Minimize Those “First Year” Mistakes in Business
Starting a business is, at the same time, exciting, exhilarating and excruciating. Many risk factors have to be weighed, many tough decisions considered, from your website and building your unique brand, to your pricing or even your online accounting software. Without the proper guidance, it’s easy to fall into traps on both sides of the spectrum, whether overextending or under reaching. For that reason, many startup companies make crucial mistakes during that first year or so of operation.
Let’s take a look at some of the more common pitfalls that can have you hobbling before barely getting out of the gate. This is important because, by understanding where the land mines lie, you can often step around them and keep your enterprise steadily moving forward.
Know Your Team and Your Technology
One of the most expensive mistakes is assembling the wrong team around you. This not only can cost you a considerable amount of money, but it also can engender poor morale. One of the most crucial components of picking a solid team is finding people with varying skill sets. Just like it’s difficult to win if your baseball team has nothing but power hitters, it’s the same in business. You need staff members who can do the little things well, people with their own unique strengths. At the end of the day, however, all of these hires must share certain common values, which enables you to sow the seeds of trust throughout your organization.
In today’s ever changing business climate, a lack of technological understanding can also be a company’s death knell. So if you’re not technologically savvy to a very high degree, it’s important to bring in someone who is…at least temporarily. And don’t just look for the best deal. This is where it helps to educate yourself as much as possible, so that you at least have the ability to know you’re making the right hire.
If you’re developing software for your enterprise, it’s especially critical to choose well, so that a three-month development process doesn’t turn into an eight-month ordeal. Remember, the longer it takes you to get your product or service to market, the narrower your window for success becomes. It doesn’t hurt to take a “tech speak” class, so that at least you can intelligently speak the language.
The Pricing Conundrum
New companies also can run into trouble with poor pricing. This is especially true if you’re a product manufacturer. There is a level of complexity here that can be mind-numbing, requiring knowledge about tax consequences, variations in labor rates in different states and also delays caused by weather and shipping. All of these factor in to the prices you allot for your goods or services. While painful experiences like bad pricing can often provide good teaching moments, they can also put you in the poor house surprisingly quickly.
It pays to do your homework in the pricing area. Study your market carefully and plan for all eventualities. And remember that charging too much, rather than too little, can be equally devastating to a business that is trying to establish a good name for itself.
Creating the Perfect Storm
Perhaps one of the biggest mistakes that businesses make is waiting for “perfect” when good is actually good enough. Continually tweaking a great idea or product, revisiting your R&D over and over, and second guessing what you thought was ideal two weeks earlier can put a real burden on your cash flow as well as your credibility. It doesn’t take a Stanford-educated CPA to realize that the longer you take to launch an initiative, the longer you operate without real money coming through the door.
While this is especially common in the tech industry, it’s also characteristic of many other types of businesses. Not only does the waiting time stunt your cash flow, but often you end up spending much more money than you originally intended. The key is being able to find a client or two who is willing to pilot test your product or service, so you further build and refine it while cash is coming in.
Quality Is Rarely Free
In today’s brave new world of powerhouse social media, a common fallacy is to believe that your product or service doesn’t need traditional marketing tactics to sell it. Increasingly, startups think they can build a viral message through Twitter, YouTube, Instagram and other avenues, basically bringing in customers for free. Nothing could be further from the truth. For instance, ZarMoney has utilized a wide range of social media to bring the message of reliable cloud accounting software to the public. But it has required a well thought-out, strategic campaign that absorbs a tremendous amount of time and cash outlay. And it’s not something that happens overnight. Doing it right typically takes anywhere from six months to a year to build good exposure.
Most experts recommend spending from 10 to 20% of your targeted gross revenue on your initial marketing budget. Once your business becomes more recognizable and accepted within the industry, you can reduce that budget to 5% or so. One of the worst mistakes you can make, however, is to scrimp on marketing. Even worse might be applying marketing that doesn’t work, so this is where you must plan strategically and analyze your customer base before pulling the trigger on a full-scale marketing program.
Finally, it’s imperative to have a qualified attorney who can write up proper contracts for you. Not only should this attorney know the finer aspects of legalese very well, but he or she must also have a good, extensive understanding of your business. A contract where some of the i’s are left undotted and the t’s uncrossed is as good as no contract at all. Bottom line…don’t be afraid to pay the going rate for a smart attorney. Your expenditures in this area will come back to you in the long run.
The real message here is to think before you act, so that you spend and save in all the right places. Though spending should lean toward the tighter side, so that you have plenty of room for unforeseen circumstances, you should allot enough to give your business a fighting chance. You’re a businessperson now…think like one.