Adam and I did not start Tally Accounting because we’re accountants by profession but really because we’re entrepreneurs at heart.
Outside of Tally we’ve had our own businesses, some that did well and some that blew up in our faces, all of which informs the way we approach our work today. I'd like to share my own story of a past venture in the hopes that the lessons learned can benefit your business.
The Backstory:
Several years ago, a friend and I decided to start a clothing company. He had design skills, and I had connections to a textile manufacturing company. We quickly went from a casual agreement to launching our first product line, with me handling the business side of things and my friend focusing on the creative aspects. We were resourceful and managed to keep costs extremely low, but our sales were nowhere near our expectations.
To put it into context we had ordered 300 T Shirts and sold a total of 30 (mostly to friends and family). To this day there’s still inventory sitting in my garage. In hindsight, there were several things we should have done differently.
Lesson 1: Know your strengths and weaknesses.
When you’re just starting out there are only 2 things that are important for your business:
1. getting feedback from the market
2. building your product/service
If you're a solopreneur (ie. wearing all the hats) you’ll need to master both however as you achieve product/service market fit (ie. people are tearing down doors to get to you) you’ll need to figure out what your strengths and weaknesses are.
The best way to do that is to figure out what type of business owner you are. From my experience there are 3 key buckets:
The production focused: you love to build things whether to be a product, service or software you’re thinking about how can you improve not only your offer but also the experience of your customers
The sales/marketing focused: you love to sell and have your story be heard, you know your offer is the best and you love talking about it to strangers
The operations focused: you love order, dotting the i’s and crossing the t’s are your favorite pastime. Your folder structure is “on fleek,” you’re the reason why things aren’t on fire right now
No one can be all 3. You might be strong in 1 or, if you’re really exceptional, 2 of these categories. At this point, if you haven’t found a partner to cover your weakness, you’ll need to hire to cover your weaknesses.
I knew that I was not going to be product-focused because I don’t know anything about fashion, I wear the same grey T-Shirt every day. So I decided to dive into both the operations and marketing side of the business.
I didn’t know anything about any of those either but I definitely knew that I couldn’t be worse at that than designing shirts.
This leads me into…
Lesson 2: Keep records of your key decisions and outcomes.
There’s a common phrase for startups "move fast and break things." This mantra refers to getting out of the start-up phase. In order to do so quickly you need to move fast and naturally break things. When you’re just starting up you need to move quickly and create a lot of “collision points” (points in your business where you’re getting feedback) because each time you do something good or bad you’re getting feedback and learning.
Now here’s my 2 cents, it’s great that you’re moving fast (and possibly breaking things) but are you really learning? Are you going to make the same mistake again? What about your team that will one day go through a similar process, will they have to make the same mistakes again?
If you’re not starting to document your journey, you’re setting yourself up for repeated mistakes whether that be from you or your employees in the future.
Documenting does not need to be difficult either all you need to do is start a google doc list out these 5 sections:
- Purpose
- Related links
- Process
- Completion checklist
This way, you can improve your processes over time and easily get new team members up to speed without having them commit the same mistakes you had to make to get to where you are.
Lesson 3: Don't get bogged down in administrative tasks.
This being my first business I have to admit, we spent a lot of time on things that did not matter. As an accounting student my first thought was we have to incorporate our business, get the bookkeeping setup and make sure we have the right contracts etc. When in reality none of that really matters at this point (depending on the business that you’re running.)
Disclaimer: if your business requires a lot of capital upfront and there’s a chance that you can be held liable if things go wrong you 100% need to speak to your accountant and lawyer to make sure you’re setup properly.
However, if your business is stemming more from a hobby or passion project that should not take up the bulk of your energy. Just to reiterate my point from the previous lessons, the only 2 things you should be focused on is speaking to potential customers (getting feedback from the market) and building your offer (building your product/service).
Once you notice “hey there actually is a demand for this thing” then you can think about all the administrative tasks.
Now here’s something that most accountants won’t tell you, you probably should wait to incorporate as long as you can.
Accountants make their money by doing your bookkeeping and tax filings and it’s in their interest to get you to incorporate, but I’m here to tell you that just is not the case.
The moment you incorporate your administrative burden increases dramatically, you’ll now need to file a corporate tax return, a sales tax return and update the provincial business registry every single year whether you do nothing.
Who’s going to do all of this for you? Either you spend tons of time navigating this compliance jungle or you pay thousands of dollars to lawyers and accountants to keep you up to date (keep in mind this is if your business is dormant.)
So I can’t iterate this enough, you want to delay this for as long as you can.
There’s another blog that goes into the nitty gritty of when to incorporate vs when not to incorporate but for this blog I’m going to assume you have nothing more than an idea.
Start to generating at the very least $30,000 then you can have that discussion and figure out if it makes sense to incorporate, otherwise don’t.
Some exceptions to the rule, if you already have a high personal income and don’t plan on using your business income personally there could be huge benefits.
Conclusion, you have low to no personal income, don’t think about incorporating till you’re making about ~$30,000. If you’re at that ~30,000 threshold speak to a trusted accountant for their advice they’ll help you find your sweet spot for incorporating.
If you have high personal income then also speak to an accountant who will help you find your sweet spot for incorporating.
All in all don’t do it if you don’t have to, all it does is increase your load and slow things down.
Lesson 4: Measure your results.
We failed to track important metrics, such as return on ad spend, customer acquisition cost, and overall performance. Tracking these numbers allows you to make informed decisions and optimize your business otherwise you’re just shooting darts in the dark, let me explain.
In the early days all you have are assumptions, “I think if I open a coffee shop here people will come, I think if I make these T Shirt these people will buy it, I think if I make this app these types of people will download it.”
You have to get very clear with what is an assumption and what is a fact, none of those statements are facts. They’re all assumptions but naive excitement will make you believe they’re fact and that you should do it.
In reality what you should be doing is identifying assumptions and coming up ways to validate them. Let’s go through an example:
"I think if we make these designs we’ll be able to sell to people that are into streetwear"
Assumptions:
- People that like streetwear like our designs
- People that like streetwear are ages 15-20
- People that like streetwear have $45 disposable income for fashion
- People that like streetwear …….
Now think about how you can start validating this
- Surveys for qualitative feedback (i.e. people’s impressions of your work)
- Run ads to a landing page for quantitative feedback (i.e. if the demographic you assumed is actually clicking through)
Lesson 5: Know your numbers.
This is a little more of an advanced topic, this is assuming that you navigated your assumptions and have customers coming in and paying you money.
You need to speak business - accounting. I’m not trying to toot my own horn here, believe me at Tally one of our first principles is no jargon, but there are some core fundamentals you’ll need to know.
Think about your profession, there’s all these specific words you need to know to communicate with other people in your profession. When you’re a business owner you need to be able to speak business so you can communicate with your other business partners.
Partners aren’t limited to who owns shares of your company. The bank, your accountant, the lawyer all these people are your partners. You need to make sure you get the best out of them, and the only way to do so is to speak their language.
This is an intro blog so I’m not going to get into this now, and if you’re really just starting out, I wouldn’t look into this too much right away. However, if you’re in business and thinking about growing you definitely need to increase your financial literacy.
Lesson 6: Align on vision.
If you’re going into business with a business partner make sure you guys both have the same end in mind.
If one partner wants this to be a lifestyle business where they can coast and work part-time where another wants to go very hard and blow the business up it’s not going to result in a good relationship.
If you’re not clear with your expectations of the future, and don’t understand each other deeper than just “business partners” (i.e. you don’t understand why someone does the things they’re doing) it’ll be very lucky if you have a successful business relationship.
I’m imagining something similar to a marital relationship but I’m very early on in my journey there so I’ll have some more insight on that 5-10 years from now.
Lesson 7: Stay level-headed.
Whether you're experiencing success or setbacks, it's important to maintain a balanced perspective. This prevents rash decision-making and helps you stay focused on your long-term goals. Any form of extreme reaction leads to bad decisions.
For example:
- You just bought all this inventory and it’s not selling let’s quickly discount everything and spend a lot in ads to get it out
- We just made a lot of money from our clothing drop let’s quickly do another one and make it bigger
Without knowing why scenario 1 was unsuccessful and why scenario 2 was successful you’re just “hoping.”
Once something has played out always do an autopsy of the situation. Why was it successful? Why was it not successful? Then try to emulate the successful parts and eliminate the unsuccessful parts for the next project/client etc.
This ties back to tracking your numbers and knowing your results because if you don’t document and measure these things you'll keep making rash decisions.
Lesson 8: Understand the complexities of your industry.
At face value everything is exciting and seems easy to do, only when you enter the weeds do you really understand how nuanced something as simple as a even in our small clothing company can be. I
’m not going into go too much into this in all honesty naivety is important as well if everyone knew the sh*t show that’s waiting for you no one would start but what I’m trying to get at is...
when it starts to get hard you know something is working.
Lesson 9: Be aware of the Dunning-Kruger effect.
The Dunning-Kruger effect is the tendency for people with limited knowledge to overestimate their abilities.
Stay humble, recognize your limitations, and always be willing to learn.
Conclusion:
My experience in the clothing industry taught me valuable lessons that I now apply to my work at Tally Accounting.
As your business partner, we bring not only accounting expertise but also real-world experience, which can help you navigate the challenges and opportunities that come with running a business.