck!

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Nov 29, 2016

Best of luck to you!

Nov 29, 2016

Shit sucks man. Wishing you the best of luck in whatever you choose. However, I goddamn know that you'll make the fuckers at ABC (and the disloyal shits they poached) regret it buddy.

(pardon my fucking french)

Nov 29, 2016

Great post, +SB. But...one question: how did you fuck up? You admitted to fucking up, but never detailed how. Was your mistake not giving your part-time guys full-time rolls out of the gate? How could you have protected your neck?

Nov 29, 2016

The way I see it is that he fucked up by not looking after his neck in the first place. I think he feels as if he wanted the deal so bad he forgot to, as my name suggests, check his 6 and specifically give his guys benefits and/or not locked anything in writing with ABC.

OP please correct me if I completely misinterpreted it.

    • 2
Nov 28, 2016

You're right. I over expanded and had all my eggs in one basket. When that basket was taken away I was left with nothing (especially since I should've been using the summer to do more selling instead of just coddling my one huge client). I never even thought it was a possibility they would go back on their word (and I may have been a bit disillusioned about my "instant success".

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller.

"Live fast, die hard. Leave a good looking body." - Navy SEAL

Nov 29, 2016

"And so, does the destination matter? Or is it the path we take? I declare that no accomplishment has substance nearly as great as the road used to achieve it. We are not creatures of destinations. It is the journey that shapes us. Our callused feet, our backs strong from carrying the weight of our travels, our eyes open with the fresh delight of experiences lived."
-- Brandon Sanderson, The Way of Kings

Quote from my favorite book. It's the journey that defines us my friend, best of luck with your future endeavors.

"This world, it is a tempest sometimes. But remember, the sun always rises again."
-- Brandon Sanderson

    • 2
Nov 30, 2016

You'll bounce back. That entrepreneurial itch comes and goes, but once you've done it, you're more the wiser.

When I ran my business, I did my best to remove the client information prior to assigning jobs so that risk of poachment would be eliminated, but it was annoying because it occurred on every assignment, no matter how small. It sounds like you needed a wall between the client and the workers to make them anonymous to the client. It's obviously tough if they need to be at the client's site in order to do the job - in that situation, you may struggle unless you can afford your employees. I also worked at a company where employees were contractors and were sent out to client sites for work..unless you enjoy your part-time availability, you're an easy target to poach when you can offer better benefits and consistent work.

    • 4
Nov 29, 2016

This. At my firm the back office guys do not have contact with the clients, and the sales teams do not contact with our suppliers.

Meaning if you're on the OPS side you develop the connections with the suppliers, and on the sales side you have the clients.

Sure you can go off as an ops guy or sales guy, but then you have to form all of the connections that we have had for decades yourself on one of the sides.

Nov 30, 2016

You might want to put a statement in your subscription that your clients cannot hire off your employees, or if they want to they have to pay you XX amount of dollars (something like double or triple the employee's annual salary). Had a previous employer put this in all contracts after one of our consultants was poached by a client.

    • 1
Nov 30, 2016

ha, as someone who has worked for a couple of "BB" construction firms, I can tell you that there are too many estimators or designers who want to do private work but failed because they underestimated (irony) business development and HR. There is nothing "intellectually" challenging about the construction industry except for mastering the connections (mostly dumb connections). I see the same people getting recycled from one place to the other. the best way to flourish in this industry, or any traditional industries, is that you either have the family connection (ex. Italian father who owns a construction company), or that you have your own network of clients, which you developed from years of working for a bigger firm.

    • 1
Nov 30, 2016

I can't blame your workers for leaving for a better opportunity, but it's pretty shitty of them to do it without giving some notice, especially given the personal connection you had to them (through the conservative club), and the opportunity you gave them.

Anyway, why not try again? You proved that you have what it takes to be successful, and your only mistake was not having a cancellation penalty for your subscriptions.

    • 1
Nov 30, 2016

A non-compete would still be helpful - you could add a notice provision requiring the departing employee to notify their subsequent employer and have provisions allowing for actual/consequential damages. Basically, you want the company to which your employees are departing to have liability, then it will induce a cost benefit analysis on the part of the hiring company (generally boiling down to whether the settlement value of the non-compete suit is greater or less than the net dollar benefit from hiring the employees). You can get a lawyer to take that on contingency if the contract is structured correctly (or build in attorneys' fees in the event of a breach, in which case the breaching party/hiring company would have to pay these). It can sometimes be difficult to quantify damages for non-competes, but ABC Construction's near simultaneous hiring of your employees and cancellation of your contract makes a pretty convincing case that your damages are ~$30k/mo (for an unknown number of months). Not sure how willing to litigate you are, but there could be some liability on the part of ABC Construction or your former employees even without a non-compete, depending on what else they brought with them from your business, what the company knew at the time of hiring, etc.

Dec 3, 2016

Get a business loan or pitch to investors, incorporate and hire again with competitive comp (pitch the start-up flexibility)
Get non-compete agreements
Undercut that company in pricing and go after their client base aggressively
Grow and gain market share
Make them buy you out

Dec 5, 2016

You're a fucking champ, all the best moving forward mate

Dec 5, 2016

Oh God forbid you should give your employees benefits. Sarcasm You know what, you deserved to fail. Fuck the monkey shit that's gonna be thrown at me. You take care of your workers and give them benefits or they will seek other jobs. I am so sick of business owners fucking over young people. This is why millennials are not loyal at all to their employers and will leave after 2-3 years because of management's inability or unwillingness to take care of labor.

    • 1
Dec 5, 2016
SUNYWallStreet:

Oh God forbid you should give your employees benefits. Sarcasm You know what, you deserved to fail. Fuck the monkey shit that's gonna be thrown at me. You take care of your workers and give them benefits or they will seek other jobs. I am so sick of business owners fucking over young people. This is why millennials are not loyal at all to their employers and will leave after 2-3 years because of management's inability or unwillingness to take care of labor.

What's the problem? His employees left because his competitors offered them superior economic benefits; that is economics (capitalism) functioning as it should. This is something he admittedly overlooked.

Your rant seems senseless to me.

Dec 5, 2016
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Dec 9, 2016