I started my first business eight years ago in 2004. I’ve managed teams as small as two (from our top bedroom), all the way to my current 54-person team at Treehouse. I’ve had some wins and plenty of losses and learned a lot of things the hard way. Hopefully other business owners can avoid these un-fun mistakes …
1. Treating employees like friends
In the early days I tried to be the Buddy-Goodtime-Boss. I would treat employees like friends by talking a lot about their emotions, friending them up on Twitter and Facebook, going drinking with them after work, etc.
The problem is that I needed to be objective about their performance and sometimes ask them to move on to another job.
I found that it was almost impossible to switch from friend to objective, business owner. It’s confusing and unfair to employees to make it appear that you’re friends and then have to potentially fire them for performance issues.
Currently, I treat my employees with respect and kindness but make it clear that we have a professional relationship. Both of us have to hold up our side of the bargain and hit our targets, or tough decisions will have to be made.
Ben Horowitz wrote a great post on this issue which I’d recommend reading.
2. Not keeping track of delegated tasks
I undermined my own authority by asking employees to do a task by a certain date, and then not following up with them when it was due. The unofficial message was that I wasn’t really serious when I set a deadline.
I now keep track of every task I delegate by using Trello. I’ve got a board called ‘Delegated’ and each person has their own list. Every time I ask someone to complete a task, I create a new card and add it to their list. I’ll write a few notes and occasionally add a checklist to the card.
When I do my weekly 1-on-1 meetings with my Leadership Team (those who report to me directly) I go through their list and ask for updates on every card.
3. Not understanding our P&L and Balance Sheet
I met with our accountant quarterly to sign off the accounts and it always felt like a nuisance. I thought all that mattered was the cash-flow. The problem is that the P&L, Balance Sheet and Cash-Flow were all working together to give me a complete picture of the business. However, I was just focusing on how much cash we had and whether we had enough to make it through the next three months.
When it came time to sell my events business, it turned out our Balance Sheet was in bad shape because we had collected a lot of revenue that we couldn’t recognize because it was for a future event. That means it was a liability, not an asset. Ouch.
That mistake cost me around $175,000 personally as the buyer knocked that amount off the purchase price. When someone buys your company, the transaction is done on a ‘zero balance sheet’ meaning they pay extra for assets or take away cash for liabilities.
This was a timing issue and if I had understood it, I could’ve timed the sale of the business more effectively to maximize the purchase price.