Three key things the FALL of my first business taught me



The WHY

When I was a little kid I told everyone that one day I will become an engineer. At the time I thought becoming an engineer means that I will be building structures like building and bridges. It was just civil engineering. This was before 1995.


Fast forwarding to 2008, I got selected to the number one engineering university in the country. With time I realized that even though it was the best university in Sri Lanka for engineering, it was not helping my dream to become an engineer. I believed that an engineer is someone who uses technology to make people’s lives efficient and easy but my goal seems to be not aligned with what the university wanted us to become, ‘EMPLOYEES’.


With disappointment I started my first job at the second largest IT company in Sri Lanka as a business analyst only to realize I was wasting my time waiting for and seeking approval of employees who joined the company before me, the seniors. The pay was good but there was nothing new I could really learn and it was not challenging at all. Almost all the time I completed the work assigned to me in less than half of the original time allocated for the same work.


A new door opened when I was headhunted by a company because I had made a good impression with the CEO of the company few years back while I was still in university. I was heading one of the corporate development teams in AIESEC in my university which lead me to do a presentation to this CEO. I started with them immediately.


The work was great, I was learning new things often and the energy level was high. After a year, I was allocated to an overseas project in Europe as a business process re-engineering consultant. I was visiting client sites in Germany, Poland and Austria. It seemed like the best time of my life until I found out I was paid only 6% of what was billed to the client.


This raised only one question in me. If someone is willing to pay close to 1000 US dollars per day for the work I do, how much is my real worth? If I put the efforts in to my own venture would that make sense?


I went ahead and founded a business with my best friend. A last-mile logistics services provider for e-commerce which soon became the country’s first and the biggest of its kind with more than 200 employees, 41 distribution centers across the country and the largest sorting center in the country. Nothing seemed to be stopping the growth.


I didn’t know anything about accounting and finance, the market was ready and booming, I was tech savvy and hard working. My purpose of building something which returned my worth on investment was finally up and running. What a feeling to have!


The Fall

The business grew rapidly due to high demand and soon I realized I was not growing as fast as the company grew. There were many problems coming up at the same time to which I didn’t know the answers. We recruited few well experienced people who eventually started solving the problems.


However we got a major hit with the travel restrictions imposed by the government due to COVID pandemic. Our business was solely catering to products not falling under “Essentials” and government allowed only the transportation of essential products. Our sales was cut down by more than 95% within few days and continued for few months.


All the cash reserves depleted, people were fired, business scaled down and as a result sales further dropped. It came to a point that the business was not sustainable with a negative cashflow and the board decided to shut the operations down.


We had burnt millions including capital raised and revenue made by the time we were forced to shut down the company because we no longer were able to sustain it.All happened in less than 6 months and THAT WAS IT!


Know your WHY and never forget it

The next 6 months I spent wondering what happened. It happened quick and we were only struggling. The more I thought about it the more I realized that there was a fundamental mistake made during the growth of the business.

I had forgotten why I founded the business with my best friend at the first place.


Build something which returns my worth on investment

I realized that I had differed from my purpose so much that the business was running to fulfill other needs. We pushed for a business which is light on assets. Mostly, anything tangible and physical was an asset. I had forgotten my purpose had become an employee.

To build something which return value and money on investments, one should build assets and only assets.

Robert T Kiyossaki in his best seller book “Rich Dad Poor Dad” explains that


An asset is anything which puts money in the pockets.

This is exactly What I wanted to build and this is the only thing I failed to do as well.

The business was growing but it was not putting money in the pocket. Instead it was eating in to millions of capital raised and revenue made. If I had remembered my WHY and took measures to ensure my WHY was served, there is no doubt the company would still be running.


Another example when I forgot my why is that instead of building assets, I was building liabilities. Since the company was growing fast and getting attention within the country, We were serving another purpose which was not ours. We were stuck in “The start up Culture” where we make a positive impact on the society. Sure we did make a positive impact on the society by providing jobs for more than 200 people but why we generated that 200+ jobs was not aligned with the original purpose. We were giving people jobs to grow the size of the company which in return grew the liabilities but not assets.


The more and more I think about it, the more I realize that forgetting my why killed my business.


The first lesson was learnt.

Know your why and never forget it


Build an “A TEAM”

Going back to 2016, soon after the business was founded there were only 4 employees. Myself, my best friend, one operations assistant and one driver. Often I had to drive a mini truck to get deliveries done on time because the only available driver’s capacity was not sufficient. However, we started building traction and it was possible to afford additional drivers. The team grew faster than we thought and I was still doing deliveries time to time. At that time it was rewarding because I thought that’s how committed founders should be to their business. I WAS WRONG! Founders have a purpose to achieve, not daily errands!


We grew even more and started few new hubs across the country. 10 to be exact and now the delivery coverage was more than 35% of the country. Traction was building further and more hubs were established. Before we know it, we were 41 hubs strong with more than 200 staff.


Guess what? I was still getting in to day to day operational matters which took more than 50% of my time and energy. I was checking driver attendance, pending deliveries etc at the very ground level while there were dedicated people to do it. I didn’t see it and I didn’t know it that I was building a team which depends on me. It was not a team who went that extra mile and solved the problems theirselves. They always came to me with problems thinking I can solve them all. I didn’t have the time and energy to solve problems of more than 50 people who were reporting to me directly. 50 people should not have reported directly to me in the first place and I realized it later, it was too late in the day!


In any business, the business leaders and founders have a specific role to play. That is to make sure the business is serving its purpose. The rest must all be delegated to a team. To an “A TEAM”.


I didn’t have an “A TEAM” built. When the COVID-19 hit us, it hit us BAD! Everyone was panicking and wanted to know what needs to be done next. Since I didn’t have an “A TEAM” built and 50 people were reporting to be directly, all 50 wanted to know next steps. All 50 were calling me and emailing me all the time. I was simply not able to handle that for a simple reason. One single person can not manage 50 people at the same time. Each person needed the emotional support to go through the pandemic and it needs TIME and time was the only thing I didn’t have simply because I didn’t have that “A TEAM” who could have done what was needed.


The second lesson was learnt.

Build an “A TEAM” and delegate

Whitney Johnson in her book “Build an A Team” explains very well what an A Team is. It’s worth reading it to fully understand how to build an A Team but I learnt that the following will help building a great A Team.

  1. Recruit people who can grow with the company and can add value in few years NOT who can only get done things at present.

  2. Recruit the right people, NOT ‘Good People’. Get the people who already love what they will have to do. Don’t try to inspire people to love new things. It doesn’t work because it may conflict with their inner beliefs and values.

  3. Delegate and let the team do mistakes when everything is small so they grow and avoid mistakes when it matters the most.

  4. Build accountability structures, NOT To-Do lists — an Accountability structure defines who is responsible for what results. The team can do things their own way adhering to company culture and policies but they must be made accountable for the RESULTS and results only.

  5. Plan for succession and execute before it becomes an urgency. If you cannot get people from within to promote when the company grows, you are doing it wrong. Parachuting people in to higher positions only demoralize the hard workers.

  6. Follow through — nothing gets done without the right followup. Followup with fanatic discipline with your direct reports and make them followup with their direct reports and so on until the very last layer. One can argue that self managed employees do not need followups. They too need followups to feel engaged and stay motivated.

Reward and recognition, talent development, managing grievances, career growth, etc come without saying. Delegate all of them to an A TEAM.

I know there are many more factors to consider when building teams. The above stand out more than anything based on my experience. I would love to hear what you think about them and your experience on the same so we can further improve this writing to help more people.


Know your assets & liabilities and build assets.

Most often we misjudge on assets and liabilities. I realized that how we define an asset or a liability plays a major role in success or failure of our goals. What is an asset? what is a liability?


An asset is anything that puts money in the pocket

Robert T Kiyossaki in his best seller book “Rich Dad Poor Dad” explains that an asset is anything which puts money in the pockets. This is exactly What I wanted to build and this is the only thing I failed to do as well.


A liability is anything that takes money out of the pocket

In the same book, Robert explains what is a liability as well. If something or someone is taking money out of the pocket, it’s a liability.

Of course everything costs money but what needs attention is the net flow of money. Even with costs, if the net flow of money is inwards and getting added to the assets column of the balance sheet, it’s probably a real asset. This is where the financial IQ is crucial.


Businesses can be built without finance IQ but cannot be sustained.

On the other hand I was building liabilities. All the distribution centers opened which didn’t bring a net income, all the physical goods purchased which didn’t help bringing a net income, all the employees I hired which didn’t contribute to the bottom line and the list goes on…


The problem was how I had defined and understood assets and liabilities.

To give another example of when a liability was misunderstood for an asset is the tech platform we built in house. It was for sure helping to bring new customers, reduce time taken to perform some of the activities and so on but in the background it was bleeding money. It was bleeding money in forms which did not seem like a liability. They all looked justifiable. The monthly server cost, cost of text messages sent through the platform and the salaries paid to the software engineers looked necessary. However in the balance sheet, it was biting in to the only real asset we had, the capital raised!


One could argue that the burn is what the capital for but I learnt the hard way that it is not. The capital raised is for building assets which bring in money, not for liabilities which drains the money out.


I mentioned before that I did not know anything about accounting and finance which sounded probably positive given the context because a business was built and grown by someone who didn’t have the financial knowledge. One could build a business without accounting and finance knowledge but cannot sustain it.

All in all another lesson was learnt.


Know the difference between assets & liabilities and build assets.


Conclusion

It takes a massive amount courage for one to give up a full time job and start a business which is risky undoubtedly. Even though I was able to build a business and grow it to become the number one in the country I was not able to sustain it. I was not able to build a business which will last no matter what. With all the mistakes made I learnt three key lessons.

  1. Know your why and never forget it

  2. Build an A TEAM

  3. Know your assets & liabilities and build assets.

It cost me nearly 5 years and $6 million to learn the lessons hard way. I hope these learnings will help you to avoid the same mistakes and succeed in building great business which lasts.


I highly appreciate your own experiences and thoughts on what’s in this article. Please feel free to email me at thilina.fonseka@gmail.com or leave comments with all your feedback and thoughts so I could maybe go on to further improve this article in to a better piece of learning material for EVERYONE!

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