Costly Mistakes Every Entrepreneur Should Avoid
- Business mistakes come in only so many varieties; learning from your fellow entrepreneurs could save you big
- It is tempting to invest in the fun or glamorous parts of a business, but that shouldn’t be done until a profitable business model is established
- Don’t undersell; price is only an issue when there is a lack of perceived value
- Entrepreneurs must learn to delegate appropriately or they risk burning out
- Even as we all navigate the current state of COVID-19, having a cohesive and realistic business plan in place will help prevent potential problems, now and on the other side
As a business owner, I’ve made plenty of costly mistakes. [Counts mistakes on fingers, and then toes.] I’ve also avoided mistakes by listening to the stories of entrepreneurs who’ve done it all before me.
After several years of entrepreneurship, here’s something that I’ve learned to be universally true: business mistakes come in only so many flavors. Yes, our businesses are all special and unique, but our business processes and journeys are often quite similar. Consequently, one of the very best things I’ve done for my business is to prioritize learning from a variety of entrepreneurs with a wide range of business models.
Below are some stories of expensive lessons learned as I began my business, along with the mistakes of entrepreneurs from whom I’ve also learned. If you are in the beginning stages of entrepreneurship, please, use our stories of failure as cautionary tales for your business. Learning from the mistakes of others is an essential part of the process when mapping out the steps to start a small business.
Investing in the Shiny Thing First
“We fell into the trap of wanting to become popular on Instagram before building a structurally sound business,” says Amanda Claypool, entrepreneur and blogger. “My partner and I prioritized branding and design before creating a viable product.” To me, this is the most relatable of the expensive mistakes.
Claypool and her partner spent thousands of dollars on logos and design work for a product-based business that ultimately could not scale. It is tempting to allow the more glamorous, outward-facing side of building a business and a brand to take precedence over more tedious tasks, like modeling and research. But as entrepreneurs eventually learn, the steps to start a small business are tedious—and essential.
Not Creating a Business Plan
When I started my own business, I had a great concept, but no idea how to bottle the idea into a product that I could feasibly sell. Although I eventually fumbled my way into a profitable product and service line, I could have saved myself a lot of late nights working as a bartender if I had first solidified a business plan. To be honest, I simply did not know enough about marketing and sales to do such a thing.
Before all else, entrepreneurs must create a map towards profitability. It sounds obvious to say, but if there is no pathway to profit, then there is no business. In addition to a business plan, chart out a marketing and sales strategy. It’s tempting to want to rush through this step, but don’t. Do ample research and hire a consultant, if necessary; this step cannot be overlooked.
Rushing Through Admin
Can we be real for a moment? No one wants to spend $1,000 to talk to a lawyer or accountant before they’ve ever made a dime in business. Unfortunately, some initial outlay into the administrative foundations of the business is not optional. The appropriate and legal structuring and registering of a business is not something that cannot be glossed over during a business’s initial setup.
You don’t have to dig too deep into the annals of entrepreneurial war stories to find tales of business owners owing back taxes, being fined by state governments, and having to restructure after a careless start. Some of this is trial by fire, yes, but plenty of purse-ache could be avoided with due diligence.
Make yourself a “starting a new business” checklist. It should include research into business structure, hiring a lawyer and accountant, securing necessary domains, and researching local regulations.
Undervaluing Your Products or Services
“I used to think I needed to give everyone a deal when I first opened, to prove myself,” says Devon McMaster, entrepreneur and founder of Portland Event Productions. “It was totally not the case. I regret it, and financially, it crippled me for a long time.”
Believing that you have to sell your product or service for less than it’s worth is a common entrepreneurial pitfall. I would know. Personally, I have used this tactic as a shortcut when sales were weak, or I was feeling insecure about putting myself out there.
Now I understand that the real work is in getting customers to see the value of the product. So long as pricing is within a reasonable bandwidth, price is only an issue in the perceived absence of value.
Instead of finding yourself in a situation where you’re working too hard for not enough profit, McMaster suggests figuring out your profit formula and sticking to it no matter what. Let the math do the work, so your emotions don’t have to. If you’re worried about generating more sales, craft a better sales message.
Not Listening to Customers
It’s a common entrepreneurial trap: building a business around the product or service that you want to create, and not what the customer wants or needs. It’s a very human thing, to place too much weight in our own tastes, or to think of them as universal. Similarly, business owners might get too excited about the next big idea or offering, even if it deviates from the original business model.
“Sometimes business owners also get bored by what we’re doing and think that if we bring in a new line of products, offer a new service, it’ll increase our sales and broaden our business to more clients,” explains Jana Lombardi, founder of 360 Yardware. But just because a product or service is adjacent or complementary to the current offerings of a business doesn’t necessarily mean that people will buy it.
Years after starting an online store, Lombardi added a product line that cost $4,000, and has yet to see a positive return on investment.
In entrepreneurship, there is a balance between giving a customer what they want and providing them with a product that they didn’t realize they needed. The only way to find that sweet spot is to do ongoing market research and to spend time procuring feedback from potential customers.
Having the Wrong Partner
You could brainstorm the world’s greatest idea with a friend over a coffee or bottle of wine, but that doesn’t necessarily mean you should go into business with them. Don’t figure this out the hard way.
Running a business with someone is, for lack of a better word, intimate. And just as people should be picky when choosing a romantic partner, they should be choosy with a potential business partner. The strength of the partnership will directly translate to the strength of the business.
Amanda Claypool elaborates on making this very mistake in her business. “After a little more than a year and a half in, my business partner became frustrated that I wasn’t providing more financial resources, and I became frustrated that she wasn’t doing her job to run the company or pitch investors.”
To stem this problem before it starts, “write a formal agreement with the roles and responsibilities each partner will play,” says Claypool. “Do this and set expectations before actually legally opening the business. Then spend a few months playing business to see how you work together.”
If only there were a tried-and-true formula for knowing what to delegate in a business—and when. Delegation is more of an art than a science, but it’s critical to the sustainability of a business over time. Entrepreneurs wear all hats, and frankly, it is exhausting. But running a business is a marathon. Grinding yourself into the ground is a surefire way to ensure that your business does not live on into the future.
If you’re struggling to delegate, challenge yourself. Often, we are too precious about our own originality, and believe that no one else could learn to do what we do. This is simply not true. When your brand and messaging resonate with people, which is the goal, then it must be clear and concise. Therefore, it definitely can be replicated. Similarly, your business processes are only as good as their applicability.
Start by picking something that you do not enjoy or could easily hire out to an expert. Hiring an accountant or a bookkeeper is a great start. Or, you might consider training an assistant (live or virtual) to take on administrative tasks, such as responding to email or website maintenance. Hiring contractors will give you the practice you need to graduate to the next level of business ownership: hiring employees.
Keeping Priorities in Place
Even as we navigate the current state of COVID-19, having a cohesive and realistic business plan in place will help in preventing potential problems before they arise—both now, and once we get to the other side. Keeping this in perspective no matter how tough things get, will pay dividends in the end. In the meantime, best of luck to you, your family, and your business.
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