The most expensive business lesson of my life
This is a very important blog post for me. It is a 100% true story that was the biggest business lesson I have ever received in my life. I don't know if the word "got" is the right one, but let's pretend it was. I hope that the situations described here will help at least one person to avoid the mistakes I made in the past. After all, there is nothing better than learning from other people's mistakes.
It seems to me that too many people focus on the successes and forget about the failures. In my opinion, failures are just as important as successes. Without failure, there is no learning, no development, and no success.
Prologue
It's 2015 and I met Paul (name changed), who had the idea that it would be good to use his current business contacts and start selling them software services. However, he did not have enough knowledge of software development, so he needed a partner who could take on the technology part. His job was to make sales.
To put Paul in perspective, he was the kind of guy who would sell you a pen-like Jordan Belfort (the Wolf of Wall Street). His lifestyle was also not dissimilar to the protagonist of that film. He had a fairly well-developed business that allowed him to enjoy life. Shortly after we met, he bought his first Ferrari. For a guy like me (at the time), in a word, he made a big impression.
Terms of business
Paul was very keen to have control of the company, so he decided that 15% would be enough for me. He said that if I invested $30,000 we could agree on a 50/50 share. He knew full well that such an amount was out of my reach at the time. However, I decided to try anyway and took out a loan for my share.
The first weeks
A few weeks later we registered the company. After a while, strange things started to happen. Paul decided that we should take on a programmer from his friend's company, which was going out of business because it would give us the opportunity to grow quickly. I decided that in theory, this was a good option as it would give me more time to do conceptual work with new customers, of which there would be more and more.
Unfortunately, it turned out that the sales potential of our services was now limited to one client. Paul didn't have much time for anything else. He often disappeared for 3-4 days to rest. Then he made a lot of changes in his personal life.
The rest of his time was spent putting out fires in his first company. He quickly delegated his most trusted man, Michael, to contact me. He was a very good, loyal soldier who obeyed all orders, even the most "inconvenient".
A series of fires
The money was running out. My sales and marketing skills at the time could be described as non-existent. Instead of concentrating on the project, I was looking for new clients. I knew that if I had one client in a few weeks, I wouldn't be able to pay the salary of the programmer I had hired, let alone my own. At that point, it was a staggering $1,000 that allowed me to survive. That's just to give you an idea of the scale of the business 🙂 I'll remind you that I could look out the window and see a Ferrari, a Mercedes, and some other cool toys. Such an advantage 😅
The lack of focus on the technical part was causing problems in the current project. I had to sort out the whole situation. Michael, who was very familiar with the current client, came to help. There was light at the end of the tunnel. There was a chance that Michael's long-standing relationship with the client would put out the fire and complete the project.
New life
My son was due to be born at the end of 2016. I decided that I would not be able to give my family a normal life if I continued to try to develop this company without the support of a vendor. I decided I wanted to leave.
Michael offered to buy back my shares for the full amount I had invested. We went to the notary. We signed a contract stating that I would finish the project and Michael would buy my shares in return. That was the last time I saw Paul.
Everything seemed to be settled. After a few weeks, the project came to an end. We signed a handover protocol with the client. This was the document that would result in my getting back the full amount invested.
I was called in by Michael for a meeting to take stock and finalize the settlement. This was...
Epilogue
At the meeting, Michal presented that it had cost him a total of $30,000 to see the project through to completion. Costs like fuel to travel to the client, his employee's time, etc. I wondered why he was telling me this. I did not wait long for an answer.
Michael threw in the text "these are my costs, so we are in agreement". It then turned out that in the contract I signed at the notary (which I had not read on the spot 🤡 ) there was an additional clause that was not in the version I had received by email earlier. This clause stated that the shares would be sold for $30,000 less the costs incurred by Michael in seeing the project through to completion.
Obviously, the costs he had incurred had been covered. On the other hand, it was hard to argue with the signed contract at the notary's office. My lawyer said that we could try to fight it, but that he did not see much chance of winning.
So I was left with a debt of $30,000, a son on the way, and no prospect of getting the money back quickly.
What I learned
Looking back, I think this was the most difficult experience I have had so far (thankfully). I also learned a lot, including
If you are going into business with someone, make sure they are as hungry for success as you are. It's impossible to work with people who aren't as motivated as you are.
Read everything you sign, two or even five times. If you are unsure about documents, get advice from a lawyer.
Always plan for the worst and have a contingency plan in mind.
Remember that even the worst situation can be resolved.