5 Lessons Learned From My First Failed Business

After graduating college I was working as a social worker running a foster care program for children with developmental disabilities when I found an ad online for someone selling a business — Amigos Spanish Program. It was a business that contracted with daycare centers to provide Spanish language classes to young children. I contacted them, reviewed a few spreadsheets and bought the business for $8k. I put it all on credit cards and started my quest towards millions… It was going to be great! I was going to own the biggest Spanish Language Class Business in the World…..or so I hoped.

I lost 20k over the year I owned it before I shut it down and closed the company operations for good. I was 22 years old with 22k in credit card debt with nothing to show for it, except for a bruised ego.

I have always had the entrepreneurial spirit in my blood. My family in Nebraska still owns and operates “Dudley Moving and Storage” (Carmen Dudley is my maiden name). My grandfather started it and sold it to my father who ran it while I was growing up. I remember playing with toy moving trucks on the floor of his office. My mom and dad met in that office — she was selling magazines door to door and he kissed her before she left the building…is how the story goes.

My mother started Crystal Joys in the 80’s with a box of rocks and a love for crystals.

My sister started a t-shirt design company in her 20’s while my brother started a mail-order pyramid scheme business where he made hundreds of thousands of dollars sitting in his bedroom in my parent’s house. Turns out the U.S. Postal Service didn’t like that….they later sued him and he had a pending lawsuit before his passing. (I have to say it was kind of brilliant….just not legal).

When I was 10 I started a “sand art” business and set up my own booth next to Crystal Joys at all the renaissance festivals and psychic fairs. I remember going to a glass supplier with my parents and choosing bottles. I would sit in the back of our van (the blue eagle) and design outfits out of felt for princesses and wizards as we traveled between each fair/festival. I got different colors of sand and then I would sell the bottles to other kids at the fair. It was kind of awesome….just saying.

I read business and investment books in college and even tried to be a business major for a hot second. Turns out I couldn’t hang in the economics and calculus classes so I switched to Psychology and Spanish.

When I bought Amigos all I saw was $$ potential. I saw what “could be”, but I learned quickly that the things I didn’t know about were what made it fail. Turns out in addition to a bruised ego, I also learned a few lessons:

1. The true cost of an employee is much higher than you think. I had calculated my budget based on their hourly wage — naive, I know. I didn’t understand employer taxes, accounting software costs, workers comp claims, or professional liability insurance. The company overhead costs were so significant that I couldn’t hit a profit margin. I didn’t account for the extra costs in my contracts with the families so I started from a loss and couldn’t recover it quickly enough.

2. Part-time employees are awful to manage. They aren’t committed. They aren’t invested. They don’t care. They don’t show up to their shifts. When I started Sample Supports a few years later I refused to hire my first employee until I could afford to hire someone that was full-time….and salaried. To this day I am weary of hiring part-time staff — they make me nervous.

3. Expect that you will not receive 100% of your accounts receivable. People don’t pay their invoices. What?!?!?!?!? For some reason, this really shocked me. The families simply never paid their invoices. By the time I wised up and started requesting payment in advance for the classes it was too late and I was too far in the red to recover.

4. You must enjoy the core service of the business. Don’t start an ice cream store if you have a dairy allergy. Don’t start a restaurant if you don’t like to cook. Don’t start a toddler language class if you don’t really like toddlers…….I didn’t really feel comfortable “doing the fundamental work” of the business. I was self-conscious about my Spanish skills. I didn’t like families watching me teach. I didn’t like dealing with potty accidents while I was trying to teach the alphabet. I learned the hard way that if you are going to start a business, you better like the core work. I dreaded being called in to cover a class. I also realize I don’t really like working with little kids. I know, I know, I’m a bad person, but the 2–5 age group of children is not something I find fun. “Herding cats” while speaking espanol is a full undertaking. I would leave a 45 minute class feeling completely exhausted and irritated. When you start a business you will be working IN the business for a long time, so you better like what the business actually does.

You will only pay attention to what matters to you. It got to the point where I didn’t want to open my Amigos email. I avoided phone calls. I didn’t respond with a sense of urgency to families or my employees. I lost contracts. I wasn’t interested in the hustle. I realized I hated what I was doing. I shut the business down with a huge sigh of relief and never looked back. I now reflect on Amigos as my low-cost MBA.

The whole time I was running Amigos all I wanted to be doing was the work in the disability field that I was still doing 9–5….I was fantasizing about my day job while trying to run my own business…..shouldn’t it have been the other way around?

My biggest lesson? Choose what you love to do and what you are passionate about. There is no amount of opportunity that can outweigh simply disliking the work. A few years later I started my second company based on the day job that I loved so much. Sample Supports is successful because I nurture it and I make sure everyone else in the company does the same. I learned that you have to love all the parts and be committed to a constant state of improvement. You have to love the hustle and the drama and be interested in every detail of what makes it tick. I love the core work of Sample Supports and get excited if I have to step in and do the day-to-day. The day-to-day work simply makes me happy.

I believe almost any business can work if the right leaders and systems are behind it. It takes an investment, unwavering commitment and the motivation to see it through. I think the Amigos concept could work — I think the right leader could have fostered it and built it…. but that leader wasn’t me. I let it die and now it sits in my garage….next to the box of ashes of my dead relatives (no, I’m not kidding. That is really where the workbooks sit.). Womp Womp.

Whenever I start to appear tired or uninterested in my current work my husband will say to me “Don’t go Amigos on it!”…to which he knows he will get an automatic eye roll from me. Haha. Jokes aside, he has no reason to worry. Even on my worst day I still love the work of my companies. I go to bed buzzing with ideas and I wake up excited to start making them a reality. I like the problems and the drama and the opportunities. I am grateful that my first attempt at owning a business was a complete failure. That failure gave me the experience and understanding I needed to grow my current businesses into a success.

…. and getting a “MBA” from the school of hard knocks was definitely worth that 20k.

Also worth a read:

1. Startup Failure: It Happens. Let’s Talk About It.
2. The 13 Top Reasons Why Startups Fail