Business:

Local business owners share goofs, gaffes and miscalculations on their way to success

Leslie Parraguirre, owner of Colours Inc., found out the hard way the danger of serving a niche market.

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Frank Martin, founder of Martin-Harris Construction, likes to say he graduated from Martin-Harris Construction University.

For a guy who has survived the Great Recession and thrived in an industry decimated by the credit crunch, it’s hard to see Frank Martin as a person who makes mistakes. But the head of Martin-Harris Construction made a big one about 25 years ago; with one bad decision, he lost it all.

O’Sheas, which recently reopened as part of Caesars Entertainment’s Linq project, looked like a prime opportunity for Martin-Harris Construction in the late ’80s. However, that first incarnation of O’Sheas was a project three times larger than any job Martin had ever taken on.

“We didn’t know how to manage something that large. We had the wrong people in the wrong places. ... After being in business for 12 years, we lost everything, plus $855,000. ... It ate our lunch,” Martin said candidly.

Martin’s big takeaway from the O’Sheas experience was that he underestimated the importance of a business plan. He ran his operation more on adrenaline and momentum, the product of living in a growing city where contractors could often jump from project to project.

To his credit, Martin hunkered down, wrote a business plan and re-established his company within the next year. As a success story with 37 years in business, Martin also knows his mistakes are probably similar to those made by some of his peers — miscalculations that under or overestimate situations.

“When people start talking about education, I say I went to MHCU (Martin-Harris Construction University), and it was one hell of a big tuition bill,” he added with a laugh.

Plans, realities

Although a business plan is a necessity, reality can still be elusive for those who write them, said Andrew Hardin, a UNLV professor and director of the school’s Center for Entrepreneurship.

Hardin evaluates graduate and undergraduate student business plans, and he said common miscalculations include overestimating demand and market share.

Oftentimes, students with a food-related business will refer to a billion-dollar food industry but don’t realize it’s a smaller, more specific segment that is likely the real market they’re after. Entrepreneurs can also have inaccurate assumptions about consumer desire for their product.

“Sometimes, entrepreneurs don’t want to give away the secret sauce,” Hardin said. “But it’s even worse to learn later that people really don’t want what you have.”

Business plans can also change. Leslie Parraguirre, a 25-year veteran of the local interior design market and owner of Colours Inc., found out that having too narrow a niche hurt her business.

“I started my business specializing in one area: model home and commercial design,” she said. “I learned very quickly that in recessionary times, you have to be in high-end luxury; in fact you have to stay in luxury. (It) has carried design through all recessions.”

Talent trust

After writing a business plan and getting a company started, eventually some duties need to be delegated to employees. But control issues are pretty common for entrepreneurs. Alex Raffi, a partner with Imagine Marketing in Henderson, understands this pitfall well.

In the early days of Imagine, Raffi was in charge of creative work. Even as the company grew and added designers, he had a hard time relinquishing control of the design department.

“My ability to produce, to me, was more valuable than my ability to lead. ... If I would’ve contributed more leadership, we would’ve probably avoided some issues,” he said.

A creative director once came to Raffi with a new idea. He didn’t like it. But instead of saying “no,” Raffi allowed the project to move forward.

“The client loved it,” he said. “I had to learn that I was actually stifling the creativity in my business. ... If I mute my own judgment and allow people to do something on their own, it actually empowers employees.”

Chef Wes Kendrick, owner of Studio 34, a prominent local restaurant now in its 10th year, has a hard time not micromanaging at times, too.

“You have to set pride aside and delegate a little more,” he said. “It’s difficult to do. ... But if you’re able to take a lot off your plate, you’re able to do more with your time.”

Early birds, lost worms

Often, new business owners launch before they’re ready. Dina Mitchell learned this lesson the hard way. Mitchell, area developer and marketing director for Tropical Smoothie Café, once owned several of the franchiser’s valley locations. She eventually sold them and has been coaching new franchisees ever since.

Mitchell admitted to being overly eager to open her first store, and did so without hiring and training enough staff.

“I was grateful to have customers out the door, but it was just one employee and myself running it,” she said. “I burned myself out and lost customers in the meantime, and it hurt my brand. ... The thing is, when you open, you’re never going to look back and say, ‘I wish I didn’t delay the opening.’ But I promise if you open unprepared, you will kick yourself for not waiting.”

Confidence killers

Daniel Matus is one of the many bold souls who started his business during the Great Recession in 2009. But in his first year, the founder of interior and exterior design firm Desired Space had a rude awakening.

“I took on every project in the first year, knowing full well that some weren’t even going to be profitable,” he admitted.

The score? Consumer: 1, Matus: 0.

“Unfortunately, the public had the mindset that, ‘Well, it’s a recession; we can get the lowest price.’ ... They were perfectly legitimate in thinking that,” he said.

After that first year in business, Matus’ accountant pointed out the mistake, and the owner was able to change course.

Matus’ story also speaks to the confidence that grows in time for some business owners. The art of saying “no” to the low-baller is scary, but it can be empowering and productive.

Andeen Rose, a local celebrity hair stylist and co-owner of ADD Hair & Makeup, says her biggest regret in her business’s early days was not believing in herself. As a result, she often yielded to others.

Rose admits her temper got the best of her at times as she moved up in her career but says she’s learned to balance being more reflective and assertive when running her company.

“Being honest, open and fair is all that anyone can ask for,” she said.

Straight talk: Money

Being unrealistic about sales is another Achilles heel for entrepreneurs, Hardin said. In business plans, he often sees what he calls “underestimating the sales cycle.” Hardin said a sales cycle is best defined as the length of time from the first client meeting to when money is actually put into the bank after the sale.

“People will underestimate the length of time this will actually take. ... I always see all these pro-formas with all this cash down at the bottom and the truth is it never turns out that way,” he said.

Parraguirre also learned the hard way that all owners must be involved with the finances, even if it is not the strength they bring to the organization.

“I had a partner in my first business and trusted him with all financial aspects, which was a fatal mistake. .... I was also embezzled previously because the bookkeeper was getting all the statements and I was not reviewing them. ... You cannot be uninvolved in the finances, ever,” she said.

Learning curve

For Martin, MHCU classes are still in session. He admitted to a more recent error in judgment that cost him some extra “tuition.” During the recession, in order to survive, he expanded to San Antonio, Texas. A desert rat, Martin then learned about rain.

“Do you know they can get 4 to 5 inches of rain in a couple of hours? When you’re working in a hole, it’s really important to know these things,” he said, laughing. “That cost us some money, too.”

Martin now has enough money in the bank to cover these small hiccups. And now, taking more calculated risks, he has learned to expect them.

“Sometimes entrepreneurs write really good plans, but they don’t execute really well. ... Almost all of the mistakes I made were errors in execution,” he said.

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