Cupcakes & Contracts

What You Can Learn From My Mistakes…

I did what everyone that has ever worked in corporate America dreams of—I quit. I walked right into my boss’s office at a large and well-respected PR agency and said, “I am done” and promptly walked out. Everyone who has ever quit will tell you that they experience a rollercoaster of emotions. First, you feel elated and on top of the world and then you panic.

Initially, I thought to myself, “What have I done?” Then, that same level of panic was echoed by my risk-averse fiancé and now husband Erik. He said, “How could you have left a perfectly good paying job to set out on your own? How will you earn a living, get your first client, market your business?” I confidentially said, “It will be easy.” A small fib was okay to comfort him, but I also needed to comfort myself. How would I do it? I did a little research, started an LLC, created a skeletal business plan and I was on my way.

Truth be told, I didn’t know the answer to my husband’s question or very much cared. Instead, I thought to myself: I’m smart and college educated…I’ll figure it out as I go along. After all, my great grandfather did it in the early 1900s. He came over to the states from Italy and started eight businesses with his Italian brothers. Both my grandfathers also succeeded as entrepreneurs—I figured it was in my genes.

My first client was a Chicago-based luxury brand. I cold-called the company’s owners. I had nothing to lose. As a sales hook, I guaranteed to get them a national media placement at no cost, so I secured them a coveted spot on The Big Idea with Donny Deutsch. They were so impressed that they flew me out to Chicago and signed a contract for a substantial retainer for one year. I was on top of the world.

As any entrepreneur will tell you, nothing feels better than your first client. In three months, I secured the company more than 100 media placements, including Ellen, Good Morning America, Dr. Phil, The Today Show and articles in countless top-tier business publications.

Despite this remarkable success, it seemed like before Ellen had even finished her signature dance, they stopped returning my calls and refused a few amazing broadcast opportunities. I began to get a sick feeling in my stomach. Something was wrong.

The campaign was a huge success from a PR perspective. More Web traffic and sales came from the PR campaign than from any single marketing effort they had ever attempted prior to working with my firm. The problem was, the company was failing and claimed bankruptcy. After a while, they stopped paying their bill and I found out the relationship was over through a bankruptcy attorney for unsecured creditors. Boy, did that shake my confidence.

As a small business owner, I quickly realized that you don’t have much recourse when your client claims bankruptcy. This made me feel powerless and made me realize how truly difficult it was to sue clients, enforce contracts or get paid when a client’s business fails.

Lucky for me, I had an old boss who said, “Never rely on just one client for all your income,” so I had secured some other consulting work and continued to build my PR agency.

Next, I was introduced to the owners of an up-and-coming cupcake shop. The shop had been open a short time and they needed some PR help to increase visibility. We met and in less than three days signed a six-month contract.

It was a contract I had downloaded off the Internet. I thought I was being frugal by not paying a lawyer for a tailor-made contract. Big mistake. This cupcake shop was a hit. They had lines out the door each and every day. We secured them the Washington Post, New York Times, Rachael Ray, Martha Stewart, Good Morning America, CBS News, Oprah—you name it and they were featured in it or on it.

The cupcake shop owners renewed their contract with my firm after six months, but said they needed less help from us because the media were calling them. They actually lowered the retainer they were paying my firm because they said they were “expanding too fast and needed all their capital for other things.” I was a victim of my own success.

So, I reluctantly agreed to the new contract because I thought it would be a great case study for prospects and I needed to pay the two employees I had brought on to service the account. I was counting on my client’s sense of business loyalty when I should have better protected myself from a legal perspective. Eventually, this client and I parted ways. But, I learned a lot from my mistakes.

Before closing any business deal, remember:

• You don’t have to go at it alone. There are resources out there, which I found after I made my mistakes. Connect with your peers, not only to expand your own network, but also to create a support system of professionals.
• Interview your clients. Run a Dun and Bradstreet report and see if they are active in the local Chamber of Commerce. Although it may be counterintuitive, ask them for references.
• Talk to an attorney who specializes in your industry and understands the ins and outs of your profession. For instance, I could have had a success clause that guaranteed payment when certain metrics were met. And I should have protected my intellectual property better. Not knowing about a non-compete clause would later cost me a client and an employee.
• Don’t be unwilling to spend the money initially to ensure your financial success later. A business is an investment. Most of us take out substantial loans and put our savings on the line, so we watch every expense. But bookkeeping, finance, HR and legal advice are all necessary investments.
• Only do the work you are getting paid to do. Sounds simple, but I can’t tell you how many entrepreneurs make this mistake, especially when first starting out. If you’re going to do more, stipulate it in writing and get paid when the client sees growth. If you over service and don’t inform the clients, they will never know. Manage resources carefully and be upfront about the hours you’re putting in.
• Not all client relationships will last and that’s okay. Every client has its own lifecycle. Come to terms with the great work you’ve done and move on. And just like dating, some client relationships aren’t meant to be. Recognize the bad match early.
• Business is tough. Every decision is tough. At the end of the day, follow your gut. You want to see your employees succeed, but if they’re not performing at the level you need them to after six months, you need to reassess. If they aren’t a good fit, let them know (gently) and offer to keep them employed four to six weeks to give them time to find a new job. I wouldn’t recommend this in every instance, but it’s a nice gesture for those who work hard and have potential.
• Most importantly, don’t manage your business decision based on emotions. The thought of losing any client was upsetting and, in the early stages of my business, I wore my heart on my sleeve. Over time, the client relationships became too personal and some took advantage. I’ve learned that you can build a client relationship on trust, professionalism and respect and still maintain a friendly and open dialogue. It’s a delicate balance, but it can be done.

Fast forward five years later: I have 10 employees, a full book of business and a lot of hard lessons learned. And I wouldn’t have changed any of it.