So you have a great idea and you wish to start a business. You are brimming with energy and enthusiasm. You put in the time and energy to plan how will you go about executing the idea and making big bucks.
You believe it is only a matter of time before your product succeeds in the market, placing you among the ranks of the successful entrepreneurs. You also dream about the same idea leading you to a billionaire tag.
Every new entrepreneur begins with the same mindset. I did too. But starting your venture comes with many risks. I do not intend to say that you should not dream big. In fact, only by dreaming big have people built revolutionary companies.
However, most budding entrepreneurs are unaware of the risks and mistakes associated with a start-up. As a result, they repeat a ton of mistakes made by other entrepreneurs along the way. Some errors even lead to the business shutting down. A few brave soldiers manage to battle it out of such challenges and come out victorious.
I have made my own share of mistakes. In all honesty, I have done more things wrong than I have done right. Many of these errors seem obvious in the hindsight today. They make me think, “I cannot believe I was so stupid. What was I even up to?”
I have learned my lessons the costly way by blowing things up and paying the price. If you are an entrepreneur already or plan to be a future CEO, I hope you do not repeat the mistakes that I did.
I am not posting any tips on the right things to do when you begin a venture on this post. In this article, I will only focus on the mistakes a new entrepreneur must avoid.
What are the 10 deadly mistakes of entrepreneurship
As a first time entrepreneur, I had some assumptions in mind but the reality was quite different. I have seen other entrepreneurs have similar assumptions. You might fall victim to such thinking too. So watch out if you have similar beliefs.
These are the mistakes entrepreneurs make when starting a business:
1. I am an expert on the topic so I can run a successful business on it
People assume that being an expert in an area serves as a catapult to build a successful business. The examples exist across all industries. Techies who excel in programming build an online web-based startup. A chef believes he can run a successful restaurant. A skilled beautician believes she can start her salon.
Being a technical expert in your domain does not guarantee success. If you hope to work as the technical expert in your own business, you will face myriad challenges. Running a business involves many other aspects such as marketing and selling your product, maintaining high levels of customer service, managing the accounts and more. As an entrepreneur, you will be forced to work on things you hate, especially during the early days.
Most people assume they will do any work that comes their way when they begin. But once the venture starts, the same people ignore or pay little attention to the areas which fall outside their expertise. I have seen countless entrepreneurs doing the same mistake including myself.
When I started my first venture, I thought, “I have the programming skills to develop web applications. How hard can it be to build applications for clients?” I was right in considering the technical part as easy. But I had failed to guage how difficult it was to find new clients, keep a tab on the accounts or lead people. As a company, we struggled because neither were we good at sales nor were we willing to step out of the comfort zone to learn to sell. All the assumptions of “I will do whatever it takes to succeed” went down the drain.
Are you the expert of your business and do you enjoy that area alone? You should know that you cannot remain as the technical person of your business forever. If you are starting a business thinking on the lines of, “I love programming so I will have a great time running my own business instead of working for someone else”, you are in for a surprise.
Michael Gerber explains in his amazing book, The E-Myth Revisited, how anyone looking to start their venture needs to have a technician, a manager, and an entrepreneur within them. Being only the technician will take you down the path of anger, misery, and frustration. If you plan to only focus on the technical area, you will have more peace of mind working as an employee than running a business of your own. If you haven’t read the book yet, grab a copy now.
2. I have a good idea so the business will succeed
Any human being considers his own ideas as the best. The same applies to an entrepreneur who strongly trusts his idea to succeed. But most people miss considering two aspects.
A good idea is hypothetical: If you believe your idea will work because you think so, you need to pause and evaluate. Unless you talk to your potential customers, do enough ground research and experiments to validate your idea, you never really know if your idea is truly great. Usually, what the entrepreneur builds is not what the user wants. Even if they do, the volume ends up too low to run a sustainable business.
An idea means nothing without execution: Let’s say, you have validated and come up with an amazing product. A good idea or a product does not guarantee success in any way. Sure, it works as a huge advantage but a successful idea requires brilliant execution. Many average ideas succeed due to the way they are executed and several great ideas fail due to bad execution.
I have been a part of several products that failed. Even till date, I still rate some of those ideas highly. It was our poor execution that led to their demise.
Many of the famous businesses you know today were not groundbreaking ideas. Twitter is all about putting up a small message. Websites like Facebook existed before it started and new ones have come up after. Yet, Facebook stands tall because they went the path of growth the right way.
3. This is how I will scale my business
A new entrepreneur plans the scale of growth well. For example, if a person is planning to start a restaurant, he has a plan on how to expand to a second outlet when the first one does well. A technical web-based product founder will have envisioned how to handle the growth from 1K to 100K users.
But most entrepreneurs fail in preparing to grow their business from a grassroots level. The restaurant entrepreneur does not think enough about how to bring in the initial customers to the first outlet. The programmer entrepreneur has no clue how to get the first 1000 users.
Budding entrepreneurs assume that the first set of customers will come by themselves. The truth is however the opposite.
It is the first few users who are the hardest to acquire. Most businesses struggle at this stage or scamper around trying to build the initial user base. Expenses rise, frustration mounts and the business goes into a downward spiral. The growth from 1K to 100K users poses different challenges compared to moving from 0 to 1K.
When I started a platform for people to showcase their talent, I had planned the product enough to handle enough categories and their nuances. As you can expect, I failed to envision how could I gain my first few users on the website. And that is exactly where I ran into trouble. I failed to get the initial users and had to shut down the product.
4. These cool features will rock
This misconception holds the highest significance for technology startups or any product based on an app or website. As an entrepreneur, you might like to think of features to add to the product. You believe the user will find them awesome and sing praises about your product.
But in reality, technical startups have a huge gap between what the entrepreneur believes the user wants and what the user actually wants. Assuming customers will love the feature XYZ is a classic entrepreneurial mistake.
No matter how good of a visionary you are, you will only know what the user wants after you spend enough time with the users and analyze their behavior. The flash that went in your head which said, this feature will change the market, is often incorrect.
When we built a platform for medical practitioners to handle their patients and appointments, we spent over 3 months building the features to handle their inventory, prescriptions, billing, etc. When we started selling the product, the doctors only used the appointments module from our product.
It turned out that they already had a software that handled the rest. They were unwilling to try our product because they had all their current patient data on the other product. All the “cool features” we built in the 3 months went down the drain.
5. I have made a detailed plan to make my venture work
Every entrepreneur has a plan to succeed. Some prepare a detailed plan envisioning every month and quarter step by step. But in a new venture, unforeseen circumstances come up and plans go haywire.
Everybody has a plan until they get punched in the mouth.– Mike Tyson
As an entrepreneur, what you do when plans fail determines whether you will attain success. When you start, your lack of experience will inevitably lead to mistakes. In such cases, if you do not have a plan B, you will have no choice but to shut down your business.
No doubt, you need a plan but what you also need is how do you handle the situation if your plan takes a U-turn. Whatever initial plan you made will almost always need a huge revision through the journey of your venture. I am yet to meet an entrepreneur for whom everything went right as per the plan.
6. Focus on the product more than the people
Entrepreneurs love to have the best product the market has ever seen. Talk to a few and you will find someone saying, “Our product has X which our competitors do not have.”
But your customers do not only buy your product, they also buy an experience.
It starts from the moment the customer steps into the store or your website. It does not even end when he leaves with your product. Your customer rates your company for the support you provide when he faces a problem with the product. You might have a scintillating product, but if no one answers the phone when the customer calls about a problem, you have work to do.
The way your staff greets customers, the thoughtfulness you apply to pre-empt what the user wants and the feel-good factor you provide is all a part and parcel of your company.
The processes you instill, the training you provide to your crew, the checklists you put in place determine how happy a customer feels.
When such little aspects shine, people go on to tell their friends and family about the marvelous experience they had with you. People buy the whole experience and associate that with your company, not your product alone.
For some of the products that I had built, we went endless hours improving the code and website. Our sales team was struggling and our answer to that problem was to add more features to help the salespeople do a better job. The sales team was expecting guidance on selling and we were all eyes on the technical part of the product alone.
Build a splendid product but also pay attention to your people.
7. I want XYZ for my business
When an entrepreneur sets out to start his first business, he feels the need to spend money on things. Many of these are just “wants” than “needs”.
All of a sudden, a fancy table, a glorious office or cool chairs seem necessary even if you have never worked in such an environment before. The fact that you are doing something exciting seems like enough reason to splurge money on things. You even convince yourself that those things will help you operate at the highest potential. But you are only lying to yourself to justify the unnecessary spend.
As a new entrepreneur, identify the difference between a need and a want. Your mind will confuse many of the wants as needs and you must refrain yourself from spending the bucks. Hold on tight to the funds you have. If not, when you have a “need” in the future, you will have run out of money.
8. I can capture X% of the market
Capturing a certain percent of the market is the biggest lie uttered during an investment pitch. Let us take an example of a product for football players. The entrepreneur googles for statistics of football players in the city or country, analyzes some competitors, throws some random numbers, keeps them modest and adds some fancy terms. When he speaks, he states, “We can capture 3% of the target market, so we expect revenue of 3M dollars for the next year.”
Such figures are fictitious and optimistic. No doubt numbers help drive success, but the habit of pulling random numbers out of thin air based on assumptions helps nobody.
I have myself made investment pitches with such figures because the investors expect them. After the meeting, hardly have we gone back to track or chase those numbers. Such figures end up as vanity metrics than actual targets or insights.
9. I can build a successful business without knowing the industry
Many startups that fail have one thing in common. The first founder comes up with an idea overnight. He talks to a friend. The friend is keen to begin a business because of the belief that businessmen mint money. Though the second founder does not buy into the idea, he agrees to be a part of the business just for success, fame or money.
Other similar cases occur too where an acquaintance tells you that if you start a business X, you can make Y dollars a month or millions in a year. You have no idea about that topic and his words make you seem like you might miss the jackpot by not participating. He also gives you examples of success stories of similar people who started the same business and how much they make now.
The fact that you hate your current job and the greed of accumulating wealth kick in. As a result, you hop into the bandwagon of starting a venture you know nothing about. Once you step in, you will realize the challenges in that particular business and how the success stories were only a few while the majority who tried the same failed. Multi-Level Marketing scams work on the gullibility of people to believe that they can take a shortcut to wealth and success.
That does not mean you cannot build a business in an industry you know nothing about. You can, but you need to put in the time to decipher how the industry works. Just because your acquaintance told you about an idea today does not mean you will turn into a successful businessman in the next few months.
Always know enough about the business you are stepping into.
10. Talking more than listening
New entrepreneurs get into a mindset that they are superior to the rest of the world. When you begin your venture you believe you have done what only a few dare to do. You might look down upon people who live the ordinary life you used to lead before.
Such a thought process can take you towards a path of arrogance. Similar behavior leaks into how you run your venture too. You start thinking that you can run the business better than your competitors. You talk about your style and how magnificent your vision is. All you do is talk, talk, and talk. You hardly ever pay attention to what the other person has to say.
Listening holds more importance than talking. Sure, speaking has its place but you must listen to the advice of other entrepreneurs, the feedback from your customers or certain industry standards of doing business which you may not agree with.
When I started my first business, plenty of entrepreneurs told me that I needed to work on sales. Yet, I believed that strength in technical aspects would cover up for our sales deficiency. After all, if we excel at technology, people will automatically buy, or so I thought.
I would go on to counter any argument with how and why my style would work without listening to the useful advice. I would talk about how my way of doing things was unconventional, fresh and visionary. Needless to say, I realized my mistake over the years.
If you have an idea which you believe will turn successful, you will feel the urge to launch as soon as possible. You hate waiting to validate the idea or asking for feedback because you feel such activity delays your path to riches. In your hurry to begin, you make a ton of mistakes that cost you dearly.
I have done my fair share of blunders which today look naive and immature. If I had the opportunity to give one advice to my younger self, I would tell myself, “It is important to do things right than do things fast.”
That is because, while one side of us falls victim to procrastination, the other worries about missing out on a business opportunity. One side of us is lazy while the other side is in a hurry. One side of us is risk-averse while another side wants to go big and grow wealthy.
In the case of entrepreneurship, one set of people, the pessimists, have an idea they never work on due to fear of failure. The other set of entrepreneurs, the optimists, want to start at the earliest to achieve success. The reality usually lies somewhere in between. It is neither as bad as the pessimists assume nor as easy as the optimists foresee.
What I am not:
What I am:
Continuously improving self-learner
Productivity/Time Management Obsessed