Many people today want to start their own small business. These startups spring up fast and die even faster. The reason for such a phenomenon is that most beginner entrepreneurs don’t know how to start and maintain a business. They keep on making mistakes even in the easiest of situations. This, in turn, leads to the loss of money and enthusiasm. To prevent yourself becoming the next failed startup read about the 5 costly mistakes you must avoid as a first-time entrepreneur.
Tip #1: No Organization
One of the most obvious situations you can get yourself into as a first-time entrepreneur is not being prepared and organized. When nothing is thought-through and well-organized, nothing gets done.
Before jumping to conclusions and signing yourself up for another startup, ask yourself these questions:
- What is my business plan?
- What is my budget?
- What will I require to make this work?
- What are the mandatory tasks that must be done in order to set everything up before launching?
- What must be done after the launch?
- Who will be doing these tasks?
- What can I outsource vs. hire help for?
If you know the answers to all of these, you can start thinking through your next steps. But don’t forget that the act of organization is not just for the startup phase of a company but must be maintained. Make sure that you, as an entrepreneur, and everyone you hire or outsource tasks to – is doing their job. The key to starting your own business is organization, this will save you time and money. So many unexpected issues are successfully resolved just because the people knew what their job is and how to do it.
Tip #2: Misinterpretation of the Market
Another very common mistake new entrepreneurs make is misinterpreting the market. One of the reasons for this is that trends often change unexpectedly and it is quite hard to predict what will be the next big hit and what will fail miserably. The market is constantly changing, stay attuned to your consumers and what their needs are so that you are delivering real business value.
Here are a few aspects of the market you can analyze and make more confident predictions for:
- Target Demographic: Who are the people that will buy your product or use your services? What are their dreams and abilities? What aims do they pursue? Can they afford your product or service? What is their age and where do they work? Do they have a family? What is their social and economic status?
- Competitors: Who are your competitors? How long have they been around? What do they offer in comparison to what you have? Are they successful? Who are their customers?
- Costs: How much will your raw material cost? How much will marketing cost? What are your additional costs?
- Demand: Is there a demand for your product or service? Is it a temporary or constant demand? How well is it being satisfied at the moment?
- Expectations: What can an entrepreneur in your chosen industry expect? What are some examples of similar start-ups in your sphere? What are your own expectations for the market?
Know that you will have competition. That’s okay, there is enough business out there to fuel all of the small businesses. The key is to know your product or service and your consumer. Determine how you will bring more value than your competition. Don’t be afraid to fail! Failure is only learning how to succeed.
Tip #3: No Contracts
Relying on relationships is all well and fine until you face reality and your plans start crumbling. The most common mistake of many startups and new entrepreneurs is that they do not establish a strong legal structure from the beginning.
Contracts are your way of securing the responsibilities of you, your employees, vendors, and your clients. Contracts are your safety net. Many first-time entrepreneurs forget that they are about to be doing business, not conducting a meet-up with friends that can be canceled on a whim. Contracts will ensure that your business is supported not by relationships or promises, but by legally binding agreements.
A few important legal documents to consider when starting a business are:
- Articles of Incorporation
- Intellectual Property Protection
- Non-Disclosure Agreements
- Employee Contracts and Offer letters
- Product/Service Contracts
Tip #4: Money Misuse
How many times have you spent big amounts of money on something you loved but would most likely use only once or twice? Probably too many times to count. Deciding to start a business is an exciting moment, but for new entrepreneurs, that excitement is often accompanied by anxiety and uncertainty. Many new business owners jump into planning without thinking carefully enough about business startup costs, and whether or not those costs are feasible.
Spending too much or too less is always bad both for your start-up and for your bank account. These kinds of situations happen due to:
- Wrong Calculations: If you estimate your costs incorrectly, you might end up having to spend a lot more than you initially intended. Make sure that you include all the possible spending into your business plan.
- Poor Hiring Decisions: Do not hire incompetent people, especially for positions that require prior qualifications and relevant education. If you think that you could save money if you hire someone with little to no experience and pay them less, then you should know that you are deeply mistaken. Incompetent or unqualified employees will cost you much more than higher salaries for professionals.
- Insincere Salaries: Directly related to the previous point, unreasonable or pretentious salaries will cause many problems, including possibly cutting overpaid staff and cutting back your other business expenses. This also goes for you: don’t appoint yourself a smaller or a bigger salary.
Tip #5: No Marketing
Many beginners think that the product or service they are offering is so unique that they will be able to hit high without any kind of marketing. Sometimes they rely on word of mouth, family, and friends, or free PR, but success has never been achieved with these tactics.
In our modern tech-advanced world there are ads on every corner, in every social platform, and website. Your product or service will drown in the sea of competition without strategic marketing efforts, authenticity and value to your consumer. There are always alternatives that will be prettier, easier to use and cheaper than yours. This is why you must be able to market your service as superior to the competition.
Research all marketing avenues for your product or service. Are you targeting the local audience? Then maybe it will be better to place the promotional material on the streets by creating street teams, ambassadors, or displays in brick and mortar shops. Are you looking for international acknowledgment? Then go online. Always keep in mind who your target audience is and adjust your plans to reach that target audience.
To conclude, there are many factors that will influence your decisions and form the future success or failure of your start-up. You must understand that a business is an investment and an investment always involves risks. There are some things you can calculate, some that you can analyze, but ultimately, you can never know for sure what way the wind will blow.
If you are a first-time entrepreneur, follow these five essential tips to guide you with the beginnings of your new venture. Learn them, act on them and they will help you build the foundation for what might become your dream come true.