How I Lost A $1,000,000 Per Year Business in Less than 9 Months: Avoid These 3 Mistakes
Save yourself the pain of regret, and avoid these mistakes when growing your business online.
It’s February 2016.
And I’m killing it.
I had just completed my first full year as a solo run business owner. Month over month, clients and revenue were growing comfortably.
Then, seemingly out of nowhere, all the hard work and long nights of year 1 finally paid off. The pipeline was bursting, candidates were getting offers, and I was closing invoices every week.
January 2016 closed to the tune of $72,000 in revenue.
How was I going to sustain this crazy fast momentum?
“Time to hire some help.”
My plate was overloaded. The next logical step was to start outsourcing areas of the business.
Inside my Executive Recruiting Firm, there were 3 core business units:
Client Acquisition → Finding new Fintech clients with a need to hire sales & marketing positions at middle mgmt or higher.
Client Delivery → Filling the roles by sourcing, interviewing, qualifying, and making offers to the best candidates possible.
Project Management → Ensuring that both candidates and clients were kept happy throughout the recruitment lifecycle.
Up to that point, I was my entire company…
My ego told me that I should stay in the driver’s seat of the client acquisition process.
I then figured that hiring an employee on the delivery side would be the “next best” option. This person would help with the sourcing & recruiting of candidates.
I didn’t want to overextend myself by hiring my first employee.
And who’s cheaper than an intern fresh out of college?
After a few postings on job boards…I decided to hire a young intern.
He had all the soft skills I was looking for:
Family Orientated & Respectful
Ability to focus on a task until completion
Lifelong athlete and college football player
Ambitious: saving up to buy a house for he and his fiance.
Unafraid to take action first, while learning as he figured it out.
All the stars were aligned.
I could now focus on getting clients, and assuming this intern would learn how to find candidates rather quickly…I could have a short list of candidates in half the time it took me on my own.
Month 1 went by, and Jason failed the first few client roles I gave him.
I figured it was just the learning curve of never having recruited before. We had runway, and I had patience.
“I’ll just spend time each week and train him.”
I decided to spend 2 days a week with my intern, sitting over his shoulder, trying to understand his thinking process as he sourced for candidates.
That’s 2 days a week…where 2 people are doing 1 low-impact job.
This was the beginning of my downfall.
And I never even saw it coming.
The Slow Burn.
You don’t get fat from eating 1 Big Mac.
You get fat from eating 1 Big Mac, every week, for years.
When you’re caught up in the moment, 1 greasy burger doesn’t seem so bad.
Even those unhealthy calories eventually burn off.
But 1 unhealthy decision, leads to other unhealthy decisions. Choices that compound on each other over time. My father calls them, “Poor Choices.”
April came around and the intern was finding his stride. But that stride arrived a little too late…
In America, interns are typically only hired for a 90 to 120 day working period.
My intern knew this. So he began to slack off towards the end. I also knew this. So I began cancelling our daily check-ins.
Since Jason wouldn’t be here much longer, I ended up just doing his work too. Cleaning up behind him, while still maintaining my full desk. And because of the time I spent training him, all the new client work that I landed in February and March, was now behind schedule.
90 days spent using an intern, and not one dollar of ROI back to the business. In fact, it was a net loss given how much of my time was taken managing and training this person.
At this point, we had $250,000+ worth of client work sitting in limbo.
But it was impossible for me to handle the workload.
3 Major Flaws Plagued My Business:
Being active in all areas of my business, I was juggling an insane amount of work…and doing a terrible job at it.
My overhead was around $7,000 per month for overpriced software & low quality email leads. (This is back when tech was expensive and way before I knew about automation.)
Recruiting is one of the worst cash flow models on the planet. Look at all the uncontrolled variables in this operation:
Start sales outreach out to find clients.
Send over a contract, and start working on the project.
Source, interview, and send qualified candidates over to the client.
Client takes a few days to let you know which candidates they want to interview, if any at all.
Narrow down the top 2 or 3 candidates after all interview rounds have been completed, and send over an offer.
Negotiate until you get the candidate to accept an offer. Yay! You’re halfway to seeing revenue.
Candidate has to give current employer their 2 week notice, then takes a week or 2 vacation before their new role with your client.
Candidate still has to show up for day 1…sometimes they shop your offer and end up ghosting you and your client.
If they do show up…THEN the client is finally sent an invoice.
Client has 30 days to pay the invoice.
This sales cycle can sometimes last 6 months or more, depending on 2 billion factors outside of your control.
So there I was → back to hiring an employee again.
This time I was determined…instead of going the cheap labor route, we needed an experienced recruiter. Someone who didn’t need any hand holding.
Even though we were running low on cash, with all that client work on the table…I was willing to pay for experience.
After a few weeks of interviews, I found a woman with 25 years of recruiting experience across different industries. She also lived in a really low cost of living area in Louisiana, so her salary demands were slightly lower than I expected to pay for someone with this tenure.
In my desperation to hire quickly, I ignored a few red flags on her resume. She was unemployed for awhile, and couldn’t find steady recruiting work.
This didn’t bother me too much, and in my mind I actually spun it into a positive → I didn’t have the time to wait weeks to onboard our new recruiting employee.
She agreed to start within 10 days, and in early May, she joined my company.
The Tidal Wave.
I felt really confident my new experienced recruiting employee would pick up on our client work rather quickly.
Another 2 weeks for her ramp up period, and she was off on her own.
My business was already doomed…I just didn’t know it yet.
What you may not know about the recruiting industry is that Summertime is usually the slowest months of the year.
I was completely burnt out from the year…but because of this slow period, I had to keep my foot on the gas pedal.
My next fatal error was to stop prospecting.
Me and my new employee were so busy trying to find candidates for all the client work, that my pipeline was nonexistent.
I had filled two client roles all by myself, and the invoices were almost due. Those invoices were worth $35,000 in total, for 2 candidates places with the same company. This was a client I had done business with in 2015, and who knew me well.
I focused on closing those positions out, but in doing so had let the other more difficult roles run way over schedule.
What could go wrong right? They should be paying me within a week.
But all the while…I had this weird intuition that something was wrong…
I Lost Everything.
Just before a tidal wave hits…there’s a phenomenon called a “Drawback.”
It’s when the ocean suddenly pulls back from the coastline, exposing the seafloor, before a massive tsunami comes rushing in.
All of these signs were a drawback I kept ignoring.
Then in mid-June…it happened.
Those “Hard to Fill” roles I put on the backburner? Cancelled.
The roles my recruiter was working on? Filled elsewhere.
The client who owed me $34,000? Ghosted me.
The client I was relying on to pay me, told me to go fuck myself.
They knew our operation was small, and that I didn’t have the time nor the money to spend on legal fees to pursue.
So now I had:
A high paying employee on salary.
No pipeline of new clients.
Only 1 role to work on.
No incoming revenue.
All during the the slowest time of the year in recruiting.
Couldn’t be worse than this right?
Wrong.
In July 2016, Donald Trump was announced as the Republican primary candidate for the 2016 presidential election.
It would be Donald Trump (the wild card) vs. Hillary Clinton (the anti-middle class).
Because of how unexpected this was…it felt like no business in America wanted to hire new employees.
This was officially rock bottom.
When we lost all our entire portfolio of clients within two weeks.
Because of this, we needed her to change from finding candidates, to finding clients. She wasn’t good enough at sales to succeed in this environment.
Once again, my time was fragmented at training & managing a poor performing employee, all the while trying to keep the business afloat.
By August 2016, just 4 months after I hired her…I had to let her go. I figured this would be a financial lift off of the business.
The plan was to downsize to a solo-run operation, and fight off the bill collectors as long as I could.
What I didn’t expect to happen, was for her to file for unemployment.
She continued to be on my “payroll” while no longer working at the company. Not shaming unemployment here…but that was the final deathblow for my business.
Her unemployment costs made it impossible for me to keep my doors open.
If losing a business is a rite of passage in entrepreneurship…
Then this was my initiation fee.
It felt like someone had taken everything I worked for, piled it up in my backyard, poured gasoline on it, and lit a match.
All I could do was watch in disbelief.
My ego, my spirit, and my physical health…
All burned down to the ground alongside that pile of ashes.
For the first time in ten years, I was forced to go get a job.
The 3 Lessons.
The great Charlie Munger once said…
Welp…
In the spirit of vicarious learning, here are the 3 biggest lessons to takeaway from my catostrophic failure:
*One bad hire will destroy your small business.*
Labor is the biggest expense a small business can incur…and there isn’t even a close second.
Back then, things moved much slower…small businesses couldn’t compete as readily as they can today. The workforce wasn’t as “globalized” and remote as we are in 2024.
Now we have access to cheaper, faster technology, like AI tools no-code software. These are tools that will work for you 24/7…without needing a vacation, healthcare, or talking about you around the water cooler.
Back then, hiring people was all I knew. I was an expert at it for big businesses, but I learned I wasn’t so good at it in my own.
My biggest lever, human labor, ended up costing me more of my time.
I failed because I hired people and expected them to work as hard and diligently as me.
When they didn’t…I ended up stepping in to do their work.
Just because you’re not technically savvy, doesn’t mean you should hire. Look for tech and tools that you can offload tasks to first, then hire people to manage them.
*Cash Flow isn’t just a yuppie accounting term.*
Without a long runway, your airplane will never get off the ground.
Nor will it be able to land during an emergency.
Cash flow is your business runway.
Create a service inside of your business model that you can sell and deliver on autopilot. One that doesn’t require human labor to actively participate inside the client delivery process. This is called “productizing.”
Today, I have a productized automation service that I sell on repeat: LinkedIn + Cold Email Lead Generation.
Clients get a fully automated LinkedIn setup, that builds their audience, gets them inbound DMs, and automates the button clicks of their sales outreach online. This LinkedIn system also feeds a cold email system that automatically sends thousands of emails to their targeted prospects every week.
This is one of my highest selling productized services.
We setup these automations & systems inside our client’s business for a $2000 one-time fee. Then after the system is ready to go, our clients get 30 days of customer support from my team.
Our aim isn’t to do the actual lead generation service itself, rather, to let the client own complete control over the system. We simply install it, then help them learn and improve upon their own results.
Having a productized offer like this in my business protects me from bad breaks.
*If you’re not filling your pipeline, your days in business are numbered.*
95% of you reading this hate sales.
So do I.
But wanna know what I hate more?
Worrying about money.
Stressing out about how I’m going to put food on my table.
Losing sleep because I can’t stop thinking about work.
Not being fully present with my family because my mind is worried about where the next dollar will come from.
Back in 2016, my ego was the CEO of my business.
The CEO figured that since he had sold millions in the past, that Ryan Hutchinson was the most important person to the business.
Without my personal involvement with prospects and clients, I was afraid that my business wouldn’t grow.
Turns out the opposite was true…my involvement caused the business to fail.
My first hire should have been a great sales person. Someone adept at getting clients. Having a consistent sales process that nutures prospects 7 days a week, is mandatory.
Your mileage may vary here…but marketing & prospecting is now a non-negotiable:
Whether you’re running ads, writing content, automating a cold email campaign, performing outreach on social media, or networking your ass off…85% or more of your week as a small business owner should be stuffing that pipeline.
Otherwise, how do you expect to take a vacation from your business?
Or to take care of a family member when tragedy hits home?
Wrapping up.
2016 was a year I’ll never forget.
There were times during this election year that felt eerily similar.
But this time around…I was prepared. I knew what was missing from my last failure, and planned accordingly.
“It is far better to have understood why you failed than to be ignorant of why you succeeded.” ~ Dr. Robert A. Burgelman
Let my failures be an example of what not to do.
Take from it what you need, and apply it to your own life & business.
Catch you next week, Autopreneur.
Time > Everything,
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