Creating a new business is confusing, exciting, and a lot of hard work. Over my time as an entrepreneur, I’ve screwed up a lot and learned even more.
Launching a startup has many variables to it. Mastering all of them (especially on your first try) is nearly impossible!
From connecting with thousands of entrepreneurs across the world and my experiences as an entrepreneur, I’ve seen the same mistakes occur very often. Here are 5 startup mistakes you should avoid:
Mistake #1: Spending More Time On Building And Less Time On Sales
I’m all about creating a great product that your customers will love, but entrepreneurs fall in love with the building process. It’s a great thing, but it can be very costly.
At the end of the day, a business is defined as an entity that pulls in revenue from selling products, services, or information/ideas. You can spend years building the greatest product in the world, but it means nothing unless people are buying it.
Building a great product is essential, but never lose sight of the big picture. Revenue is what enables your vision to come to life and helps you create a successful business. Always spend more time marketing and selling your products!
Mistake #2: Trusting Strangers Too Easily
As a young entrepreneur, I had to find strategic partners to fill holes in my startup. I was young and naive, which made me easily believe everything strangers told me.
Believe it or not, people have sold me on crazy dreams. So crazy that I actually went home and created a contract giving them equity in my businesses after just one meeting. Why? Because they glorified my image of success and I believed everything they said.
Luckily, I always placed performance clauses in my contracts, which saved me quite a few times. However, I would bring people in who would sell me on big dreams, but never ended up doing anything.
As entrepreneurs, we meet a lot of new people who can potentially have big impacts on our businesses. It’s easy to talk the talk, but it’s much harder to walk the walk. Be careful who you give out equity to and make sure your ass is always protected!
Mistake #3: We Can’t Do It Without An Investor
For some reason, most entrepreneurs look at investors as their first option. However, investors should be your LAST option! Why?
Imagine this, you’re sitting on a brilliant idea that doesn’t need hundreds of thousands of dollars to make successful. Investors are going to take equity in your company and dilute the founders percentages.
Now the 50% you hold in your business just became 30%. You get $250,000 in seed money, maybe even a nice salary, but you just lost your startups soul.
Not only does your investor get paid back $250,000 first (in most cases), but he now gets 40% of all the money that is made in your startup. He doesn’t do much work (after he puts his $250,000 in) while your founding team slaves away.
The biggest regret I hear from entrepreneurs who have venture funding is the decision to go for funding too early. If you can come up with any amount of money yourself (even $100), invest it yourself in the business.
If you have a mortgage to pay, but enough money in the bank to pay it, you’re not going to borrow money from your friends. The same principle applies to your startup. You don’t need a ton of money to make your startup successful.
Grow slowly if you have to, but find every way possible to make your business successful without the help of investors. If all else fails, find investors to fund your startup.
Mistake #4: Customer Development Is Non-Existent
Customer Development is one of the biggest principles of entrepreneurship. You can only create a product that your target audience is willing to use, pay for, and enjoy.
I see too many entrepreneurs make the deadly mistake of creating things they think are good ideas. It’s great that you love your idea, but do others feel the same way?
Once you build the idea, you’re going to be talking to your demographics with hopes of closing them into customers. When you have a great idea, screw intellectual property or creating a prototype.
Go find your target audience and ask them about the product. Ask them what they think, how much they would pay, if it’s a viable option, and any other negative feedback they can give to you about the product.
When you have nothing built, it’s easy to pivot and make changes to your idea. Listen to your customers (hundreds of them) and take notes. See the common patterns in your data and use that to create your product. The sales process down the line becomes a hundred times easier because you know what your customers think.
Mistake #5: Focusing Too Much On Growth
Growth is an exciting thing for anyone. However, growth is also extremely dangerous in a startup. I’ve seen too many startups fail because they try to grow way too soon.
If you have a product or service that is successful, why should you grow your business? Unless you’ve captured as much market share as possible with your initial product/service, you really shouldn’t be growing.
Why break away from a good thing to an unproven idea or product? You really shouldn’t! Focus on your product or service that is finding you the most success. It takes years to capture your market and that is the only time when you should be growing.
I’ve seen startups grow into new areas within few months of launching, which is absolutely ludicrous! You spend months, if not years creating a great product. You should only grow or expand once that great product is getting close to reaching its full potential.
Conclusion
Running a startup isn’t an easy job. The entrepreneurship lifestyle has been glorified by the success stories posing next to their Lamborghini’s, but the rewards require a lot of hard work. Hopefully this list of mistakes to avoid will help expedite your startups path to success!
photo credit: plewicki via photopin cc
