What a year! That’s all I can say about 2016, and I don’t mean it in a positive, enthusiastic way. I worked harder, yet earned less than I did in the prior two years, and the hard work was rarely enjoyable.
As I reflect upon the year’s events, I suspect that we netted at least $500,000 less than we should have. This number includes about $250,000 in human-related payments (salary, bonuses, consulting/coaching fees), and at least $250,000 in opportunity costs (missed deadlines, execution fuckups, etc.).
Before I jump into the mistakes, a very brief primer on my business and the state of it:
We sell men’s dating and self-development advice – ebooks, online seminars, etc. – using direct marketing.
That means we spend money on ads, drive visitors to our sales websites, attempt to convert some percentage of visitors into buyers, and then attempt to convert some percentage of buyers into repeat buyers. Our revenues have been into the eight figures for the past few years.
We’ve wanted to move into other markets since late 2014, while still serving our core men’s self-development vertical, which is a perfect segue into the first mistake.
#1 – Letting A Problem Simmer For Too Long
Tech has been both a big enabler, and the Achilles heel of this business. Because of some tech decisions I made, we’ve been able to do things that others in our market haven’t. Yet the cost of those decisions has been greater complexity… which demands more talent, management and money.
Our tech worked pretty well when we had our first big hit product. It survived the launch of our second product. Then everything went to shit. And this was back in 2014!
Rather than re-evaluate our tech and our leadership, I plowed ahead with more products and marketing. Yet tech problems continued to simmer, and occasionally boil over. I was trading long-term strategic growth for short-term income, and here we are two years later, and we still haven’t moved into new markets.
#2 – Loyalty Shouldn’t Be The Primary Reason To Keep Someone Around
The guy who was leading tech had become a good friend of mine, and I trusted that his intentions and interests were aligned with mine. We were loyal to each other, and that felt really good.
I kept making excuses for him and for tech. I hired a coach for him. I pushed him to give me a budget and ask for resources. I spent a lot of time trying to understand and dig into the problems… time that could have been spent on any other growth activity.
If I’d been more clear-eyed about it, I would have begin looking for new tech leadership in early-mid 2014. But loyalty skewed my perspective on reality.
I still believe that this guy is a great person who always had my best interests at heart. He just wasn’t up for the job, and I didn’t want to accept that until it was blindingly obvious.
EDIT: my friend Dmitry, another successful entrepreneur, made a comment on Facebook in response to this post. It’s a subtly different, but profound take on this point:
#3 – Full Time Employees > Coaches and Consultants
In late 2015, I hired a coach/consultant to help us with tech. Then I hired a consultant to help with data and analytics. Then I hired a consultant to help with brand development. With the money I spent on those guys, I could have had some incredible full time employees. Or a Lamborghini Huracan.
In fact, the ONLY coaching investment I’ve ever made with a real ROI was with David Garfinkel, who taught me copywriting (and arguably, that investment paid for all the rest of these guys!).
Hiring FTE’s is more of a commitment than coaches or consultants, and not every hire works out. But I can point to a small number of full-time employees who’ve been with me for over a year (and in one case, over five years!) as the enablers of my success (and whatever “genius” I bring to my business).
#4 – Onboard For A Clear Strategic Reason
Sometimes you meet someone and think “man, this person is fucking smart… I really want to work with them.” Or at least, I do. It’s a great feeling that can lead to poor decisions if you have money.
Several of the consultants I hired, and a few employees, were hired under this pretext. They had a set of skills that loosely aligned with something that I kind of wanted to do in this business, and I really liked them (and still do!)
But the hiring wasn’t proactive. It wasn’t driven by a strategic plan. It was more like, “oh hey, here’s this person I want to work with, let’s amend the strategic plan to fit them in.”
Yet I’ve found that the only time I succeed is when I plan to win. It’s like… “we’re gonna do this fucking thing, and we’re gonna win, so let’s figure out how, and keep at it until we win.” Everything else ends up failing, or being a diversion.
#5 – Hiring When You’re Needy
On the flip side, hiring when you’re needy is all sorts of bad. It’s like going to the supermarket when you’re hungry or dating when you haven’t had sex in a month. My worst two hires this year – and possibly ever – were hired under these conditions (the neediness, not the lack of sex!).
One was a Marketing Manager. We’d been without one for months, and we wanted to get the position filled quickly, so we only interviewed two candidates. Our winner lasted for all of three months, but I knew I wanted him out after two days on the job.
The other was a new VP of Engineering. We’d been collecting resumes for months, re-listing the job, bumping the salary… we were starting to feel desperate when we finally started getting decent resumes. We narrowed them down to three, and our #1 and #2 choices took other jobs. That left us with #3, who was an even bigger disaster than the Marketing Manager.
The best hiring I’ve done has been proactive, and is often done before I think I’m ready to fill the role. It’s a leap of faith, but it gives them time to learn the ropes and shape the role.
#6 – Not Trusting My Gut On Hiring
My friend Mark has a great article called “Fuck Yes, Or No.” It’s about dating, but I think it applies just as well to hiring.
The best people I’ve hired, I’ve liked… right away. The first time I talked to our COO Chris, or our Customer Happiness Manager Amy, or our current tech lead Robert, it was awesome. I still remember getting off my first call with Chris, and saying to Marina, “man, if all the candidates are as good as this guy, this is gonna be a hard decision.” They weren’t, and it wasn’t.
Good vibes have to be weighed against everything else – the resume, the references, the interview, and the need. Good vibes alone aren’t a good reason to work with someone. But bad vibes are an immediate reason to say no.
The aforementioned Marketing Manager was a genuinely good guy, and for that reason alone, it gutted me when we let him go. But from the first interview, I knew he wasn’t a cultural fit. We never “gelled,” so our work – and the role – suffered for it.
The VP of Engineering hire was like… an instant fuck no. I almost ended the interview after the second or third thing out of his mouth, and man, I sure wish I had done so!
In fact, we had written him off until the other two candidates took other roles, but revisited (out of neediness, of course). His resume was great, and we were shocked by how highly his references spoke of him. So hire him we did. And we’ll all look back on two months he was with us, with the grim humor that good teams adopt when they’ve survived a disaster together, and lived to tell the tale.
#7 – Making Vague Compensation Promises
We were lucky to re-fill the Marketing Manager role quickly, with a friend of mine who’d been doing project-based work for us. He threw himself into it, and I was ecstatic. A few months in, we began a “skunkworks” sort of project – just me and him, many late nights, and lots of Longboard Lager.
During the initial working sessions, I made a vague promise that he’d get a bonus if we finished the project by October 1, and left it at that. It turns out that what I had in mind for the bonus was about a sixth of what he had in mind, and that “finishing the project” meant different things to us. When October 1 came around, he came to us with his deliverables, and expectations for compensation… and I literally choked on the banana I was eating.
Chris and I worked to bridge the gap with him, but he couldn’t overcome the feeling of being taken advantage of, and he resigned in mid-October. We lost a great team member (and of course, it wasn’t ideal for our friendship).
That’s not the first time this sort of thing has come back to bite me. Over drinks one night at a club with my first Marketing Manager, I threw out an idea for a new comp plan for him. It was a throwaway thought for me – and a very generous, good-vibes-induced one at that. But he held onto it, and it poisoned (and greatly lengthened) all of our future compensation discussions.
It should be obvious, but since I was dumb enough to make the mistake multiple times, let’s just be blatant about it: don’t mix drinking and compensation discussions! And more broadly, don’t make compensation promises until you’re ready to be specific about what they are, and what it will take for someone to hit them.
So How Are We Still Profitable???
It’s amazing to me that it’s possible to fuck up this much… on such big things… and still manage to make millions. I think that the things we get right – our copywriting, our products, our customer support, and more recently, our operations – have been enough to compensate for all the mistakes. But just barely! March was the first month ever that this company lost money, and our current profitability has more to do with expense management than it does with expanding our revenues.
It leaves me with a lot of respect for guys like Travis Kalanick or Reed Hastings, who’ve built much bigger businesses, and been embattled on much larger strategic fronts. And it makes me incredibly thankful for my team and our customers.
Make no mistake – there’s a big vision and a strategic plan, and tech is the current bottleneck. But we finally have some great developer talent on board. And I put all of our big product and marketing initiatives on hold, to give the developers space to rebuild our core tech. I’d rather that we “walk and chew gum at the same time,” so to speak, but we’ve gotten tech wrong for long enough that I felt it was worth the sacrifice. Based on what we’ve rolled out so far, it looks like it will be… but let’s see how things are looking in mid-2017.
Hopefully you’ve taken something away from this, and if you’ve got any fun and costly mistakes worth sharing, I’d love to hear them.