When you build a company, you have to make investment decisions on where to put your money to achieve the highest growth. Here are the 4 worst investments I’ve made and my lessons learned:
- B and C quality staff members. An average performer costs twice as much as a top performer. A below average performer costs you many times that. This is hands down one of the worst investment decisions I have ever made. I used to think that some people were too expensive for me to hire and so I would hire a lesser qualified person whose salary was more within my self-allocated budget. Bad move. Hiring anything but an A player for your team spells trouble. A players may appear to cost more initially, but their productivity level far exceeds anything a B or C player can do. A players spot opportunities, B and C players just get by or look for the status quo. To infuse innovation in your company that will fuel your growth, invest in the top performers. A really good A player will do more for your company than hiring two B and C players.
- Products we built without sufficient market research. Ugh, the money I lost not thinking through our products and feature sets gives me a twitch. We built some of our products based on instinct thinking “of course people would love this, we’ll save them so much money and it’s faster, too.” Had we just asked potential clients whether they would buy such a product, we could have saved an immense amount of time, money and lost opportunity costs. The worst investment decisions ignore basic market research.
- Print advertising. I’ve had a lot of sales people from publications call on me and several of them were so polished that I succumbed to their pitch and bought print advertising. While this type of advertising might work for some companies, I have never seen it work for any of mine. Maybe it’s my price points which require a lower cost for customer acquisition. I just don’t think as many people respond to print advertising these days. It is certainly not an easy metric to measure compared to online advertising. Whatever the reason, I have found print advertising to be one of the worst investment decisions for my businesses. I should have put that money into public relations.
- Consultants hired without setting extremely concrete goals and expectations. Consultants are valuable. We finally got the hang of hiring them – after losing a lot of money to ones who were better at selling their services than doing the work. When we analyzed what went wrong with previous contracts, we found that we never really set extremely clear expectations. It was our fault. Had we outlined in detail what we wanted out of the project, we would have had a much better chance of success. We goofed up like this with technical consultants, marketing consultants and even business advisers. Lesson learned. We now list out specific goals with absolute clarity on the results we expect. If a consultant isn’t on track, we terminate the contract quickly to cut our losses.