In the spirit of the new year, we’ve had a bit of a focus on new businesses. I’m glad to hear that there are many people planning to start new businesses with the new year. Starting a new business is complicated and many who have done so will tell you to avoid making mistakes early on. Now nobody can foresee the future but there are some common mistakes which tend to be made in the starting phase of businesses. These can lead to complete devastation or setbacks that are very difficult to overcome.
Premature deal celebration
You’ll see a lot of this going around. Celebrating deals or orders before they are written in black and white. This, unfortunately, tends to create overconfidence in the product while creating a false sense of security about the future of the business. Learn to slow down and temper your expectations. Someone expressed interest for 1000 units great, don’t stop until it’s a done deal. While we’re here deals shouldn’t be celebrated until the payment is received and the obligation discharged.
Expecting someone else to sell your product
Coupled with prematurely celebrating deals this mistake will create an early headache. One of the keys to business is understanding your market. While the concept of using agents or distributors to sell your product is great for scaling it may be difficult early on. While people may position themself as sales professionals the knowledge of how to sell your product should rest with you. Agents don’t make the task any easier because they tend to come back to you to tell them how to sell it. This is all well and good later down the line but early on if you don’t have the knowledge if you haven’t done enough of the sales to know you can’t tell them either and these could end up being expensive relationships.
Focusing more on looking good than being good
There are many cautionary tales that I can tell to evidence this practice. Sooner or later those that spend more time and money on looking good over being good eventually suffer. By looking good this includes crazy ideas like investing in PR services, renting out impressive office space and spending time taking selfies for Instagram. Rather spend time, money and energy on the things that make you better at serving your customers. And no bigger office space does not make you better at serving your customers unless you sell office space. There is a time for that and it’s not at the start of your business. Forget the fancy equipment where it doesn’t improve your ability to do your job. Invest in your capacity, not your Instagram feed.
Assuming they will come
When I see a new business with projections based on capturing a small percentage of the market or a particular number of customers I know who hasn’t done their homework. It’s great for a fireside chat, you just need 2% of adults to be your customers but you must start with why. Why would that 2% give you their money? Are you’re catering to their specific niche needs? Are you addressing a gap in the market people have been clamouring for? Why you expect it is more important to me (and your long term viability) than what you expect.
Paying consultants early on
Hear me out. Consultants are great people. I have friends who are consultants but in a majority of cases, consultants are sapping much-needed money from your business with little risk to them and no guaranteed benefit to you. The people you are looking to work with early are those who want to partner with you. It stands to reason that a person who truly believes in your business would be willing to partner long term or at the very least take on a results-based agreement. A lot of people are going to walk away and that’s fine. You need to put your money into making the business better, consultants may well be able to do that from outside but it may be at the cost of your cash flow. It may be wiser to bring expertise into an organisation by equity participation.
There are many more but these classic 5 tend to be hidden very well and hit founders by surprise. Avoid these in your business and if you’ve already made any of them I hope you have learned and live to fight another day.