5 Common Mistakes when Starting a Business
I’ve formed many businesses over the years, ranging from professional services to retail. While they may not share a similar product or mission, all the successful businesses avoided these mistakes:
1. Not Laying the Foundation. People get so excited about their new product or their new business that they rush in and start selling on Facebook or Amazon and forget to protect themselves and their product. Forming an LLC at the start of your business is so much easier and less expensive than waiting until a problem hits you down the road. An LLC can protect you from car accident lawsuits, from damages, and from breaches of contract; it places a protective wall around your house, your cars, your bank accounts, and your personal assets. Trademarks and Copyrights protect your idea and your product. Once your products are flying off the Amazon virtual shelves, competitors can try to steal your ideas or sell similar product under generic names for a few cents lower if your product isn’t property protected. Unfortunately, most people wait to form an LLC or trademark until it’s too late. The sooner you protect yourself, the stronger the protection.
2. Expanding Too Quickly. I see a lot of clients have grand plans. They know where they want to be in five years and how they want their business to look. It’s the intervening years that trip them up. It’s great to have a vision, even necessary, for how you want your business to grow and expand. However, you don’t want to spend your initial capital on a big office that isn’t necessary, on top of the line laptops, or on expensive furniture. Your sole focus, as a new business, is bringing in clients (for a professional business) or in selling your product (for a retail business). Nothing else matters. You can have the best office with the best view in town, but if you don’t have any clients walking through that door, you won’t be in that office for long. Advertising is the best use of your initial capital. Get the word out, and then as clients begin to come in and as your product is sold, then spend the extra money on upgrading your equipment or expanding.
3. Expecting Clients to Come Flocking. Clients and Customers don’t magically appear. They don’t automatically know that your product is the best one on Amazon, or that your professional expertise is better than everyone else in town. You have to educate them. You have to tell them you are in business. That you’re the best. That your product is the best. Advertise. Advertise. Advertise.
4. Lack of Research. Research is boring. Research is tedious. But Research is an absolute necessity for any business to succeed. Know your product. Know how your competitors are selling their products. Research who would be buying your product or your services. Google your competitors. Talk to your spouse, your family, your extended family and friends about the product. How much capital will you need to realistically invest to survive those first five months when there are no sales? Do you have to hire an employee immediately or can you do most of the initial work yourself? Know yourself, know your product, and know your customers.
5. Lack of a Concrete Advertising Plan. You must have a concrete plan for advertising. How do you plan on spreading the word that your product is awesome? How do you let clients know you are willing to solve their problems? You have to advertise. But knowing how to advertise is the key. It’s dependent on your product and who your customers are. Billboards may work for one company, while web keywords will work for another. Tv, radio, and newspaper ads may be an older medium of advertising, but they still attract a huge audience in certain demographics…if your target customer is in that demographic, all the flashy web ads and keywords may not help you. Call advertisers before you start your business to get quotes on a monthly plan or an annual plan that way you can budget it into your initial capital requirements and you won’t have any surprises down the road.