Recent studies showed that the average age of a successful entrepreneur is 45, not 20-something, hence debunking the young entrepreneur myth. Ultimately, it’s experience, not luck, energy or passion, which makes an entrepreneurial project work. That’s only natural if you think about it. We all make mistakes when starting a business for the first time, and the second, and the third…
Eventually, we all get to a point -sooner or later- where we have learned enough from our missteps to make things right. In my case, I started to get there later rather than sooner. I have mastered the art of failure throughout the years. 🙂
While it’s difficult to extrapolate all these experiences from one entrepreneur to another, in this article, I want to discuss the most common mistakes when starting a business that I have made, in the hopes of helping you avoid them.
Starting The Business Without Customers
This is probably the biggest mistake one can do when starting a business. And I think we all make this mistake when we are starting something for the first time.
I find this technique to be hit and miss. In my view, it does not work. And it does not work because, in the process of extrapolating the problem to other people, you make lots of assumptions, and generalize things incorrectly.
That happened to me when we developed The Task Ninja, as I wrote in this article. We solved a problem for our team and thought our product could serve a lot of other startups and companies in our situation. We did lots of wrong assumptions, from lumping all startups together to
Forget about market validation. A potential customer is not a customer. Only when the money is in your company’s bank account, they become customers. For Companio, I didn’t write a line of code, and outsourced everything, until I had some recurring revenue.
So start with the customers. Solve their problems manually. Once you are sure that you may be able to build a business around them, go for it. But don’t even start thinking about it if you don’t have customers willing to pay for those services or products.
Startup Unicorn Hype
We’ve heard all the stories about Jobs, Zuckerberg, and the guys of AirBnB. We all love Slack, and Uber, and Instagram, and think we can come with a cool idea for a video app or the next blockchain craze to disrupt our societies and economies altogether. Heck, we even have reality shows like Shark Tank. Yes, guys, building a startup has become mainstream, it’s not indie or hipster anymore. Get over it.
While I believe some level of passion and naivety is necessary to push innovation forward, you need to be realistic. You need to decide if you want to build a business or enter the startup arena. Many times, these are two completely different games.
The chances of entering the startup game and becoming the next unicorn are similar to winning the lottery, even more so if you are not in the first league (Silicon Valley or the US).
However, similarly to what happens with the lottery, there’s this “dreams come true” hype, plus the feeling that you are doing something innovative and cool. And we all are vulnerable to falling in love with an idea or a product, especially if you have a technical background.
Despite what you may be thinking, I am not discouraging you from launching a startup. But if you want to build a business, one that works, don’t start from an idea and found a startup. Start from a market and a group of customers willing to buy your product or hire your services. If the best way of expressing that business is through a startup, go for it! But don’t fall prey to the startup hype.
Spending Money On Things That Don’t Matter…
The other day I was cleaning my laptop bag and I found -literally- dozens of old business cards from failed products and startups. Some of them were still inside their original boxes, untouched.
And that’s a common mistake of every business I’ve had in the past. Focusing and -especially- spending money on things that don’t matter at all.
Business cards are a typical example. Sometimes when a startup has just been born, in the excitement of the moment, you create all kinds of promo stuff: business cards, t-shirts, flyers, posters… And that’s ok if your company is already up and running, you are already generating some revenue, and you may indulge some of it to expand your brand.
But if you are just starting, save that money and invest it on AdWords, on Facebook campaigns, or on hiring someone to build the product or the website. I can’t think of a single occasion where handing out a business card to someone has been useful, or has brought me customers or investment.
Not even close. If an investor is interested in your company, they will look for you or make sure to get your contact. If a customer wants to find you, they will. So don’t focus on vanity stuff. Focus on acquiring customers and growing.
… And Being Stingy With Things That Matter
This is super important. You need to spend money on the things that will make your business grow. What are those things? Off the top of my head, marketing to get more customers, hiring good professionals, and making sure to have a great online presence.
I have to admit I have erred on this myself a lot in the past. Micropreneurs wear lots of hats on their business. They do the administrative tasks, marketing, sales, coding… It gets to a point where you realize you can do a lot of things that cost a lot of money with just a little of your time.
So you become stingy, and spend less money on things, sacrificing your own time in exchange. And the problem is that it’s so easy to fall into this trap and so difficult to realize when you are overwhelmed. In my case, I just kept on trying to reduce expenses at the cost of my time, work and health.
Never do that. Invest in the things that will make your business grow. Not on business cards, not on ping-pong tables for your office. Invest in ways of getting more customers and more revenue, especially at the beginning.
Doing It All Yourself
By and large, of the things you should not spare money on, the one that made the most difference for my business was hiring someone to help me.
Of course, when you are just starting, you probably cannot hire anyone. But the first thing you should do, once you can afford it, is identifying the tasks that are more challenging, technically difficult or stressful, and hire someone to do them. Yes, I know this blog is all about micropreneurs, but being small does not mean you have to do it all yourself. On the contrary, hiring the right people can allow you to stay small and focused while growing your customers and increasing your benefits.
So finding someone to help you is not something you should do in an improvised way. Instead, take your time to look for alternatives and choose the best candidate. You should aim for the best professional you can afford. When I did that for Companio back then, the first month this employee ate almost all the revenue.
This might sound counterproductive for growing, but it’s not. In my case, it not only helped me release stress but gave me more time to focus on growing my business and the stuff I do best. Ironically, delegating some stuff gave me more control over my business.
Becoming A Buzzword Victim
Some time ago, I received an offer to collaborate with an absolutely weird project. Let me describe it to you. It was an IoT smart home device making use of the blockchain technology to not only manage your home but to mine a special coin while using the most sophisticated machine learning algorithms to intelligently optimize the energy consumption of your smart house.
So it had almost everything fancy today in startup terms: blockchain, smart home, machine learning, IoT…
When I read the whole project, my first thought was: “Oh my god! Why don’t they put some propellers on the thing so they can add ‘drone’ to the list of buzzwords?”.
The problem was, it didn’t look like a “real” thing at all. It looked like an ultra-hype Frankenstein designed to attract investors’ money.
Probably most of us have fallen into that trap. When we started The Task Ninja (initially
The thing is, we focused so hard on trying to build that very complex functionality, that we forgot that it had nothing to do with what the product did best (and attracted users): manage tasks and customers easily. Nothing less, nothing more.
Looking For Venture Capital Right Away (The Unicorn effect)
You probably know that I’m not a big fan of Venture Capital or the unicorn game of growing for the sake of getting investment and selling. Eventually, I think every company gets to a point where it may look for investment to grow. Obviously, it’s up to you to decide whether you want to pursue that path or not. It has obvious advantages and disadvantages.
However, launching a startup with Venture Capital in mind is a big mistake, in my opinion, for several reasons.
First and foremost, because your main motivation for starting a business should not be being invested by a Venture Capital firm. It should be something you are passionate about, something that solves a problem you care about. You can fake this at the beginning, but a business is a very demanding and exhausting journey. If you don’t really love what you are doing, if you are not really convinced of what you are doing, you’ll never make it to the end.
Secondly, because if your business needs venture capital from the very beginning, most probably you don’t have a product or service that solves a real problem. If you need to inject big money for your company to acquire users or customers, your success will last only while you have money to burn. And startups do burn money fast.
That’s one of the reasons I grew disenchanted with the startup scene. Innovation was no longer the driving force behind those startups. And I had the feeling of being surrounded by professional beggars pitching investors. What’s worse, it got to a point where we were part of that game too. That’s when I decided to walk the micropreneur path.
Relying On Accelerators Or Startup Communities
Related to the previous point, you should not rely on accelerators or startup communities like Google Campus to launch your business.
Meeting fellow entrepreneurs and building a network is certainly valuable for your business. Joining a community of fellow entrepreneurs or startups can bring you lots of positive things: contacts, perks, media exposure, coverage, mentors, advice, collaborations, etc… Those things are worthy and can help
However, what will make your company grow and thrive is not your network, media coverage, mentors, or a discount of $500 on AWS or Google Cloud… It’s customers. So keep this in mind and focus your energies, time and money on what’s important.
Also, don’t forget that all these accelerators, venture capital firms, investors and communities make a living from startups like yours. There’s a whole infrastructure in place to convince you that you need them to succeed. You don’t.
In this post, I wrote about some of the most common mistakes when starting a business. I have made all of them at a certain point in time. While no two businesses are the same, there are some universal pitfalls, in my opinion, that can be avoided.
Do you have some suggestions or recommendations based on your own experiences? Don’t hesitate to share them with us in the comments!