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The 10 Biggest Mistakes My App Development Company Made in Our First 10 Years in Business

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October 20, 2020 11 min read

Opinions expressed by Entrepreneur contributors are their own.

Ten years ago, on October 14, 2010, right before I graduated college, I went to Boston City Hall, paid a filing fee and registered my company, Yeti, LLC

I soon brought on my business partner, Rudy Mutta, and now, 10 years later, we’re still in business and, despite Covid throwing us some major curveballs, growing.

We are a bootstrapped service business, so compared to some of our peers in our hometown of San Francisco, we can really only claim modest success, having never IPO’d or become a billion-dollar unicorn. 

Looking back on our decade running this business, we’ve had the highs of being in a Netflix documentary, building high profile apps with top-tier clients and making it into the Fortune 5000. But, what you don’t hear a lot about from entrepreneurs is the mistakes they’ve made.

As we look back over the past decade, those mistakes are the moments when we learned the most. So, instead of touting 10 years of triumphs, I thought I would share 10 of my biggest mistakes and the lessons that came out of them. Knowing very little about running a company 10 years ago, I could have saved myself a lot of time, money and energy knowing these things.

1. The taxman cometh

In our first year of business, we thought it would be wise to show just how profitable we were. We even made sure we cashed a massive check from a client at the end of December to close out the year with even more earnings. 

We didn’t realize that no one really cares about your profits at this stage, but the taxman cares that you pay what is due. 

Not having kept track of our expenses properly, not paying monthly or quarterly taxes and not saving adequately left us almost completely decimated after our first year. 

In hindsight, it would have been hugely beneficial to understand some of the basics of business tax going into this venture.

2. The world is not flat

When we started our company, we got really excited about the idea of keeping our organization completely flat, where everybody had the initiative and self-organized to hit company goals. This works when your company is six people, but as it grows, it becomes impossible.

Reflecting back, I think it was because I was scared of doing the work necessary to be a leader. I had one business coach eventually tell me, “It sounds like you are trying to operate a pirate ship.” That might sound fun, but in actuality, pirate crews don’t perform very well.

Leadership is an artform that is important to study and practice — you can often give people more freedom and job satisfaction by providing them with a structure to do their best work.

3. Establish core values

As our business grew, so did our team. However, we kept hiring and losing employees, which, as it turns out, is quite costly. In fact, a conservative estimate puts the cost of replacing an individual employee at one-half to two times the employee’s annual salary.  

What was frustrating is that there wasn’t always a tangible reason some people didn’t work out. We couldn’t quite put our finger on it. After consulting with many other business owners, I learned that having established core values would help us make sure we were aligned with employees during the interview process before bringing them on board.

We made it a priority to have constant communication with the team about our core values and have since used them to promote and retain employees. It is important to have everybody understand and align around these. It makes for more harmony in the business.

Related: 9 Common Mistakes Made by New Entrepreneurs

4. Enjoy the moment

Running any business is going to come with its headaches. I have yet to meet an entrepreneur who has had an entirely stress-free go of it. Whatever the struggles, be it struggling for cash or dealing with personnel issues, it’s important to appreciate the moment and time and space your company is in. 

For a while, we tried to be a company that we really weren’t and it took a toll. We were trying to be who people thought a software development firm in San Francisco should be. It resulted in a lot of wasted time and money and left us frustrated and dissatisfied, chasing something we were not. 

5. There are no silver bullets

When you are growing a business, it’s really easy to think, “I just need to make this one silver bullet hire or execute on this one tactic. After I do that, we will get to the next level.”

It never works out.

The honest truth, which it’s taken me many attempts to learn, is that no one person or thing is going to come in and solve all the problems at your company or just immediately take you to the next level. It’s all an iterative process, and you need to find the people that want to go through that process with you. Make very clear to everyone on your team that you all are in the business of working on the business. 

Even if someone you are thinking of hiring has been amazing at another company and has done awesome things, it’s not the same company as yours and it will take work to make your company that way. One person alone, new to your company, isn’t going to do it.

What’s most important with any new strategic initiative like hiring is to take your time, know your core values and share honestly with your team where you are and the work it’s going to take to level up. Get people aligned so they know the path you are on — running a business is more about creating and navigating a roadmap than going out searching for silver bullets.

6. Design your culture to have a cadence

Company culture doesn’t mean “cool” swag, being BFFs with your co-workers, or in-office happy hours every Friday. Those are superficial. 

I started this business right out of college, so you can imagine that, at first, this is exactly what I thought company culture was. We rented a fun office with a roof deck, had bands come and play, threw parties. It was a lot of fun, but the business didn’t really gain much … and I lost a lot of Saturdays cleaning up beer bottles.

The company would have benefited from more meaningful team bonding, and I’m pretty sure we lost some clients when they saw our office looking more like a hacker house than a place where professionals worked.

As I’ve grown into becoming a “real”” business owner, I have realized culture is how your team all comes together, holds each other accountable, supports one another, gets the work done and celebrates victories together. We now have more structured team days and meetings focused on themes with actionable takeaways that our team finds more impactful.

Build the systems, make space and have a cadence for how these things are done.

Related: 8 Huge Mistakes Most Entrepreneurs Don’t Realize They’re Making

7. Marketing should be authentic

Any entrepreneur who’s been in the business long enough can give you a laundry list of marketing tactics they’ve tried. 

It’s hard not to fall for some of the “get rich quick” schemes out there, ourselves included. (We’ve literally spent hundreds of thousands of dollars learning this lesson, folks, so if you don’t take any of the other advice, at least listen to this tip.)

But what we have found is that when it comes to sales and marketing, if it seems too easy too good to be true, it absolutely is. This sort of thing works in the movies and people love to brag about how they gamed the system but in actuality, nothing replaces doing the hard work.

We have found that to resonate most with leads and potential customers, we need to be authentic and true to who we are as a company. The more authentic you can make your outreach and communication, the more you’ll resonate with people — maybe not everyone, but the people who are right for your business.

8. Focus on building relationships

As a young company, we didn’t realize the power of relationships in our business, but as we’ve grown up, we are continually reminded of how important they are.

When we started out we were very focused on getting a job done and then moving on to the next one. We were very focused on the here and now. We weren’t looking at the bigger picture of three, five, 10 years and beyond. 

No matter how much “lead gen marketing” we’ve done, the primary driver of our business has been referrals. They may not be referrals we get right after we finish a project with someone, but putting effort into maintaining and strengthening our relationships has absolutely paid off over the years. (Plus, people on my team and I have made some lifelong friends along the way!)

I wish I had spent more of my time focused on that in our early years. There are really simple things you can do to stay in touch, check in with people and develop relationships. For a service business especially, this is some of the best marketing you can do. 

9. Know when to say “no”

This one was a real struggle for us at first. We took on bad clients because we hadn’t identified how we bring value to the table. They had the money to pay us so, why not? 

It has always resulted in more pain down the road. 

Every. Single. Time.

For us, bad clients usually come in the form of independently wealthy individuals that have no business building apps but have stumbled upon a significant amount of money and have dreams of being the next Mark Zuckerberg.

At the end of the day, these people didn’t want to do the work to build the business or take the time to understand some of the complexities involved in building a product from scratch. We now have the experience to be able to identify specifically where we bring value to our client relationships and where we won’t be a good fit. 

Since building relationships is important to us, we now have tools that make it very clear when there are red flags during sales conversations so we can be honest and tell people when it’s not appropriate to hire us. This saves everybody time and money, even if it seems wrong to pass up a potentially lucrative opportunity.

10. Don’t let your gas tank run out

You probably would not believe how we managed our finances when we began (or maybe after reading this article, you would). We would periodically sketch out on a whiteboard all our receivables and payables and get a rough idea of when “D-Day” was. We used this to motivate ourselves to get new projects and complete work. 

As you can imagine, this was not super effective nor sustainable and scalable. As our business grew and got more sophisticated we nearly ran out of cash, this is very common as you grow and your expenses go up but you are waiting on payments. It’s scary as hell when you have 15 or more people who are depending on you for their jobs. I never had more sleepless nights.

We ended up with a 12-week cash flow forecasting tool which has been a vital tool to our success as a business. It means we know if and when we’ll ever run out of gas.

Using financial tools like this to help you properly plan for the future is essential to the longevity of your business and enables you to effectively communicate with your team why you are making certain decisions. Also, when in doubt, turn to the experts. Don’t be afraid to hire a consultant to help if finances aren’t your area of expertise. 

A good financial reporting structure and a basic understanding of your P+L and Balance Sheet will ensure you catch issues before they kill your company. Use accounting to hold yourself accountable!

It’s well said that you learn more from your mistakes than you do your successes, and I honestly believe that to be true. I like to think of the hundreds of thousands of dollars I’ve spent learning these lessons as my unofficial business school tuition.

If we hadn’t made the mistakes we did, we wouldn’t have been able to so effectively right ourselves. With the recent turmoil of the Covid pandemic, we are leaning on these experiences more than ever to navigate our way through it and come out stronger.

You’ll no doubt make your own mistakes, it’s how you’ll ultimately succeed. I hope these 10 mistakes can help you avoid some troubles but more so inspire you to overcome and learn from whatever challenges you face on your entrepreneurial journey.

As Richard Branson says “You don’t learn to walk by following rules. You learn by doing, and by falling over.”

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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