

Ask HN: What was your biggest business mistake? - flavio87

Team, Investors, Marketing, Risk Management, Technology - whatever it is. What have you learned from it? What could you have done to prevent making the mistake in the first place?
======
davidst
Where to begin? I'll pick one of my favorite mistakes: Cleverly avoiding a
market that was ripe for the taking.

In the early/mid 90s I built a compressor called Quantum that outperformed
PKZip by an average of 20% to 30%. For a few years it was the best-performing
general-purpose compressor available.

Microsoft, Borland, Novell and a handful of other companies licensed it.
Cumulatively it saved them hundreds of millions of dollars in cost-of-goods
for disks.

My smaller mistake was to not apply for a patent. Quantum was the first
compressor with a workable implementation of optimal parsing and about half of
the improvement over PKZip was due to it. I was then (and still am)
philosophically opposed to software patents but purely from a business
standpoint possessing a patent on optimal parsing would have made it difficult
for competitors. That said, I don't view the decision to not apply for a
patent as being a mistake as much as a deliberate choice.

My bigger mistake was to ignore the retail market. I felt that PKZip owned
that and going up against them would be foolish. Instead, I took the low-
hanging fruit of selling to software publishers. It was a handful of boutique
sales (which one man could do) instead of attempting to penetrate the retail
market against a strong, established competitor (which seemed intimidating.)

Except... I was completely wrong. PKZip never made a concerted effort to build
a usable Windows version of their product. Phil Katz didn't like Windows and
so PKWare was slow to evolve the product from a shell wrapped around the DOS
tool into a first-class Windows app.

The world needed an easy-to-use compressor for Windows. An improved UI and
support for additional compression formats extended beyond the scope of my
original product but I could have done it without difficulty and I rejected
the idea for the wrong reasons.

The market was ripe for the taking yet I cleverly convinced myself it wasn't
worth trying and settled for less. Fortunately for WinZip they didn't make the
same mistake and they quickly rose to a dominant position.

------
vlad
I created a helpful product that 9 out of 10 users said they would recommend
to a friend, with about 1,000 paying customers. I was too shy to market it or
advertise it anywhere, though. I got dejected after being declined from
YCombinator in Spring of 2007, and on top of that, my dad was laid off that
August. I decided to make the program free to focus on a job I started, and I
stopped maintaining it soon after.

Another is that I got into the iPhone Store beta program in March of 2008 due
to this product, and purchased a MacBook Pro to learn Objective-C. I felt it
would be correct for me to quit my job right then that March and spend the
next few months creating an app to release to millions of iPhone 1G and 2G
users while app expectations and competition was very low. I didn't want to
deal with the stress and negativity from my dad of quitting my job just six
months after starting it, having dealt with that negativity for years. I was
also doing some dental work and the job had a $2,000 dental insurance.
Instead, I created mockups for the company I worked for that were shown to the
COO/CIO, thinking I could maybe get a bonus money. Instead, my manager was
promoted. I applied to UMass that same March in case I wanted to go back to
school in September, which is what ended up happening; the idea being that
college was a good place to find a co-founder. Although I ended up winning one
of the two entrepreneurship competitions here, the overall feel of a state
school is to get a job, not do something entrepreneurial.

I'm about to make a third business mistake: trying to get into the grad school
so I can continue working on the front-end of a rails app I'm already doing
undergrad research with right now.

The problem with being a single founder is that there are so many people
trying to tell you you're wrong, and with increasing intensity, that even if
the signs are all positive it can eventually get to you. My customers love my
product, and that's actually all that matters according to entrepreneurship
logic. But when your parents or others don't see your customers, as well as
pretend not to care in order to demotivate you from it, to them, it was like I
was just home all the time.

~~~
arpan888
if you're about to a make a third business mistake, then why not stop it
before you do?

------
hippo33
Didn't seek product/market fit quickly. A couple years ago, a friend and I
started a real-time social shopping tool that we'd hoped to pitch to online
retailers.

We spent months and months just building and building. We had a small team of
developers working with us as well. It took us about 10 months to get our
first prototype out only to find that no one wanted it -- not consumers nor
retailers. By that point, morale had already started to drop, because everyone
on the team thought we were just spinning our wheels and couldn't see any
traction. Instead of spending another few months building in the dark, at that
point, I mocked up something quickly in Photoshop and started pitching
different ideas to retailers to see what people were interested in. I was
amazed that retailers could understand what kind of product I was talking
about just by seeing a mock and without actually having a demo or a prototype.
After going back and forth on different design iterations, (I'm not a
designer, so it was even more remarkable that potential customers could
understand my mocks) we finally hit upon one that was of interest to many
retailers.

Although we piloted and signed with retailers, unfortunately, it was already
too late. The sales cycle with retailers is quite slow, and many of the larger
firms plan for their website a year in advance. So we would not have even
gotten the data needed to prove out the success of our idea for at least
another year.

Speed to find product/market fit was something I completely did not understand
then. I should have started circulating mocks on day 1.

~~~
fezzl
Hi, we are also working on a "real-time social shopping tool" that we hope to
pitch to online retailers. I'd like to talk to your further about your
experiences. Is there any way that I can contact you?

~~~
hippo33
Sure -- email me at hello@launchbit.com. Cheers!

------
jacobroufa
Communication is vital. If communication breaks down then everything else
turns to shit.

Also, handshakes don't cut it as much as we may want them to. I'd love to be
able to trust people, but in matters where money is involved no one can be
trusted.

I learned this the hard way. Please, use my mistakes to your advantage.

~~~
arcwhite
Seconded. It's not a done deal until the money is in your bank account. If
someone offers something, you write a Memorandum of Understanding _at least_
to clarify the details.

Also, never trust anyone who asks for a little bit of work at a discounted
rate in return for the promise of more work later. Even if they're a
government department. They may mean well, but they're almost certainly not in
a position to back that promise up.

------
phamilton
While starting a ad driven website, we relied on Google Adsense. We were
trying to bootstrap the site on very little funds. It wasn't until we'd been
running for a couple of months that we dared to try and find local
advertisers. In 1 month we were able to make more than double with local
advertisements than what we had made the month before with Google Adsense. Our
traffic didn't grow very much in that time, but local advertisers were much
more willing to buy space on our site than we anticipated.

If I could do it again, I would try to book specific advertisers from day one.
Slap a guarantee on there if necessary, but only use Adsense to fill in the
gaps.

------
codeslush
Getting into a business I didn't know enough about, that wasn't aligned with
my core strengths and desires, in anticipation that I could make a stronger
income than I could doing the things I actually loved. It was a very poor
decision that I stuck with far too long. It nearly killed my spirit and took a
huge financial toll on me and my family.

The decision to do this was the direct result of an ego that was out of check.
I made a significant hourly rate for many years consulting (to one client -
another mistake, btw) - when that contract ended, I didn't want to accept the
lower rates and rejection found when trying to find high paying consulting
jobs via the web. So, instead of adapting to the situation or finding creative
solutions to it, I avoided it by doing something entirely different. VERY,
VERY poor decision. I've been humbled greatly - which I actually think is a
benefit of this experience.

I did learn a tremendous amount about people and business during this process,
but it isn't one I would likely repeat with the benefit of hindsight.

------
iuguy
Thinking if you build it they will come. It doesn't. You have to go out and
sell, you have to push harder than the other guy, who may be bigger, stronger
and cheaper than you. You still have to do it. You have to get rejected and
have your skin make a Rhino's hide look sensitive.

~~~
aymeric
When do you know you should keep pushing and when should you pivot/move on to
something else? I always seem to be battling with this question.

~~~
iuguy
On the sales side I don't stop till I'm told we've lost the deal. Even then I
still ask for feedback and try to see if there's anything that can be done to
recover it, but direct B2B is a bit different to what most people do here.

For other stuff, to be honest I'm just as guilty of holding on too long or
overinvesting time in something that won't work at the expense of something
that does as much as anyone.

I just try to recognise my mistakes, learn from them, how to spot them
happening again and how to avoid/evade them. I think that's all I can really
do. I try to suck a little less each day, with varying degrees of
success/failure :)

------
arcwhite
Trying to run a service-based dev business to support creation of products.
That consulting grew to consume 100% of our usable time and resulted in a
period of pretty intense burnout, personally.

~~~
zdw
If you're in this situation, you might try honing your focus - if you can zero
in on the most lucrative/time segments of your consulting practice, you may be
able to make this work.

This does depends greatly on your client mix and financial situation.

~~~
arcwhite
We'd almost done that - had a brilliant marketing plan drawn up and
everything; then burnout hit myself and my business partner (hard). The coup
de grace was delivered by the GFC

(Even here in Australia, small businesses were hit - and all our clients were
small businesses or primary industry and simply stopped paying invoices or
returning calls.)

------
variety
Attempting to communicate a distance (or in a context lacking suitable
bandwidth, otherwise: in an overly hurried fashion, in a noisy cafe instead of
a quiet office, etc) in regard to a matter that really required an unhurried,
face-to-face discussion.

That is, even though there've been situations where I'm (still) pretty darn
sure it was ultimately "their" fault things weren't working out too well,
there are still things I could have theoretically done to guide things to a
smoother transition -- by waiting a day or two to have time to travel to the
next city, for example -- and thus, perchance _not_ see a relationship that
took years to cultivate suddenly go down the crapper, apropos of almost
nothing, or so it would seem.

Again, theoretically. And all in retrospect.

In the moment, it's so easy to be (justifiably) consumed by the sheer
obtuseness of what the person is doing, that it's hard to see the benefits of
simply waiting things out... or perchance, simply not "leveling" with the
other person, simply because it feels like the right thing to do, at the
moment.

But the bottom line is, even if you do feel you have to "level", or unwind a
business relationship with someone you at least once, theoretically,
considered to be a friend -- email and chat are just really awful channels to
have to do that in.

------
xiaoma
I put in more than full time effort for three years as a partner building a
small business in a country where I couldn't actually own it. In the end all I
could have was a private agreement with my local partner... but I didn't
realize that until I was already emotionally and financially committed to the
enterprise.

In retrospect, I learned a great deal from it and am doubly motivated to
become a good programmer and have a stab at the software business. It was a
costly way to learn, though.

------
edge17
discussing equity after product had been built and a bunch of code had been
written.

------
pasbesoin
This is hardly revelatory, these days; nonetheless:

Trying to "pay my dues" as expected and/or manipulated by an older generation
particularly of middle-management. That may have been the way things worked
for them, but more and more of the U.S. employment space doesn't work that way
anymore and hasn't for well over a decade.

Employment in the U.S. is becoming de facto class based, and if you permit
yourself a) to become over "classified", and b) to let such a role mis-direct
your energy in inefficient directions, you can seriously screw yourself.

Neither am I a fan of the know nothing hotshots that e.g. were being
parachuted in as excessively paid management consultants. But that resentment
doesn't negate the above fact.

Look for the exceptional person who really is competent, and cooperative, and
build your relationships that way rather than through whatever formal
hierarchy. And keep yourself prepared to jump ship; don't paint yourself into
a corner, especially financially.

------
kapauldo
Bad partners who didn't want to work hard. It's toxically demoralizing.

~~~
iuguy
The same goes for any people who either don't fit (to a much lesser extent) or
for toxic people who bring politics into the game and suck the life out of a
company. Those are mistakes I've definitely had to make more than once to
(hopefully) avoid in the future.

