When starting a business, you are bound to make mistakes. The key is to make sure that the mistakes you commit are not fatal to your business. From the book So, You Want to Start a Business?: 8 Steps to Take Before Making the Leapby Ed Hess and Charles Goetz, here are nine killer mistakes to avoid when starting a business:
1. Choosing a bad business opportunity.
The hardest lesson for eager entrepreneurs to learn is that having a “great idea” for a business doesn’t equate to a good business opportunity. Learning the distinction will greatly improve your chances of success. Here’s how to recognize a good business opportunity:
- It satisfies existing customer needs and
- Customers are willing to pay for satisfying those needs.
Too many businesses fail simply because the entrepreneur doesn’t take the necessary steps to ensure he is pursuing a good opportunity. Don’t get so attached to your business ideas that you try to force a business to work. If you do, you’ll lose every time.
2. Pursuing the wrong customers.
All too often business owners try to sell their products to people who don’t need them, resulting in wasted time and money. To be successful you have to win the match game—you have to align the right customers with the right products or services. And the key to finding your customers is figuring out what need your product or service relieves. You’ll need to do some research. Market surveys and focus groups are two great options. Knowing which customer base you should target will help you save money in marketing and advertising, provide more enhanced product or service design, and increase sales.
3. Trying to sell the unsalable.
Many entrepreneurs love their business idea so much that they can’t fathom that others might not be as ecstatic about it as they are. But of course, in the real world, customers will pay for only what they need regardless of how cool or useful you think your product is. To make sure there are enough customers who really need your product, take the following steps:
- Determine your differentiator—that aspect of your product that makes it better than the competition.
- Use that differentiator to market your product. Get it out there in front of customers as soon as possible.
- Develop a prototype right away and use it to get customer feedback so that you can work out any problems they have with your product.
Remember, when it comes to your product, let constant improvement be your goal.
4. Selling for the wrong price.
Put the incorrect amount on the price tag for your product and two things can happen—neither of which is good. Either no one will buy your product because it is overpriced, or you’ll make sales but lose money because your costs exceed the money you are bringing in. When determining your price you should consider the following:
- How much will your product cost fully loaded? Remember: Price – Cost = Positive Cash Flow;
- How much do your competitors charge?; and
- What is your potential customer willing to pay?
5. Overestimating the number of and the speed of customer purchases.
Just as entrepreneurs assume that everyone will love their product, they assume that when that product goes up for sale, it will fly off the shelves. They don’t take into account customer inertia, which is basically the reluctance of customers to switch from a product they already use to a new, unfamiliar one.
Fortunately you can overcome this phenomenon. One way is by perfecting your sales pitch. Create a pitch that solves customer needs and stresses the benefits of your product. And when you are delivering your pitch, know when to shut up and listen. (No one likes an overzealous salesperson.) You can also offer incentives to first-time customers: free samples, product demonstrations, free repairs/service for six months, and bonuses for customer referrals.
6. Mismanaging the business.
Running a business is like baking a cake. You need the right ingredients. You need to do the steps in the right order. You have to use measured amounts—and you do it the same way every time. But also like baking a cake, if you put in too much of one ingredient or misread the cook time, one simple mistake can ruin everything.
Entrepreneurs should manage by objectives and exceptions. When you manage by objectives, you create lists of “to-dos” that help you prioritize and focus your time on the most critical tasks and keep you from becoming overwhelmed by everyday minutiae. You should also learn the art of management by exception—or knowing how to quickly and efficiently fix those things that go wrong on a given day.
7. Failing to hire the right people.
Running a business is all about people. You do business with people (customers) and through people (employees). If you start a business that will require you to hire employees, your success will depend on how your employees treat customers and how well they do their jobs. When hiring, your number one objective should be to select people with the right attitude, a track record of success, and with high standards and integrity. Don’t make skill level your number one focus. You can teach skills—you cannot teach character and drive.
8. Losing good employees.
Once you’ve hired great employees, you want to make sure you keep them. Always treat your employees with respect, give them a sense of doing something important and meaningful, praise them, teach them, and help them accomplish their dreams while they help you accomplish yours. Ask your employees monthly if they are happy. If they aren’t, find out why not. And make positive changes based on their recommendations. When they see that their opinions and concerns matter to you, they will want to work even harder for you, and you can rest assured that happy employees will result in happy customers.
9. Being unable to accommodate growth.
You’re probably thinking Too much growth? I should be so lucky. The reality is that growth always looks good on paper, but if you can’t properly manage your business’s growth, the whole operation could implode. Big mistakes can happen when growth comes too quickly. For example, poor-quality products are made, customer delivery times are missed, and new employees are hired too quickly.
Keep two things on your mind when you are experiencing growth: quality and employees. You must always maintain a high-quality product and be sure to involve your employees as much as possible. You’ll be asking more and more of them, so make sure they are involved in every step of the process. Keep them informed so they know they are growing with you and involve them in finding and training new coworkers.
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Category: Business Challenges