For entrepreneurs, there's a rush that sets in when an investor signs on, the first customer bites, or passion kicks into high gear. At some point, a surge of momentum signals it's finally time to start that new business. How exciting! Dreams are about to become reality!
Dreams are great, but reality is often harder. And here's the reality: Up to 90 percent of start-ups fail. There are a ton of reasons for that, but the death of many a business can be attributed to making fatal mistakes in the very beginning. Here's what to avoid for a higher chance of success.
1. Not researching the market
Don't quit a day job without determining whether there's real demand for the product or service you're trying to sell (and no, Uncle Ted's promise to buy doesn't count). Don't aim for such a broad audience that the business appeals to no one, don't focus on such a small niche that profit is unlikely, and don't just copy what other companies are already doing. (In the words of Paul Graham, "You can only avoid competition by avoiding good ideas.") Instead, research the competition, current trends, potential customer base, and room for improvement in the field. Really think about how to provide higher-quality service than customers currently receive, and then test whether those ideas are worth their salt. Only then will it be time to take the plunge.
2. Prioritizing revenue over value
Want to retain customers and attract new ones? Of course you do. That means it's critical to provide distinct value all the time. The customers' needs should inform the company's every move--whether this means creating new products, partnering with other organizations, or expanding customer service. If a business plan doesn't prioritize the customer, go back to the drawing board until it does.
3. Not investing in marketing
The best product or service in the world won't sell if nobody knows about it. It's crucial to think about how to get the word out from the very beginning. What's the company's online marketing strategy? Do you know anyone with a platform who would value the product (and help advertise it)? Decisions about the direction of the company and decisions about marketing should be made in conjunction with each other. This is made infinitely easier by crafting a brand identity that bleeds into and informs everything the company does. Start building this sooner rather than later.
4. Failing to address legalities and technicalities
Accounting, contracts, tax prep, and state by-laws might seem like concerns for a large corporation, not a one-person show operating out of grandpa's garage. But failure to craft a realistic budget, adhere to relevant laws, or implement contracts with contractors or customers can cost new business owners a lot of money, time, and headaches. Even the friendliest relationships can turn sour when money gets involved, and it's enormously helpful to have a legally binding document for protection if things go south. Likewise, by knowing the laws and adhering to them, you'll save yourself from potentially fatal government fines.
5. Failing to establish metrics of success
While every new business will undergo shifts in its business plan as things get off the ground, it's critical to establish how to determine progress from the get-go. How many sales are needed to profit (or break even) each week/month/year? How will you know when a marketing strategy is working? Will growth be determined by customers, revenue, networking contacts, or all of the above? Figure out how to benchmark success so you can chart the business' growth--and identify and course-correct potential pitfalls before things come crashing down.
6. Following other people's advice even when you don't believe in it
Every entrepreneur benefits from the input of a supportive network of friends, fellow entrepreneurs, family members, and/or investors. But as the leader of a business, final decisions need to rest with you. Do good research, rely on data, and trust your gut. If something feels out of line with the brand you're trying to build (see #3), don't just take the plunge because a mentor said so--doing so can kill a business and the vision for it. Instead, take responsibility for the risks and rewards of building something new.
The great thing about being an entrepreneur today is that it's possible to learn from the mistakes made by the many people who've gone before you. So take it from me. Don't fall into any of the traps outlined above, and you'll increase the chances of building a business that sticks around past its launch.