Thread by @Nicolascole77

When I was 26 years old, I started my first company with one of my closest friends.

18 months later, we had 20 full-time employees & several million in revenue.

❌💸Here are the mistakes we made that cost us hundreds of thousands of dollars ❌💸👇👇👇

Mistake #1: Scaling the wrong product.

Our V1 offering was 12 ghostwritten articles per month for 1 executive/founder client. That level of output was absurd, but at the time I was used to writing 1 new article per DAY for myself.

Clients signed up, but many fell behind.

Every time a client fell behind, they would "pause" and then we'd be stuck with the balance of overdue articles, which ate into our profit margin heavily over time.

We scaled with that broken V1 product for months without even considering bringing the workload down.

Lost $$$

Mistake #2: Not increasing pricing.

~6 months in (and after hiring 5 full-time employees), we reached a breaking point. We brought workload from 12 articles per month down to 4. Huge margin/productivity increase.

Unfortunately, it took us another 6 months to do same w/ pricing.

This was in 2017, during the first big crypto boom.

We were signing 10-15 new clients per MONTH, and 1/3rd of them were in crypto. During this entire growth spurt, we didn't change pricing at all.

Had we increased prices, we'd have easily made another $250k in cash.

Lost $$$

Mistake #3: Having 100% of our staff full-time.

We were selling a premium service to CEOs/founders at a very high price point compared to industry standard for written content. So, we felt it important to employ full-time.

This was arguably our biggest mistake w/ the business.

Full-time employees means fixed overhead. We had to pay salaries no matter what.

Meanwhile, our churn was high because of the nature of our offering. Not many clients could stick with the volume/long-term publishing consistency.

The bigger we got, the higher the overhead/risk.

Months where we were profitable, we'd make great $$$.

But then a few clients would churn, and we would need to cover overhead costs for 1-2 months before new clients started, and those 60 days would erase the profit we'd just collected.

This happened over and over again.

Mistake #4: Not adding an "up to X articles/mo" clause.

Since we were writing on behalf of busy execs, founders & investors, many would miss their calls. Not their fault. We understood.

But this would push publishing back, and within 1-2 months, we'd be "overdue" on articles.

Since we didn't have an "up to X articles per month" clause in our contracts, we would accumulate balances with clients and owe them pieces long into the future.

This killed our accounting. On paper, we looked profitable and healthy.

In reality, we were racking up labor debts.

Mistake #5: Chasing top-line revenue over bottom-line profitability.

In 2017, I moved to LA and we decided to bring in two (amazing) angels @jeffseibert @Wayne. We were profitable (esp then) but were hungry to grow. We used the investment to speed-hire.

Between 2017 and 2018, we grew from 5 full-time people and 15 clients to 20 full-time employees and more than 60 clients around the world.

Our sales machine was incredible, and we were closing clients so fast hiring became our full-time job.

Unfortunately...

Our mindset was that "once we get to X, then we can care about profitability," and that was a mistake.

Every month's profits were reinvested into next month's hires. We were scaling top-line, but had very little cash in the bank relative to the size of our team.

Had we stayed small, reduced our output (X articles per month), and increased our pricing all earlier in the startup journey, we would have built a 5x more profitable business.

My co-founder and I would have each made a killing in our late 20s.

Instead, we lost $$$

Mistake #6: Trying to build 2 different businesses at the same time.

In 2018, my co-founder and I realized we were in a dangerous place. We either needed to speed-grow through the next $2-3M in top-line revenue and settle into profitability, or scale the business back.

We essentially did neither.

We thought if we could move the business from being a service to being more of a tech product/platform, we could get out of the hours-for-dollars agency game.

This was the wrong thing to try and do while the company was still so young.

For a year, we worked 10 hours per day running the agency, and then worked another 3-5 hours every night on trying to turn the agency into a tech product.

We explored fundraising. We got a big commitment from a VC firm here in LA.

"Under 1 condition..."

We had to shut down the agency.

It only took 1 meeting for the VC firm to point out that the agency and a tech platform were two fundamentally different businesses.

"Every hour you spend building the agency, you're NOT building the platform w/ 100x more scale."

He was right.

Mistake #7: Not paying ourselves first.

Very early on, when we brought angel investors in, my co-founder and I stopped paying ourselves first.

We stopped all distributions from the business, and reinvested everything back into growing top-line revenue.

We thought, "This is how you do a startup, right?"

You eat ramen noodles for 5 years and then in the end it's all worth it.

We learned the hard way, no, that's not how you do it.

It didn't occur to us until ~2 years in that we weren't building an exitable business. Agencies don't get acquired for huge multiples, and you need to be $10M+ to really be acquirable.

The entire time, we kept our salaries low and fixed, never enjoying the fruits of our labor.

Mistake #8: Cutting our salaries before cutting team members.

There were a few times during our startup journey where biz got tough.

We didn't know if we were going to be able to make payroll.

To combat the problem, we cut our own salaries instead.

BIG PROBLEM.

This is one of those things you can't learn until you experience it.

The moment we cut our salaries (in half), we both resented the business. We were working 12 hour days earning less money than either of us had made since graduating college.

Huge kick in the balls.

But, we were the ones who made the decision.

And we learned the hard way we were masking problems within the biz by taking the financial hit ourselves.

Mistake #9: Not realizing what type of business we were building (and if it was meant to scale).

In the very beginning, we had created an amazing boutique offering. Clients who used our process LOVED it, raved about it, and often introduced more clients.

It just couldn't scale.

There is a different version of this story where my co-founder and I reduced workload, increased pricing, and built a more exclusive/"waitlist" boutique business capable of generating significantly more profit.

Maybe a few employees. But stay small.

That would have netted $$$$$

At the beginning of our journey, @Wayne said to us,

"Give 10 different entrepreneurs the same resources, and they will all end up in different places."

In the end, I finally understood what that meant.

Had we made different decisions, we'd have enjoyed very dif outcomes.