Starting a new business is a minefield of powerful emotions. It’s exciting, exhilarating and can be extremely satisfying, if things go well. It can also be a nerve-wracking, frustrating, stressful, and holding-on-by-the-seat-of-your-pants scary – especially if you aren’t prepared.
The start-ups with the smoothest beginnings (and often the ones that end up being most successful) are those run by entrepreneurs who are aware of the hiccups and cock-ups that lesser start-up businesses are inclined to make.
Today, Unlimited Success looks at 5 start-up business mistakes that you cannot afford to make when starting a new business venture, and how to avoid them. Read on, get prepared, and avoid the footsteps of those who failed before you!
Start-up business mistake #1: Choosing the wrong team
CEOs often lament how tough it is to keep hold of a good employee, and when a company is taking its baby steps it’s unsurprising that many new staff members don’t fit the director’s vision. Depending on the size of the company, this can cost thousands, tens of thousands, or even more. The CEO of the shoe and clothing retailer Zappos once put the cost of poor hiring choices at a horrifying grand total of “over $100 million”.
Employees who are a bad fit often result from a director’s rush to hire too quickly, and an unwillingness to invest the time or money into finding a worker with the right skill set and attitude.
While instincts can go a long way towards deciding if someone is going to work out, a bad hire can be deceptively tough to spot, which makes the recruiting process all-important.
What to do instead: There are many options for hiring staff, and the most obvious is to work with a reliable recruiter – but while recruiters can increase the likelihood of finding a good match, they are expensive. Alternatively, you can send out the word that you are seeking staff to your online and offline networks, because those who know you best are likely to have a good idea of the kind of folks who will be a good fit.
When you find a potential candidate, ask them about both their primary and secondary expertise, query them about their interests and passions to work out if they will fit your company’s culture, check their references and make sure they know exactly what will be expected of them.
Start-up business mistake #2: Failing to understand costs
One of the many truths about setting up a new business is that there will always be unexpected costs.
It will often feel as though you are holding on by the skin of your teeth, but there are certainly ways to reduce the chances of over-spending. Making savings where you can, heeding the advice of free consulting services and mentors, outsourcing when you need assistance, using free or trial software and apps to get your business off the ground, buying used items or renting them, and offering incentives such as equity to team members instead of initial wages will both help your company to get started and help you hit initial targets.
What to do instead: List the spending you have made and will make on EVERYTHING, using your business plan as your main guide. Calculate the costs of setting up business, running costs and wages to the closest degree, erring on the side of caution and over-estimating wherever there is the slightest uncertainty.
Start-up business mistake #3: Demanding perfection
Starting a business will never be flawlessly executed, even if you have several start-up businesses already under your belt. For entrepreneurs running their first ever business, insisting that everything is carried out to the absolute letter can hold a company back and slow it down.
Aside from the inflexibility of perfectionists, insisting on perfection from employees can also create a greater level of stress and therefore a tense work environment. You may find that they take longer to get things done, due to the flawlessness expected of them.
What to do instead: Employees want their bosses to have realistic expectations of their work, and don’t like to feel constantly on edge. If you value your employees, recognise that they are human.
It may be a struggle, especially in the early phases of your business, to handle mistakes that others make, but as long as they weren’t the result of carelessness or crass incompetence, they are unavoidable and need to be accepted. Perfection is unattainable and starting a company is a learning curve for all involved.
Start-up business mistake #4: Not spending enough money or time on marketing
Customers won’t come to your business unless they have heard of you and know exactly what you can offer them. Unless you have a reputation in the industry already, you will want to make sure that your marketing – especially your initial campaign – is high on your priorities list.
While there are free ways to produce marketing, and even ways to make a little money from great content, marketing should take up a portion of your budgetary considerations.
What to do instead: A few start-up business ideas include co-sponsoring an event related to your niche before your business starts running, sending out special offers or even e-vouchers, and ensuring that you engage with your market via social media.
Great content is a long-term strategy, but you will want to start it as soon as you launch, or even before. Great digital marketers, copywriters and content marketers will come with time, but if you have no budget for them yet, great marketing can begin at home. Social media and your website should act as connection paths to potential clients, partners and contacts, offering you the chance to begin a dialogue and communicate with your market online. Over time, leveraging some of these marketing duties will become an important strategy, but even then you will be able to invest in teaching your market and potential partners via books, blogs, podcasts and videos.
Start small, find your niche, learn everything you can about it, share your knowledge and become a thought leader within that area.
Start-up business mistake #5: Partnering with the wrong investor
Accepting money from the wrong investor can spell disaster for any budding business. The wrong investor can give poor advice, they can act like your boss, and they can create friction at every possible opportunity.
A study written by the Harvard Business Review in 1998 still stands strong today, and describes a toxic business relationship suffering from “set-up-to-fail syndrome”. The study’s comments focus on manager-employee relationships, but extend to almost any business relationship, including investors and CEOs. When an investor has an underlying doubt in the venture or the CEO, difficult or dissatisfying business periods can magnify these concerns. When the investor insists on extra scrutiny for the company’s progress, their disapproval creates a self-fulfilling prophecy in the CEO, who will either blame their staff or will become risk-averse and uncommunicative with their investor(s).
This situation, as well as many others, demonstrates how problematic partnering with the wrong investor can be.
What to do instead: While any start-up business needs capital, entrepreneurs need investors who are 100% on board with both the nature and the spirit of the business. There needs to be a shared vision and agreement on the targets you are aiming to achieve, as well as a strong relationship based on a recognition of the value the investor represents, which should go beyond their cash injection.
Compatibility should be at the roots of an effective investor/entrepreneur partnership, so before you become excited about a potential investor’s hard cash, learn about their history, the other kinds of projects they have invested in, and, if possible, what they are like as a person. If you feel that they are a good match for your vision, speak to them realistically and openly, being clear about your goals and what you are looking for in an investor.
Learn more about how to save money in your start-up business here
Let us know what other BIG start-up business mistakes can be made in the comments or on the Unlimited Success Facebook page, and tell us how you overcome them!