Making mistakes is a necessary component to finding success in your local business. Applying what you learn from those mistakes is required to sustain that success in video production. Throughout my career, I've made thousands of errors. The key to my success, I believe, is that I'm not afraid to make a mistake, and when I do, I recover from it quickly.
Then, I apply the knowledge gained from the mistake not to go down that path again. After making and surviving thousands of mistakes, it has become easier and more comfortable to instinctively make the right choice when important decisions need to be made.
I had a football coach once that said, "I don't care if you make mistakes as long as you make them at full speed. I can correct your mistakes. I can't correct your intensity." I've taken that message from the football field and have applied it to growing and managing my local video production business. Below are three lessons I've learned over the years derived from some pretty serious and not so serious mistakes.
Get a Line of Credit for Your Local Business
Sales have never really been a challenge for my video production business. Since day one, we've grown at a reasonable rate, but what has been a problem is receiving payments from clients on time. Early in my career, I severely damaged my credit because these late payments from clients caused me to be late on my payments to vendors, banks, etc.
Finally, after a few years of heartache and overwhelming stress, one of my mentors helped me realize that all I needed to handle the stretch between when I had to pay a bill and when I received payment from a client is a revolving business line of credit.
So I talked to my banker about setting up a line that would cover three months of expenses that I'd pay off as the checks came in. This is a must-have for your local business to keep cash flow in balance so that you will never be late again on payments.
Every local business, no matter how large or small, has a line of credit for the very same reasons you and I should have one. Call your banker today to ask them about setting a credit line up for your business, or visiting sba.gov for more information. If you have any questions for me, reply to this email, and I'll be glad to help.
Always Get It In Writing
This lesson isn't just referring to having a contractual agreement with your clients so that there is no question what they have agreed to pay you for the services you will provide. It's referring to the need to have a written record of every agreement you make in your local business.
If you tell a client, you will do something in exchange for something. You need to write it in an email or form a production agreement and send it to them. Also, be sure to close the loop by asking them to return a signed copy of the contract or a simple email reply stating that they understand the terms. The same goes for deals you make with vendors, employees, etc.
As a business owner, you manage thousands of details regularly, and the only way to know for sure what the terms were of any agreement is to have a paper trail. If you ever have a question about an agreement, I highly suggest you consult your attorney. A few hundred dollars is worth getting it right. Plus, you can bank that knowledge and apply it to future agreements.
Keep Your Fixed Expenses Low and Your Variables High
When you experience your first taste of success, you'll be tempted to purchase the equipment you've always wanted but couldn't afford and perhaps even to hire full-time employees to carry most of the workload for you. Tread carefully!
By now, I'm sure you've realized that the video business is very cyclical. Just because the gettin' is good right now doesn't mean your sales will continue to be as strong a month or several months from now. If you take out loans on equipment and hire employees when times are good, you'll have the cash flow needed to make the loan payments and cover payroll.
However, when sales aren't so hot, you'll still have the same payments and payroll to make. This will put you in the wrong spot because you don't want to make payments on equipment or pay employees when there isn't any work to cover the costs. Obviously, we must invest in gear in personnel if we hope to grow. All I'm asking is that you be very conservative when doing so.
I've had as many as seven people on my payroll. And over $200,000 in equipment loans at one point in time. This was fine when revenues were high. When the market shifted, and people were no longer buying videos faster than I had to write checks, things got pretty tough.
I eventually had to lay off a few employees and sell off some of the gear to reduce my fixed monthly expenses to a comfortable amount.
By having such high expenses, I was forcing myself to sell, sell, sell just to make ends meet. After reducing my fixed costs, our profit margins soared without having to deal any more than what naturally flows into my company each month.
Always remember that there are two ways to increase profits for your local business:
1) Sell more.
2) Spend Less.
If you are talented marketing and salesperson, selling more might not be a problem. If you are a better videographer than you are a marketing genius, focus hard on protecting the revenue you already get just by being in local business. Ultimately, It's how much money you get to keep that count.