In my experience it usually involves employees. The following mistakes are MY mistakes and didn’t necessarily kill any one of my businesses, but it definitely gave me heartburn.
Credit
Background Checks - Always do a background check. It took me two bad experiences before learning this the hard way. I hired two sales employees around the same time, who both seemed great at first, but later their true colors appeared: showing up to clients under the influence, falsifying documents,, forging signatures, credit card fraud, etc… The first hire had served a year in jail for falsifying insurance documents to earn more sales commissions. The second bad hire is still in jail after not paying child support for 10 years. Had I spent $100 on a good background check I would have eliminated all of the headaches and the lost time associated with these employees. Also, I’m not sure of the rules, but if possible run a credit check to make sure they don’t have financial issues. My first hire from above, was being evicted from his house and was constantly asking for personal loans. (Good thing I didn’t give into his sob stories!). He spent more time dealing with his personal issues than selling for us and ultimately became so desperate he committed credit card fraud and forged our signatures to survive.
Employment Agreements - before hiring any employees make sure you have an employment attorney prepare an employment agreement for salaried and most importantly commission based employees. When it comes to commissions, there are a lot of terms you don’t think about until it’s too late. Make sure you have your commission based employees sign a detailed sales commission agreement to cover you down the road. Had I known this before, I would have saved myself a lot of time and money. I would recommend including the following terms (I’m sure I’m missing some):
What % of sales or net profit?
When is the commission earned? At the sale, upon completion of the project or upon final payment?
Are you going to advance them future commissions in the form of a monthly salary? If yes, are they required to pay it back? Is it treated as a loan?
Is there a termination clause? When they leave or you terminate them, are they still eligible to receive commissions from the last jobs they worked on?
Building your business - don’t expect that you can hire an employee to build your company. They are an employee and they will never be as passionate about it as you. You as the owner have to build the business and strategically place them in areas that help you scale the business. Also, be happy when an employee does something 70% as well as you. You can’t ever expect them to put forth the same effort, so be happy when you only have to do 30% of what you ask them to do.