8 Make-Or-Break Business Rules That No One Teaches But Everyone Should Know
I fell in love with hostels during a college study abroad trip. By 2014, I had stayed in over 150 hostels in 30 countries. I’ve slept on everything from pillow-top beds with handmade duvet covers that could rival any Four Seasons all the way down to hammocks strung above dead cow parts on a cargo ship in the Amazon (advertised, of course, as a “luxury cot”).
When you stay in a hostel, it’s an adventure unto itself. You’re straying from the beaten path; you never quite know what’s going to happen next or who you’ll meet along the way. Guests mix and mingle with each other in a way they never do at hotels, and the close quarters lead to lifetime friendships. As anyone who has spent time on the hostel trail can attest, it’s a slice of traveling life you have to see (and experience) to believe — and I had seen enough of it to know the good, bad, and ugly.
Over the years, I’d always return home from my travels longing for the atmosphere inside hostels. Hoping to find a way of recreating that excitement and camaraderie without having to jump on a plane, I moved to Austin, TX in 2014 and invested nearly every dollar I had in opening what I hoped would be a very different kind of hostel.
Easier said than done: hostels aren’t the most understood thing in the neighborhood, to put it mildly. It took a full year of wrangling with the city, acquiring permits, finding partners, and establishing ourselves, fighting city hall at almost every turn. It was, at times, totally maddening. One example: It took three months, 12 (unanswered) emails, and four different trips from city inspectors just to reach consensus on — wait for it — the height of our stairs. And that was just one of thirty such measurements or approvals we needed. But it was all worth it when we could open our doors to guests and, at long last, in June 2015, HK Austin was born. By the end of 2015, in a result none of us expected, HK Austin was the highest-rated hostel in America.
It was a year packed with mistakes, heartbreak, and dozens of sleepless nights. But like any great entrepreneurial journey — or any journey at all — I walked away with scars and lessons that will last a lifetime.
1) Just because your competitors fail at something, it’s not your job to improve it
Most hostels provide a meal approximating breakfast for their guests. Emphasis on “approximating”. One glance at a review of most hostels, and you’ll find the all-too-frequent complaints about the quality of breakfast. “They put out boxes of pizza and old doughnuts (half a donut each, if that),” wrote one traveler on the review website HostelWorld. From another: “The hostel’s ‘free breakfast’ consisted of ROTTEN EGGS, Stale BREAD.” And that’s only scratching the surface. A hostel breakfast is a culinary roll of the dice.
Why is that? Simple: It is labor-intensive and cost-prohibitive to cook great breakfasts for dozens of guests, each one with their own specific tastes, allergies, and preferences. Hostels run on relatively low margins, so simple decisions like whether or not to serve a gourmet breakfast can actually make a big difference. The result: a meal that begins the day and starts with the best intentions turns out to be too much of a hassle for the hostel owner, and you, the unfortunate hostel guest, are left smearing peanut butter onto white bread and calling it breakfast.
I know what you’re thinking: HK Austin decided to make breakfast amazing, right? Nope. In fact, we decided not to serve breakfast at all. Here’s why: Across the street from HK Austin are the best breakfast tacos in the city (and possibly the world). We encourage our guests to visit Veracruz All Natural, and we’ve never had a single complaint about the tacos or about our lack of breakfast. After all, half the enjoyment of staying at a hostel is taking in the local flavor and culture. We want to encourage that for our guests, and we knew that our own pitiful attempts at breakfast would never compete with the Veracruz migas (a taco that Food Network named one of the Top 5 in America). Competing against that was a losing battle, and one we had no intention of fighting.
Here’s the truth: Competitive advantages are excruciatingly hard to find, and it’s tempting in business to think that any one of your competitor’s weaknesses is something you can exploit. But sometimes what can seem like a hidden advantage for you turns out to be a warning. That was the case with our breakfast issue. If you notice a defect in your competitor’s product, rather than race to say, “We can fix that!”, take a step back and ask yourself, “Why is that a defect? What is keeping them from fixing it themselves?” More often than not, you’ll discover good reasons why they’ve chosen to leave a flaw in their product, and that knowledge can be valuable competitive intelligence.
2) Your customer’s ideas for your business are probably wrong
In fact, it’s worse: Your customers can often lead you astray. But catering to the customer has become a kind of legendary goal, with companies like Zappos setting the standard for bend-over-backward service that tries to anticipate the customer’s every desire and respond to their every whim. In our business, high-end, five-diamond hotels are notorious for going out of their way to do anything and everything their guests ask for, and they often earn their reputations by their willingness and ability to fulfill a guest’s zaniest request.
But that doesn’t mean it’s always the best business practice, especially for a hostel. I learned this firsthand putting together our hostel common room. When they’re at their best, the common room becomes the nerve center of any hostel: It’s where you meet other guests, trade expert travel tips, swap war stories, and, importantly, where you plan the adventures you’re going to have with other hostel guests. It’s no exaggeration to say that a solid common room can make or break a hostel experience.
One of the most disheartening experiences in my own hostel travel was arriving at one in high spirits, only to find a few guests trapped indoors, glued to the television in the common room. Everyone silent, staring at the blue screen as if in a trance. No socializing, and none of the convivial banter that makes for the best memories. If you can judge a book by it’s cover, then you can judge a hostel by the amount of wine and conversation that flows in its common room.
For HK Austin, I decided to head this problem off at the pass: A ban on TVs in the common room. Our guests were, initially, surprised. No TVs? What gives? A few guests even went out of their way to tell us that we absolutely, positively needed a television in the common room. We flat-out refused — and we haven’t regretted that decision for a second.
I’m proud of the space that our common room has become, and I know that it’s due in large measure to the fact that there’s no television around. People use the space to play card games, concoct plans, strike up conversations, drink, and actually enjoy each other’s company, without the endless buzzing distraction of television. In other words, they use the common room to find out what they might have in common.
Sure, it can seem strange to come into a common living area in the 21st century and not see the boob tube against the wall. But the customer isn’t always right, and we had to trust our instincts and intuition. Besides, people will remember their stay at our hostel; they won’t remember the show they never watched.
Think of what your customers say they want, but that you know in your gut isn’t good for the business. Then stand up for yourself, and make your case if you have to. Don’t let the cult of the customer crowd out your own strong instincts for what you know is best.
3) Know when to pay full price
It’s basically the only iron-clad law in business: You will never, ever have enough money when you start. And so, you’ll have to cut a few corners. There’s no crime in that, and everyone who has started a business has done their version of it.
But there’s an important difference between being cheap and seeming cheap. You can save money without appearing to be the cheapest joint on the block. Remember, in business, appearance is reality. Which is why it’s important to know when to shell out a few extra bucks.
For us, as veteran hostel travelers, we immediately honed in on one thing: mattresses. When we were first putting together the hostel’s bedding, we had an important choice to make. Buy the $109 mattresses, which were in keeping with our budget. Or, spring for the $279 mattresses. Multiplied by the number of beds we had, the $170 price difference wasn’t an inconsiderable amount. At the time, that was actually our operating budget for a full month.
We went with our gut and not our pocketbook: the pricey mattresses were the ones we wanted our guests to sleep on. At the core of our business, after all, was people paying us money for time in a bed. Everything else — the atmosphere, the common room, the location, the book collection, the guests, the reviews — was secondary, and, to some extent, outside our control. But if we could make at least the beds an unforgettable experience, we knew we would be putting money on a sure bet.
It was a bet that paid off: Our most common “complaint” these days is that our beds are just too hard to leave. That’s a problem any hostel owner is thrilled to have, but it wouldn’t have happened if we nickel-and-dimed the decision.
Think about how this applies to your business. Where should you be ruthlessly frugal, and where should you be extravagant? What’s the core part of the business that affects perceptions, and in a universe in which you can’t control what everyone thinks of you and your product, how do you shape the few pieces you can control?
4) Stop “playing business”
“Playing business” is a very easy trap to fall into when scrambling to do any and everything you can think of to “help” your business. For me, “playing business” meant, among other things: setting up profiles on sites like AngelList, trying to get local bloggers to come to various BBQs, reaching out to other local business owners, researching complicated legal structures for when it was time to grow, trying to gain Twitter followers, spending weeks on logo creation, and plenty of other premature things that didn’t directly impact a guest’s stay at our hostel that night.
The reality is none of those tiny details matter if nobody likes your product. When we dropped the bullshit and focused solely on the guest’s experiences, our reputation grew, and all of the little details started to take care of themselves. Now bloggers reach out to us for write ups, people follow us organically on Twitter, and other business owners want to talk business with us.
If what you’re doing each hour doesn’t directly and immediately benefit your customer’s experience, you should probably be doing something else. Be honest with yourself: Are you setting up profiles on these sites for the dopamine hit of satisfaction they gave you, or because they will actually improve the business? Are you ignoring or avoiding some more difficult task that’s actually tied to your success, in favor of idling on social media websites, gaining “followers” who will never become customers, and planning for realities way off in the distance rather than focusing on the here-and-now?
5) Hire faster
Every small business owner has a control freak living inside them. Especially when you are starting out, every single part of the business, no matter how insignificant, can seem like something you ought to have your personal stamp on. In our case, this meant scrutinizing everything from the website design to the email templates to the brand of bathroom cleaner, all the way down to making sure I was the one hand-making each bed so that the sheets were tucked in just tight enough. Plus, it was saving us the expense of paying someone else, right? And didn’t Steve Jobs obsess over every detail of Apple products? That’s sort of the same, isn’t it? Of course I should make the beds myself, if only on the what-would-Steve-Jobs-do-if-he-ran-a-hostel theory of business.
You can see where this is going. While it’s great to know a business inside and out, you have to acknowledge the difference between working in the business and working on the business. If your business is going to grow, you have to work on growing it. Otherwise you’re just making beds all day, while the core business languishes.
The solution is to hire fast. It’s in vogue these days to say things like “hire slow, fire fast.” That’s a fine rule of thumb in certain businesses and companies at certain stages in their growth, but it was my experience that I was reluctant to hire because I was unwilling to cede control. I assumed I knew best, and that anyone I hired wouldn’t do the same high-quality job I could, right down to how tightly they tucked in the sheets. My delay in hiring was a kind of arrogance, and it badly impaired the business.
When you wait too long to hire, your company can’t capitalize on your competitive advantages. In my case, I’m a partner at a successful marketing company. My competitive advantage is in marketing, branding, messaging, and growing the business and its digital footprint. Instead of focusing on that, I was busy making beds. And as soon as I got out of my own way, and trusted that others knew what they were doing, our business started growing.
6) Boredom is your new normal
Here’s an inconvenient truth for anyone about to start a new venture: If you don’t like doing the mundane parts of your business, you probably shouldn’t be in that business.
I’ve seen many hostels fail when the ‘owners’ fall in love with the “lifestyle accessories” they believe come along with owning a hostel: adding “owner” to the LinkedIn profile, hooking friends up with free stays, flirting with attractive people who came through the door. Yet they hated changing beds, cleaning bathrooms, dealing with questions from guests, running the software required to keep track of stays, fixing small problems around the property, and the like. You know, everything that goes into actually running a hostel and making guests feel at home.
The trappings of owning a business aren’t going to get you through tough times. You have to enjoy every part of the business if you’re going to survive. This might sound like something of a Zen parable, but it’s a fact of doing business that isn’t talked about enough. Mundanities are the business; boredom is the norm. The sooner you accept that, the sooner you will know if your idea is something you’re going to want to pursue on the lowest of low days.
7) The beginning isn’t the end
Here’s a daydream familiar to anyone who has had to launch a product: The larger-than-life grand opening. In our imagination, we’d invite our friends, family, and the press, and they’d all be blown away by our perfect hostel machine. We’d pop champagne from the second floor balcony, admire the amazing art on the wall, and laugh with all the guests occupying every bed in the place. Until that exact moment was possible, my partner didn’t want to be in business at all. It was another excuse for inaction, another excuse to “hit the whiteboard” and plan some more, instead of actually hosting guests.
There is no perfect time to launch. A “grand opening” or a “launch party” — these are usually just overhyped events that don’t deliver any kind of sustained firepower, revenue, or sales.
When the time actually came for HK Austin to open, we had bare walls and only half of the beds ready. We couldn’t afford champagne, and we had a grand total of two guests. But we launched faster than we thought, and did everything we could to make the best two-bed hostel in the world. There was no reason to wait till we had everything set up to give it a true effort. In startup talk, we had achieved a minimum viable product. Every day since, we’ve worked to make the place a little bit better and slightly closer to that finely tuned machine of our dreams.
Start now. Figure out the rest as you go along.
8) Being human can get you extraordinarily far
Whole shelves groan under the weight of books about “customer service.” Here’s a simple formula that worked wonders for us: When in doubt, be a human.
What does that mean? Well, we knew our only ace in the hole was going to be the fact that we could beat our competitors on how and how much we engaged with our customers. We didn’t have the sexy murals, established bar crawls, or the bank of good reviews to rest on when new guests came in the door. To be perfectly honest, we didn’t have nearly the best amenities either. But we knew we could lavish time and attention on each guest who came through our door; we could make them feel like old friends. So every single one got a personal tour and an endless supply of conversation and advice. In other words, we treated them like human beings, not customers. We took time to pay attention to what they said (and didn’t say) and we tailored their experience as best we could.
When a guest found themselves flat broke and in need of an unexpected 5 A.M. ride to the train station due to a family emergency, we woke up and gave them a ride, saving them a four mile walk. When another found themselves with nowhere to stay and all local hostels (including our own!) were fully booked, we invited them into our home for a place to crash and a family-style dinner. When one guest was too shy to go to two-step lessons on their own, we scrambled our local friends to accompany them — creating a memorable night for everyone involved.
This didn’t cost us gobs of money, nor did it require us to do anything more than pay attention very closely and respond with energy and empathy. You’d be surprised how far simple humanity can get you in business. We were competing against hostels and hotels many times our size and with much deeper pockets, and yet, we were able to compete with them on ratings because we made each guest feel like a guest and not a line item on our balance sheet.
When you’re starting, you don’t have many unlimited resources. But you do have a limitless capacity for work, endless opportunities to provide a great experience, and the proximity to your customer that reminds you they are a person, not a profit center. Given you’ll be starting with a minimum viable product — not a finely tuned machine — it is important to understand how much extraordinary customer service can make up for. At the start, you won’t be able to match your established competitors in all aspects of business, but outshining their stale customer service can be a way to make up the gap.
Applying these hard-won lessons took our hostel from nothing to one of the best in the industry. While it is still a work in progress, each day we try to get a bit better. This year is sure to bring many more lessons, but we will never forget these and we hope you don’t either.