10 Common Mistakes When Starting A Business

Posted on Aug 01 Sunday, November 12th, 2017 at 7:01 pm 43
10 Common Mistakes When Starting A Business

Over the past year I have been the founder of Problemio business starting apps. The apps have over 15,000 actual businesses planned on them, and out of that number I have talked to about 1,000 right inside the apps. In this article I will share some of the most common real-world mistakes founders make when starting their business, and how you can avoid those mistakes.

1. Not having a full grasp of finances

By far, the most common mistake made by the founders whom I helped on the apps is that they did not have a deep enough understanding of the finances that pertain to their business. Such finances are:

a) Costs to open the business: These can be creating websites, leasing physical space, buying inventory, legal help, etc. There are many potential starting costs spending on the type of the business.

b) Ongoing costs: These can be employee salary, server costs, marketing costs, physical office space costs, etc.

c) When the business will break even on a month-to-month basis: It will take a certain time from launch before the business brings in enough revenue to cover monthly expenses. In other words, this is the point when the business will stop losing money. For nearly all businesses, this does not happen right away after launch.

d) After calculating how long it would take to get to various financial and growth milestones, the founders can calculate how much money they need to raise to get them to those milestones.

e) Revenue and Margins: The business has to ultimately bring in enough money each month to cover costs. How will the revenue be earned? How many customers are needed to meet revenue needs. What is the revenue/profit per sale?

Most founders (especially young and excited founders) skip over the finances and focus on more exciting parts of the business. But that is a deadly mistake. Not having a deep understanding of the finances of the business will lead to very bad surprises down the road.

2) Thinking the business will help personal financial situation

Some people look into starting their own business because they see it as a way to improve their financial situation, or solve financial difficulties. In most cases the business does not make money for quite a while. Most businesses fail, and even in the case of successful start-ups, they often lose money at first, and require additional investment of time and effort. Additionally, a business can add extra stress, and put a strain on social and family relationships, so it is in no way a savior from current financial problems.

3) Jumping into a business without having experience in that field

Too often, entrepreneurs jump into a business without having experience or knowledge of the industry in which their business will be in. That means they will have a learning curve of 3-9 months of just trying to get an understanding for the industry they are in, and how to do business within it.

That means more costs, more mistakes that could have been avoided through experience, and more time needed to get the business truly moving forward. In fact, many new companies run out of money during that time and simply fail.

4) Worrying the business idea will be stolen

If you are successful, your business will be public for everyone to see and copy. So your business idea will be free for people to steal for the entire duration of your business after you launch.

The benefit you get from being secretive about your venture is that fewer people can copy it before you launch which can at best give you a little bit of a head start.

The detriment entrepreneurs do to themselves is that by being secretive they put themselves in a position to get less feedback or advice. Just to put things in perspective, during the idea and company formation stage, feedback and advice is just about the most valuable thing you can get. It is probably more valuable than money because one piece of good advice can save you from very expensive mistakes.

Of course, entrepreneurs should not be too open about their business either. It is best to try to use good judgement and not let the masses know until your product is solid and you are getting traction.

5) Starting out without looking professional

It is understood that small businesses are always short on funds and resources. But your potential customers will do research about you before they decide to purchase your products or services. And if your website, social accounts, or anything else looks unprofessional, it may discourage them from engaging with your business further.

Remember, you never know how many customers never purchase or never return to your product or service. They get disappointed, and in most cases do not care to tell you why. Be aware that at every step where your business does not have an appearance of a professional operation, you are losing sales.

6) Trying to do good in the world before thinking about business fundamentals

Many people often want to make the world a better place in many ways. Some people want to decrease hunger, pollution, or any other bad thing while others care about human and animal rights.

The number of businesses which are motivated in these ways is overwhelming and it is really an amazing thing to see so many people truly caring about the greater good. Unfortunately, there is a bit of a catch-22 here in that to really help the cause you want to help, the business has to generate a lot of money so that it can thrive and be in a position to give more.

Ironically, that necessitates an approach that is focused on building a product or service that can be grown to generate more and more money, and be financially robust. Once that happens, the founder can donate to the cause they are passionate about.

But if the founder focuses on the cause they are passionate about too early, it will dis-focus them from creating an actual money-generating business.

7) Not fully understanding the value proposition of the product

For many businesses, product is everything. Take this Google.com for example. Search is the consumer facing product there. If it is helpful to most people, then it is a useful product. But if it was not helpful, then no one would use it, and no one would recommend it to friends, and it would live in mediocrity. But Google won people over by being the best search product of their time, and maintaining a certain level of quality, authority, and trust.

So for every business, it is very important to have a very clear idea of what exactly the benefit is to the consumer, and provide that benefit with highest quality possible in a way that is most convenient to the consumers. This is very core to almost any business. Quality, convenience and usefulness of your main product/offering will make everything easier. Marketing and sales will be easier, partnerships will be easier to come by. Just about anything will be easier to do if your product resonates and is liked by your target customers. So stay very focused on the value you provide, and do it with as much quality as possible.

8) Not understanding how to market and sell the product, or extent of the competition

If you have a consumer product, marketing is the lifeline of your business. It is how you bring in a steady flow of new customers.

One of the most helpful things to do is put yourself in the shoes of your target consumer and think about how they shop for your product. What is their behavior pattern? Do they search for it and seek it out? Is it the thing they are likely to share with friends? Will someone else have incentive to promote this product to their audience?

For example, if you sell fashion items, it may be tempting to start talking about it on Twitter or Facebook, but the reality of those sites is people are not shopping. They are there to stay in touch with friends or browse content. But people do search for fashion products in Google when they are shopping, or Amazon, or their favorite fashion websites. So your marketing strategy may be better if you focus letting people find your items when they are looking for fashion items, wherever they are looking for them. It does not have to be online only. Why not get physical stores to carry and resell your fashion items for you?

So think about your target customer behavior and make sure your marketing efforts match.

9) Not doing market research before starting the business

Every business is in some “market.” It might be a designer clothing market, or ecommerce, or anything else. The mistake many people make is not learning enough about the market in which their business is in.

Before starting, the entrepreneur must research who the competitors in their market are, and what the consumer demographics, spending patterns, and consumption behaviors are like. Additionally, there must be research whether this kind of a business has been tried before. How many such business were there before? Did they fail? Why did they fail? How can your business avoid the reasons that caused the previous such businesses to fail?

Founders who do not research the questions above have a gigantic blind spot that tends to show itself very quickly once the company gets started.

10) Not having a well-rounded solid strategy

While you can not plan for everything, often, if you do not have a solid strategy or plan for a crucial part of the business, the entire strategy may fall apart.

For example, if you can not build the product, the business will not exist. But if you can build the product, but do not find any great ways to market the product, you will face a continuous uphill battle. Even if you get these items right, and can not sell the product, or can not raise money to fund operations, or can not maintain operations at profitable levels, or can not get a number of other important parts of the business right, the business will continuously face significant risk.

Obviously, there is no single fail-proof plan, but when you are thinking about and planning your business, try to have at least a strong idea of how to build, market, and sell your offering to a large-enough group to have that result in whatever financial outcome you are looking for.

Bonus 11) Not starting

Of course, this is a major problem that plagues many people. They really want to start, but something is holding them back. Sometimes it is foresight and caution, which is commendable. Sometimes it is something psychological. Sometimes it is actually a result of over-planning and trying to get every detail just right. And often it is purely financial since many businesses require some finances to get started.

Whatever may be causing your apprehension, and you just can not seem to get truly started, do not put too much pressure on yourself to succeed right away. Try something very small and simple to start just to test out the waters and see how it is.

Bonus 12) Thinking as a marketer and not a user experiencer

Just about every business owner wants to grow their business, and make as much money from it as possible. It is natural. That causes the marketer and sales person role becomes large and tends to overshadow other roles. But keep in mind, your product is incredibly important. So make sure you are constantly thinking about improving user-experience for your clients, and not just about how to squeeze the most money out of them. Chances are that it will pay off in the short and long term.

About the author:

Alex Genadinik is a web and mobile developer and a whiz marketer. He is the founder of problemio mobile apps which are apps that help people start their own business. Please say hello to Alex on Twitter @genadinik