Lessons Learned From A Failed Business: Part One

I am beginning the first post series here at the Caffeinated Design Blog. I’ll be writing about the lessons I learned from a failed business that I was a part of. Please join in with your experiences in the comments section!

Several years ago, my mother opened a mortgage company here in Michigan. She had been working with a business coach for a few months, and he encouraged her to open a brick-and-mortar store, rather than keep the business in her basement. My mother was enthusiastic and shy about opening her own storefront – but she began to pursue it, to look for ways to make it happen.

I went to her house a lot, where we would sit together at her kitchen table and plan and dream; she was reluctant to take such a huge step, but she felt very deeply that it was something she needed to do. My youngest son had recently been born, and I was in need of a job – so she hired me, part-time at first, to be her new office manager.

Months went by, and she hired a contractor, found a location, and began planning the build-out of our lovely new offices. But she had made her first mistake already.

First Mistake: Putting It All On Credit

One thing she had learned, through research and from her coach, was how to find and open lines of credit for her fledgling business. Because she had no savings to use as capital, and she had no investors, this was her brave plan: put it all on the credit lines, wait for the business to take off (because of course it would, right?), and then pay off the credit she had used.

It sounded easy, sure – but it was the first big mistake she made.

The Reason I’m Writing This Series

It’s been several years, as I said, and the company my mother started is no longer in existence. It failed just over a year after she started it, and it failed hard. It would be easy to just point a finger at every single decision she made and warn everyone against doing it that way, because oh no! It didn’t work!

But that’s not why I’m writing this series.

It’s easy to make good decisions and get bad results.

The thing is, it’s very easy to make good decisions and get bad results. It’s also easy to make iffy decisions and get good results, for a while. I’m not pretending to be a marketing guru (you want one of those? Go visit Naomi!), but I was there through the planning stages, the implementation stages, and – ultimately – the fast-road-down-to-oblivion stages at the end. It was horribly sad for me that it happened, and I wasn’t the one in charge.

It’s easy to take your failure with you and let it color everything you do later.

I’ve carried the heartache of this failed business with me into starting my own business, and at every step along the way – when there were decisions for me to make about what I would do, what I should do, and what was the best and smartest idea I could possibly come up with – I remembered what I learned from the mortgage company.

Today’s Lesson: Don’t Use Money You Didn’t Earn

The first mistake my mother made was using money that she had not earned – whether by working a job to earn it, or working to earn it by putting together a kickass proposal for an investor – to finance the business that was close to her heart.

Some people can play the credit card game, and I’m not saying you can’t do it. What I am saying is that it’s a treacherous road. Your money and your heart and your head are all connected, and once you start playing around with money you did nothing to earn, bad things inevitably follow.

If she had used money she sweated and toiled to earn, her attitude about it would have been different from the beginning. She would not have believed she might fail. She would not have given herself that unspoken escape route.

Invisible Money Produces Invisible Results.

I’m sure there are exceptions to this rule, just like with every other rule I’ve ever heard of. However, I continue to believe that if you start a business by giving it an invisible foundation, you’re setting up your own failure.

Have a different opinion? Have an experience you want to share? Please comment. :)