At 23 years old, I started Infographic World, a data visualization company working with brands to tell their story in a more visual and effective manner. It doesn't matter that I've practically studied business since childhood or that I have an MBA—there is simply no greater teacher than failure. I've had to acknowledge this truth more times than I can count.
My first lesson came about 10 months into starting the company. At the time, I had virtually no systems in place to track money: how much was coming in, how much a job would cost, how much I would eventually need to pay vendors, etc.
More importantly, I never stopped to think about the payment terms I was offering my clients. In my head, I had been conducting a fair amount of business, so the money would come in whenever it came in, and I would be fine as long as there was a nice, comfortable amount of money sitting in the business bank account. To make matters worse, I always wanted to pay my vendors, so whenever I received an invoice, I would cut a check immediately, every time.
On a particularly fateful Friday, I was printing out the invoices that were in my inbox. For some reason, a lot of my jobs had come to a conclusion around the same time, which meant that there were now a lot of contractors that needed to get paid. I laid out all of the invoices on my desk, added them all up and wrote down the total number. Just before I began writing out the checks, I randomly figured that I should check my bank account balance and see what I'd be left with after paying these vendors on time, like I always did.
The next moment was one of the worst feelings I've ever had in my life—my bank balance wasn't enough to cover the amount I had promised my vendors. It wasn't even close, actually.
I closed the office door and sat there at my desk with a pain in my stomach that completely overwhelmed me. For the first time in my life, I felt like a complete and utter failure. How could I have been so stupid to allow a situation to arise where I had to pay out more money than I actually had in my bank account? I didn't want to upset my vendors; they were the lifeblood of my company in terms of producing something for my clients. In my head, my business wasn't going to survive the next 30 days.
I decided to visit my parents' house that weekend and speak with my father, who has always been a mentor of mine and someone in whom I confided in times of trouble. I explained my situation and we sat there for hours, discussing what caused the problem and different ways to remedy it in the future.
With a hard look, I realized that my first problem was obvious: I wasn't enforcing any sort of payment terms with my clients, and I was paying my vendors too quickly. Essentially I was paying for jobs long before I was actually being paid for them—a model that will eventually catch up with you, as I've learned. I proceeded to set up new terms both for the clients and the vendors: I began to require a certain percentage of money up front from the client, and also came to an agreement with vendors to pay them in a manner that's more realistic for me as a business owner.
In order to enforce these new policies and prevent myself from making such a great mistake again, I found that I also needed a better way to track what money was going in and out of my company. My father insisted that I set up a "reserves" bank account for my business: whenever money was received for a job, I would set aside what I knew to be the future costs of this job into this separate bank account. This way, regardless of when the job got done, the money that would be needed to eventually pay the vendor would always be there.
This truly was my great mistake, but what matters is surviving it -- and learning from the experience.
Justin Beegel is the founder of Infographic World, Inc. He left the big corporate world at 23 to help companies transform the way they communicate their messages—essentially taking things people don't want to read (long and boring PDFs, text-heavy articles and dense subject matter) and turning them into captivating visualizations that people actually want to read.
The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprised of the world’s most promising young entrepreneurs. The YEC recently published #FixYoungAmerica: How to Rebuild Our Economy and Put Young Americans Back to Work (for Good), a book of 30+ proven solutions to help end youth unemployment.