10 Stupid Mistakes Made by the Newly Self-Employed

1. Selling to the wrong people.

While sales are important to the survival of any business, you dont need to push your business on
everyone you meet, including friends and family. Furthermore, its a waste of time to try selling to
people who simply dont need what youre offering.
Selling to the wrong people includes trying to sell to everyone. Some customers are much easier to
sell to than others. For example, my wife does web consulting for small businesses, and shes
learned that some clients are much harder to work with than others. If a potential customer is broke
and obsessively worried about every nickel they spend, if they want a web site but dont know why,
or if they simply dont understand the Internet well enough, they wont be a good client in the long
run. Feel free to say no to customers that are more trouble than theyre worth. et your
competitors sell to them instead. !oull save yourself many headaches, and youll free up more
time to focus on serving the best customers.
"ust because someone is interested in doing business with you doesnt mean you should accept. In
my first year in business, I probably said yes to at least #$% of the people who approached me with
a potential business relationship. I wasted a lot of time pursuing deals that were too much of a
stretch to begin with. I accepted lunch invitations from random business people who &ust wanted to
'see if theres a way we could do something together.( )irtually none of them made me a dime. If
you think a meeting is pointless, it probably is. *ont network with random people &ust because
you think youre supposed to network. +oday I accept such invitations less than ,-,$ as often. If an
offer doesnt excite me right away, I usually decline or ignore it. .ost relationships simply arent
worth pursuing. earn to say no to the weak opportunities so you have the capacity to say yes to
the golden opportunities.
2. Spending too much money.
/ntil you have a steady cashflow coming in, dont spend your precious start0up cash unless its
absolutely necessary. I started my computer games business with about 12$,$$$ cash 3my own
money4, and it went fast5 shortly thereafter I was using debt to finance the business. /nfortunately,
the original business model didnt work, and it took five years before the business was generating a
positive cashflow. I soon learned that every dollar invested in the business was another dollar that
eventually had to be recouped from sales.
In 2$$6 I started this personal development business with only 17 cash even though I could have
spent much more on it. 8o fancy logo, no sna99y web design, no business cards or stationery. I
paid to register the domain name, and that was it. +hats as much as I was willing to spend before I
started generating a positive cashflow. :ll other business expenditures came out of that cashflow.
!our business should put cash into your pocket, so before you 'invest( money into it, be clear on
how youre going to pull that cash back out again.
;bviously some businesses re<uire lots of cash to start, but in the age of the Internet business, you
can very easily start a lucrative business for pocket change.
. Spending too little money.
Its also a mistake to be too stingy with your cash. *ont let frugality get in the way of efficiency.
+ake advantage of skilled contractors who can do certain tasks more efficiently than you can. =uy
decent e<uipment when its clear youll get your moneys worth. !ou dont have to overspend on
fancy furniture, but get functional furniture that helps you be more productive. *ont use an
anti<uated computer with outdated software that slows you down if you can afford something
better.
It takes time to develop the wisdom to know when youre being too tight or too loose with your
cash, so if youre &ust starting out, get a second opinion. ;ften the very thought of getting a second
opinion makes the correct choice clear. If you cant &ustify the expenditure to someone you respect,
its probably a mistake. ;n the other hand, there are situations where its hard to &ustify not
spending the cash.
!. "utting on a fake front.
.any one0person businesses refer to themselves as 'we.( +hats something a lot of new
entrepreneurs do, but it isnt necessary. +heres nothing wrong with a one0person business,
especially today. .y games business has mostly been a we over the years, but my personal
development business is still an I. .y wifes )egFamily .aga9ine business is a we, since she has a
staff working for her, but her web consulting business is an I. Its perfectly ;> to refer to your
business as an I when youre the only one working in it. ?retending that youre a we when youre
really an I is a bit silly. Its not going to gain you any respect in a way that matters. ?romoting
yourself as an I may even be an advantage today, since people will know the buck stops with you,
and if you make a promise, youre the one who will carry it out. ?romises from a we sometimes
arent worth very much.
If youre a newly self0employed person, dont pretend youre anything else. ?rice your products
and services fairly for your level of skills and talents. Some newly self0employed people think they
must become actors. +he business they promote to the world is pure fantasy. +rying to fool your
customers in this manner will only backfire. If youre so desperate for business that you need to lie,
you shouldnt be starting your own business. If you cant provide real value and charge fairly for it,
dont play the game of business. *evelop your skills a bit more first.
#. $ssuming a signed contract will be honored.
Ive made this mistake more than I care to admit. Ive had signed contracts with supposedly
reputable corporations, and they werent worth s<uat when the @A; decided he wanted out of the
deal, even for completely dishonorable reasons. Sure I was in the right, but did I want to go to court
to enforce itB 8o, Id rather continue doing meaningful work.
: signed contract is &ust a piece of paper. Whats behind a signed contract is a relationship. If the
relationship goes sour, the contract wont save you. +he purpose of a contract is to clearly define
everyones roles and commitments. =ut its the relationship, not the paper, that ultimately enforces
those commitments. When I understood this, I focused more on relationships and worried less
about what was on paper, and my business deals went much more smoothly. ;nce you start falling
back on the paper, the deal is already in trouble. @reative 3and lucrative4 business deals almost
always stray from the paper contracts that represent them. ;ne of my attorneys, who had worked
on do9ens of game development deals, told me that no deal he worked on ever followed the contract
exactly5 most werent even close. :nd these were big money deals in many cases. =usiness
relationships are similar to other personal relationships C they twist and turn all over the place.
Written contracts are still necessary, especially when dealing with larger corporations where people
come and go, but theyre secondary to relationships. "ust dont make the mistake of assuming that
the contract is the deal. +he contract is only the deals shadow. +he real deal is the relationship.
>eep your business relationships in good order, and you wont have to worry so much about whats
on paper.
Its sad but true that there are loads of scoundrels in business. .any of them hold titles like @A;,
?resident, and @F;. +here are indeed people out there who seem to care about nothing but money,
and they will lie, cheat, and steal to get it. In recent years some of the more despicable ones have
gotten themselves indicted 3or are already behind bars4. =ut there are plenty of others to whom the
word honor has no meaning. For example, in the computer gaming industry, it isnt unusual for
large publishers to feign interest in certain games and string the developers along. +hey give the
developer every indication that a deal is pending, but all the developer sees are delays and false
verbal promises. In reality the publisher only wants to keep the game off the market to keep it from
competing with one of their own titles5 they hope to cause the developer to miss the next @hristmas
season or to run out of cash and cancel the title altogether. It happens. =usiness, especially the
entertainment industry, is not for the timid.
%. &oing against your intuition.
Intuition is &ust as important in business as it is in other settings. !oud be ama9ed at how many
gigantic corporate deals are green0lighted or red0lighted because of some @A;s gut feeling. While
you might think that logic is the language of business, thats far from reality. If you base all your
business deals on hard logic and ignore your intuition, most likely youll be in for a world of hurt.
We humans arent very logical to begin with. We simply dont have enough data to make truly
logical decisions because business deals depend on human beings, and we dont have a logical
system for accurately predicting human behavior. 8ot being able to predict how other humans will
behave is a pretty big gap in our logic. :nd intuition has to fill that gap. +he real performance of
human beings is what makes or breaks business deals. =ut to assume everyone will perform as
expected is unrealistic in the extreme. 8o deal ever goes perfectly.
Its hard to say no to a deal that seems &uicy by the numbers when my gut is saying, '!oull regret
it,( but more often than not, I later see evidence my intuition was right all along. Sometimes I &ust
get a bad read on someone, and then years later, several people I know are complaining about being
ripped off by that person.
Intuition is a critical part of the decision0making process in business. Since business deals depend
on relationships, you need to get a read on the other people involved in any deal you consider. If
you get a bad read, walk away. If you get a good read, proceed with caution.
'. (eing too formal.
Ill say it again. =usiness is built on relationships. In some settings a certain degree of formality is
appropriate, but in most business situations being too formal only gets in the way. =usiness
relationships work best when theres a decent human0to0human connection behind them.
I think its a mistake to be too formal even when looking to establish new business relationships. If
someone mails me a letter that starts with '*ear .r. ?avlina( and then goes on to explain a long0
winded business proposal, Ill usually &ust trash it, especially if it uses the word 'we( a lot. =etter
to fire off an email with a 'Di Steve,( and &ust ask me very informally if Im interested in the kind
of arrangement youre seeking. It saves time and opens the door to a real human relationship.
Duman beings dont want to build relationships with faceless corporations. +hey only want
relationships with other human beingsE sometimes animals too I suppose.
+reat your business relationships like friendships 3or potential friendships4. Formality puts up
walls, and walls dont foster good business relationships. 8o one is loyal to a wallE except the one
in @hina.
Formality is boring and tedious. ?eople want to en&oy their work. If someone address me like a
computer, Ill respond in kind C by hitting delete. =ut if someone demonstrates they have a real
personality and a good sense of humor, a connection is far more likely.
). Sacrificing your personality *uirks.
In the early years of running my games business, I took myself too seriously and assumed that I had
to act 'businesslike( E whatever that meant. =eing self0employed was a weighty
responsibility, and other people were counting on me. Sink or swim, rightB
I started my games business in my early 2$s, and people in their early 2$s are invariably weird. =ut
I assumed that as a business owner, being weird wasnt appropriate or acceptable. So most of my
business letters and emails looked like they were written by the same people who created
.icrosofts A/:s. +he &ob title of '?resident( really went to my head. I learned how to function
without a personality.
It took a number of years, but eventually I became comfortable &ust being myself, especially after
my games business became profitable. 8ow that Im a blogger, my personality <uirks and unusual
experiences are strengths. .y personal oddities give this blog a uni<ue flavor. If I were to take
myself too seriously and write more formally, this blog would be very dull and would likely lose
much of its audience.
Its perfectly ;> to be your own weird self and to in&ect your own uni<ue spirit into your business,
especially if youre in your teens or 2$s. *ont be afraid to be more like Steve "obsE and less like
Steve =allmer. *ont pretend to be something youre not. /ltimately youll en&oy your work much
more if you attract the kinds of customers and partners that want to work with you for who you are
C warts and all. Send the people who only want to work with androids to your corporate
competitors. +hey deserve each other.
If other people cant handle your weirdness, too bad for them. Focus your energy on the people
who can.
+. ,ailing to focus on -alue creation.
Its easy to fall into the trap of thinking that the purpose of a business is to make money. =ut the
real purpose of a business is to create value. While its possible to make money in the short run
without creating much value, in the long run its unsustainable. Aven criminal organi9ations have to
create value for someone. When you know your business is &ust sucking value away from others
without providing anything in return, it will erode your self0esteem, and the business wont be
much fun to run.
Why does your business existB It exists to provide some sort of value, both for you and your
customers. +he better you understand what value youre trying to provide, the better youll be able
to focus. +he basic value provided by my games business was cerebral entertainment. +he basic
value provided by Steve?avlina.com is personal growth. +oo often business owners arent clear on
what value theyre trying to provide. +hey &ust sell stuff and hope for the best. +hats a lousy
business model. +he world doesnt need more selling or more stuff. =ut it always needs and
wants genuine value creation, and thats where you should direct your efforts.
?resently this web site contains over 6$$ free articles. +hats a lot of value creation. +housands of
people visit each day to receive some of that value. Delping people grow is the
business primary aim.
10. ,ailing to optimi.e.
:lthough value creation is essential to a sustainable business, its e<ually naive to assume you can
simply focus on creating value, and the rest will take care of itself. !ou may build a business that
provides good value but loses money. :s a business owner, you need to find a way to deliver your
value in a cost effective manner. .ost likely your first attempt will be very suboptimal. !oull
waste too much time, money, and resources trying to produce and deliver your value. +hats ;>
though. .any businesses start out that way. "ust dont let yours stay that way.
;nce you have a particular business process in place, pull it apart and re0optimi9e it from time to
time. ook for ways to make it more efficient. @an you get it done in less timeB :t less costB @an
you do it less fre<uentlyB @an you outsource itB @an you dump the process altogetherB
I used to process credit orders for my games business manually. I started the business in ,776, and
when Id receive an order through the mail or via my web site, Id use some software to input and
run the orders by modem. :t the end of each month, Id manually tally the sales. +hat worked fine
when sales were low, but it became burdensome as more products were released and sales
increased. Several years ago I upgraded the process such that online orders were fully automated,
including instant delivery of the game download. :ll orders are recorded in a database, and I can
view real0time reports to see how sales are doing for each product. It took some work to set this up,
but it was well worth it. +hat one optimi9ation saved me a lot of time and effort, and I dont have to
pay high fees for a third0party order processing service.
*ont fall into the trap of using archaic methods for doing routine tasks that could be
automated, including inventory management, billing, accounting, order processing,
communications, and marketing. If you find yourself doing the same repetitive tasks month after
month, make sure you put some effort into optimi9ing them. 8ot optimi9ing is like throwing time
and money down the drain. Its often much easier to save time and money than it is to create them.
:n Internet business has abundant opportunities for optimi9ation because its so easy to try new
things and measure the results. In the first year after launching this site, I experimented <uite a bit
with Foogle :dsense. .any people dont like the ad layout on this site, but its the most effective
layout Ive tried so far. I use it because it works. :dding the donations page was another
optimi9ation. Some people click ads, some people donate, and some do both. So even though
value creation is the primary aim of the business, this is still a for0profit business and needs to
generate income in order to be sustainable. If I dont eat, I dont write. .ore money means more
resources for ongoing value creation. So value creation and optimi9ation go hand0in0hand.
It takes significant effort to build a successful business, but its also a tremendous growth
experience. I know many people who have <uit their &obs to run their own businesses. .any of
them didnt do as well as theyd hoped, but I dont know any that regretted taking the plunge.
+heres simply no substitute for holding the reins of your own destiny.