Avoid New Entrepreneur Pitfalls With These Tips

For first time entrepreneurs, the idea of starting a business can be overwhelming, a mountain of work to plow through on the way to work independence. It’s enough to make anyone second guess things. And they make mistakes in the rush to get to their goal. In fact, even veterans of the game can be apt to make mistakes. Here are some common missteps people make when starting a company and how to avoid them:
1. You don’t learn to work within your (limited) budget.
Unless you were born in a gold mine or won the lottery, you’re going to have limited capital when you start your company. It’s totally normal. Finding financing can be difficult and deserves an article on its own.
The important thing is to be selective when deciding where to put the money you DO have. When making this decision, consider two phases of your company’s development, future goals and baseline profitability. For example, do I need to rent an office with room for 10 people? Probably not…yet.
Remember to start small. Premature scaling runs a lot of new businesses into the red unnecessarily. It’s great to have goals in mind, but it’s important to give yourself time to get there. Expanding too fast could mean the end, even if you have a spectacular product.
One way to think about things is by using “ramen profitability.” This is a term coined to describe when a startup is just profitable enough to cover the founder’s living expenses. While “breaking even” isn’t what you dream about when you start a business, this is an important position to be in. It allows owners to spend some time working towards growth vs. focusing solely on financing, or they can start finding funding for tweaking their business model. They are no longer dependent on investors’ money for existence.
Consider this survival mode. This is like a college student who is learning life skills but isn’t quite ready to move out of the dorms and function as an adult yet. They can survive, but they’re eating ramen and asking their parents how laundry works.
2. Poor time management causes things to fall through the cracks.
You overwork yourself because you have to cover multiple roles with limited time. The budget needs to be set. Your vendors need to be negotiated with. The Facebook page needs to be updated. Your office hasn’t been swept in two weeks. Your spouse hasn’t seen you in days. It goes without saying that you have a lot going on. This is the phase that you will only get through with good time management skills.
When you wake up in the morning, prioritize your to-do list. Ask yourself what is vital to get done before the end of the day. Put differently, what will be detrimental to business if it’s not completed before you go home tonight? That goes at the top of your list. If you’re having trouble deciphering key items, here’s a tip: Focus on the things that are currently bringing in income. Protect your current income streams before moving to the things that will increase them.
Another way to save time is to delegate. If you have the funds, outsource things that don’t require that you, specifically, have to complete. Admin work like payroll and bookkeeping could easily be entrusted to an accountant. For anyone that doesn’t enjoy playing with spreadsheets all day, this would be a welcome relief even if you do have the time to do it yourself.
3. You’re passionate, but sometimes you let emotion guide you over logic.
The whole reason people start businesses is because they’re passionate about something. Sometimes it’s the product or service itself, and other times it’s simply the love of creating something from nothing. Regardless which category you fall into, passion has the tendency to overtake logic at times.
Maybe it leads to choosing the wrong business partner or turning down a deal you regret later. Maybe you scale too quickly, setting your expectations higher than the market is showing you is appropriate. Passion leads us all to do great things and make bold moves. Just be sure that the decisions you make out of emotion are backed up by logic.
On the flipside of this, your passion can quickly turn to self-doubt if you hit a rough patch. It’s important to seek out a support system, including mentors you can talk to. It’s always a good idea to have someone who has been through the process before to help you through the difficult times. Don’t give up on yourself. Sometimes a lack of income is caused by something other than a lack of demand for a product. It could be your business model or an incorrect target consumer.
4. You have trouble finding people to hire that are as passionate about your company as you are.
Listen closely. If you’re only willing to hire people as passionate about your company as you are, you’re going to be disappointed. You are definitely going to need good employees as your company starts to grow, but be realistic. No one is going to be as excited about your company as you are.
What you need is a group of people are passionate about the work. Once they start working for you, you can show them why doing so is so smack dab fantastic and promote company loyalty via perks for long-term work.
In order to really build something to last, it’s vital to hire people who are different from you. Different skills, different experience, different history, different world view. This will be an asset to your company. If you only hire people like you, the work done will be similar to what you yourself could do. Why not hire a group of people who are going to expand your vision and improve upon things in a way that only their unique past experiences could have lead to?
If you’re not ready to commit to a team yet but need to have some work done, try using freelancers. Websites like Upwork and Fiverr are good places to start.
5. You’re selling what you want to sell vs. what people want to buy.
You might love the wooden bicycles you carve, but if no one wants to buy them, you’re not going to be able to build a sustainable business using them as a product. The mistake many new entrepreneurs make is not establishing demand before diving into everything else.
The first thing you should do before even thinking about investing your life savings — pay attention here — is to find out if people will pay for your product. Do some market research. Know the competition and how you will be different, because if you’re not different, why would anyone buy from you?
Going along with this, know your buyers. Who are these people that want to give you their hard-earned cash? How much are they willing to part with? Are they teenagers looking for something to do on a Saturday night? Are they business professionals who commute? The more clearly you can define this, the easier it will be to delve into marketing.
6. Marketing
This biggest issue newbies have with marketing is this: they don’t know how to do it. Often times, a founder will sink a huge portion of their budget into getting their name out via expensive ads or — dare I say it — hiring a consultant to plaster their name anywhere people let their eyes wander.
What they really need to do is reach a small, specific target customer (See above.). And often, that can be done for very little money.
If you’re not a social media marketing person, that’s ok. But how can you make it work? Typically, you’re the one and only person doing things in a startup, and you have eight million things to do on any given day, only a small number of which is getting people to recognize your brand. The more clearly you’ve defined your target customer, the easier it will be to figure out where they spend their time. If you haven’t figured this out by now, let me say it. THAT’s where your marketing budget should go. If stockbrokers aren’t your target, don’t advertise on Wall Street.
The idea here is to work smarter and be creative. This is the era where YouTube stars make millions. Take advantage of the free tools at your disposal first. Then work your way up to the more expensive paths if you need to. You’re not going to start a Fortune 500 in a day, so think small until you get things up and running. There’s always time to expand later.
One way to be creative is to participate in The Experience. This is a program that allows you to hire a remote team for low-risk and zero cost for a month. Candidates who have just finished their degree or who are looking to change careers volunteer to work unpaid for a month in exchange for some on-the-job training and help building a professional portfolio.
At the end of the month, you can part ways, or if the marketing has brought in enough income, you can hire them on a more permanent basis. Everyone wins. And if you’ve been paying attention, diversity is key to building a strong team. What better way to find diversity than by hiring remotely? Your candidate pool jumps from locals or people willing to move to your base city to the whole world.
You can use remote teams for many things, but marketing works particularly well in this environment and eliminates a lot of daily tasks that will free you up for more urgent matters.
Starting a business is a lot of work, but there are a lot of benefits to being your own boss. Don’t think of the process as a mountain you have to climb to get what you want. Think of it more of a meandering path that will lead you to any number of exciting destinations. Be flexible, and remember to make time for yourself and your family. Burnout is real.
Comment below! What mistakes have you learned the most from?
