“I would love to start a business but I do not know where to start.”
These are common thoughts running in the minds of many aspiring entrepreneurs. While they hold a full-time job, they have an idea which they believe can run as a successful business. Unfortunately, starting a venture of their own seems like such a huge challenge that intimidates most people. Most give up even before they begin.
Are you one of them?
Don’t be embarrassed if you are one. No one has a clear idea about how to build a successful business until they get their hands into it. Just like you cannot learn swimming without getting wet, you cannot learn the skills of building a successful business without running one.
If you expected a blueprint for building a successful business, I have bad news for you.
There is no such common success formula or guide for success. At least, not that I am aware of. Businesses vary as per people, industry, market and current trend.
Having said that, there are some common mistakes to avoid when starting a business and some tips to follow which can increase your chances of success. Again, these tips do not guarantee success in any way. But knowing some possible mistakes makes you better prepared as an entrepreneur.
I will cover the dos and don’ts for startups that you need to know about
- 5 Dont’s of Starting a New Business
- 5 Do’s of Starting a New Business
5 Dont’s of Starting a New Business
You might have expected the Dos before the Dont’s. The truth is, when starting your first business, you must learn to avoid mistakes first.
Even if you do something path-breaking, some simple mistakes can slow down your progress, take a long time to recuperate or even kill your business to death. Avoiding simple mistakes will take your venture a long way. Even if you do not know what is the right thing to do, knowing what not to do will help.
Here are the top 5 mistakes entrepreneurs make when starting a new business:
Don’t 1: Don’t be blinded by the idea
All new entrepreneurs believe in their own idea. While such a belief helps you stay motivated to achieve your goal, it can hurt you too. A new entrepreneur has a high tendency to fall victim to the confirmation bias. Moreover, your idea is worthless without good execution.
In simple words, confirmation bias is the tendency to only accept information which matches our belief and ignore/contradict any facts which go against our belief.
For example, let us say you plan to open a continental restaurant. You have done some groundwork already and you believe you are on the right track to start your restaurant a few months later. However, you hear from a source that 2 restaurants in the same locality have failed in the last 1 year.
Many entrepreneurs turn a blind eye to such news because they are blinded by their own idea. They do not want to accept any facts which show their idea could fail. They dismiss the information thinking the previous owners committed stupid mistakes or that their restaurant is better than most others.
I have been blinded by my own ideas and ignored information which told me early that the idea had a high chance of failure. Yet, I thought I was different. Turns out, I wasn’t.
You do not have to drop the idea because you encountered contradicting information. But at least explore what you heard with an open mind without much of an influence of your own idea.
Because the cat closes its eyes while drinking milk assuming no one can see it, it does not mean no one can see it. Similarly, because you close your eyes to facts, it does not mean they do not exist.
Don’t 2: Don’t start work before validating your idea
Every new entrepreneur thinks his idea will turn into the next big thing. In countless cases, new entrepreneurs have built a complete product without even talking to a customer. The founder envisions the idea and another partner or the founder himself builds the product. Flash news after the launch: No one wants the product or no one wants to pay for it.
I have spent 2 months building an online web application that did not have a single sign up. Yes, not one single one even though sign up was free. Today, before I put in any effort towards a venture, I make sure I research online and seek the input of my potential customers.
That said, some ventures have worked based on the vision without asking the customer first. For example, if the founders of Uber asked people if they would pay higher for a cab compared to availing public transport, I doubt if the users would say yes. Certain products create a demand which does not exist thereby disrupting the market.
Do not assume you will disrupt the market too. Remember Don’t 1. So, talk to potential customers.
Don’t 3: Don’t try to expand in a hurry
When you start your business, chances are you will notice a good response due to the initial buzz. New entrepreneurs can make a mistake of assuming such a response will continue or even grow better. They proceed to expand the team, workspace and other materials to handle growth in the future.
A few months later, the sales drop and the growth flatlines. They now have more resources and expenditure than necessary.
In my first start-up of a web development firm, we added more programmers and designers based on the projects we won in the first few months. Fast forward 3 months, we had fewer projects to handle and more people than necessary on the team.
The truth about your situation is usually in the middle. It is neither how good you assume it to be nor as bad as people scare you about.
Don’t 4: Don’t spend a penny more than necessary
When it comes to our idea and business, you and I have a soft corner for our venture. Whether you like it or not, emotions come into the picture too. When starting a new business, we try to arrange for the best even when we do not need them. We confuse “wants” with “needs” and convince ourselves that we actually need it.
Spend on needs, not on wants.
Here are some examples of “wants” which new entrepreneurs waste money on:
- Spacious office to make everyone comfortable(In some cases, an office itself may not be necessary)
- The cool adjustable table which can move up and down to work seated or standing
- The fancy laser-cut visiting card
- A fancy website even if the website is not where your customers look at
Ask yourself, does the spend make a difference or add any value? If it doesn’t, you shouldn’t spend on it.
Save the money. You will need it.
Don’t 5: Don’t hire friends/relatives as employees
Let’s say you decide to start a restaurant with a partner. You have a friend who works as a chef for a living and does a great job at it. You consider hiring him as the chef for your restaurant because you think having a friend working for your business creates trust and leads to success.
But you should avoid hiring friends/relatives. When you are the boss and your friend is an employee, other elements come into the picture.
Your friend may not like it when you give him feedback. You may find your friend underperforming and not know how to tell him.
When things go well, your friend might feel you do not reward him enough. When things go south, you might feel that your friend could work harder than he does.
A ton of other such complexities emerge in the relationship. You are best off keeping friendship at a distance from the business. If not, you might hurt both your business and your relationship.
5 Do’s of Starting a New Business
Not all tips work well for all kinds of startups. Some of these Do’s may work for you, some may not. Here are 5 things to consider when starting a business. Apply them as per your judgment.
Do 1: Do your research
As much as you believe in the success of the idea, do your research. The internet can provide a ton of information. Find out how similar products are faring in the market. Try to dig up any past similar ventures which failed. Look for any facts show you the problems with your idea.
Every business has a lot of depth associated. While it is impossible to master every element before you start, gaining some knowledge will help.
Starting a restaurant might seem easy when you look at it as a customer. You might think, I need to arrange for supplies, hire good cooks and waiters, find a suitable place and boom! You have a successful restaurant.
But the details can turn more intricate like, how do you handle when your main chef goes on unexpected leave, what if your supplier backs out, how do you handle the leftovers, etc.
These are only trivial problems in the food industry but you must realize that you might not know as much as you think you do.
Do 2: Talk to people who have done it before
Find people who have done a similar business before and ask them for feedback. You might be surprised to know that most entrepreneurs will happily give you useful inputs. You just have to ask them politely.
If entrepreneurs in your area can turn into direct competitors, approach those who do not fall under your direct competition. For example, if you want to open a continental restaurant, speak to the owner of a continental restaurant owner from a different city. Though you are in the same line of business, you are not competing against each other.
When I considered starting an ice-cream store, I spoke to a fellow entrepreneur whose store I used to visit as a customer. He was very vocal in mentioning that entering the ice-cream market was not a good idea. Due to the cuts from the online delivery platforms and the users moving to order and eat at home approach, the food market had changed. The margins had turned thin and profits had reduced.
He suggested adding more items to the menu along with ice-creams to make it profitable. I would never know such crucial information had I been overconfident about my knowledge.
In another case, inputs from another entrepreneur helped me cut set up costs by about 15%.
Honest entrepreneurs who have done something similar give you the best inputs. Even 1 hour of their inputs can save you from mistakes which can cost you a load of money and effort.
Do 3: Track your numbers
If there is one thing all new entrepreneurs hate in common, it is budgeting and accounting.
You do not have to create complex excel sheets and graphs to track your numbers. But you need to do a few basic things:
- Tracking all your projected expense to take the business off the ground
- Tracking how much you earn
- Tracking how much you spend
You do not need accounting knowledge to track these details. Use simple excel sheets and do it your way. It does not matter how you do it as far as you do it. You can check a simple way of creating a budget for your startup by referring to this.
During my first venture, we did everything on the flow. We set up the business without having a budget. We had no idea how much we made in revenue per month nor how much we spent on expenses each month. All we knew was there was barely money in the account at the end of each month. Needless to say, the business failed.
Do not be stupid like me in your first venture. Knowing how you make and burn money is crucial to improve your growth and cut down your expenses. Make a plan for how much revenue and expense you expect each month. Measure your progress and evaluate expectations vs reality. Do the appropriate course corrections.
Ignorance is definitely not bliss when it comes to numbers.
Do 4: Prepare for emergencies and failures
With a new idea, you might be pumped up with a lot of fire in your belly. You are ready to tame the bull by holding it horns or putting yourself on the line in case of difficulties.
Almost all businesses run through difficulties and failures. If you do not anticipate them, you will not be prepared for them.
During my venture, one of our websites was making good money from advertisements. Our assumption was this will continue to grow and we planned every single thing we needed to do if it grew exponentially. Not once did we prepare for failure.
All of a sudden, our search engine traffic dropped like a plane that had lost both engines. The dip was due to a Google algorithm change. The cheque which used to show up a handsome amount earlier now had peanuts. Though we managed to recover, the time, energy, stress and money spent could have been avoided had we thought about this.
As an entrepreneur, you will constantly be dreaming about the bigger picture. Do not forget to prepare for emergencies and failures too. Are you prepared for a simple scenario like – what if my business has 0 revenue for 3 months?
You must have buffer cash to handle your operational expenses once your business starts even if you do not make enough revenue in the first few months. Do not blow everything you have on the setup.
Besides that, people might quit, revenue can nosedive, natural calamities could strike or you might lose motivation. While you cannot prepare for every single emergency, prepare at least for those you could.
Do 5: Keep learning and improving
Building a successful business is a never-ending journey. If you think you can rest when your business does well, your competitor can bring your business down to the rubble.
Keep learning the market and skills required to keep your business successful. Read books, talk to other entrepreneurs, attend networking events, seek advice and keep an open mind.
What sells like hotcakes today might be ignored like a burnt pizza in the future. You will not only need the effort to take a business from scratch to success, but you will also need the effort to keep it there.
Starting your own venture is both thrilling and risky irrespective of whether you intend to start a small business or go big. No matter how good your idea is, you will encounter scenarios you never expected. The better prepared and aware you are about such scenarios, the lesser it will hurt you and your business.
Your confidence is the key to your business. At the same time, if you are confidence is blind, you might shoot yourself in the foot.
Starting your own business will take you on a rollercoaster ride. You will love the adrenaline you gain from it and be scared when it takes a steep dip. Have the hunger, humility, and heart to deal with it.
Maxim Dsouza has spent over a decade experimenting and finding various time management techniques to improve his productivity. He strongly understands the fact that time is a limited commodity and tries to make every second count. He has extensive experience in leadership in startups, small businesses, and large corporations.
He has helped people of different professions and age groups gain clarity on their goals, improve focus, revise their time management skills and develop an awareness of their psychological cognitive biases.