Mistakes happen. We are human, and we are not infallible. The trick is not necessarily avoiding mistakes altogether, but instead using them as a learning experience. In business — particularly when running a startup — it’s also essential that you deal with any problems as soon as possible to prevent them from growing into something insurmountable. Some business mistakes may even come back to haunt you later down the line, in that case, it’s about being prepared.
Of course, the best thing to do is to avoid making the mistake in the first place. That’s not always possible, as some things are just going to play out how they play out. However, you can avoid some common problems during your first year of business — mistakes which many other entrepreneurs have made in the past. Here are eight examples.
1. Register as a Business Entity
In the U.S., most states require you to have a business license or at least be registered before you can start operating as one. This process is not the same as incorporating or starting an organization, but it’s just as important because it separates your personal assets from your business assets. What does that mean?
If you’re selling a product that hurts someone or makes them sick and they decide to sue your company, that’s where the business entity comes into play. When registered as a business, that essentially takes over, and the person(s) suing can only collect from your business assets and funds, including available insurance. If you’re not an “entity,” your personal assets are on the table, too. It could very well be the difference between only losing your business funds and supplies or losing your home and personal materials, too.
The most common form of business entity is an LLC or limited liability corporation.
2. Plan Ahead
There’s no way to know for sure what’s coming in the years ahead. Your business could slowly start to grow, die off entirely or hit a sudden boom bringing in millions of dollars a day — you just don’t know. But that doesn’t change anything in regards to planning. You should always plan ahead and have multiple contingencies for when an event or scenario plays out. Don’t prepare just for success, either.
More importantly, you should remember to set goals you can strive toward. Don’t just set them in the near future, either — consider two, five and even 10 years down the line. What would you like to achieve? What new avenues, products or services would you like to pursue? Would you like to be in new markets?
Expanding your business into new markets or opening up new locations, for instance, will be necessary to grow influence and support. But it’s important to understand the risks, timing and requirements, so you don’t incur more significant problems. Do it at the wrong time, and you’ll stretch your capital and assets thin, which could result in failure for the entire operation.
Start with a huge list of desirable yet realistic goals and narrow down what you want to achieve as you continue to grow.
3. Learn to Protect Your Business
Too many startups fail simply because the owner or owners were not prepared to deal with certain unfortunate yet legal events. They did not consult legal assistance, they did not file the appropriate paperwork to protect their assets or they did not draw up a contract to prevent gutting or theft.
Imagine two friends working together to build a startup. Things start to go sour, and one decides to leave, but they want to take “their” ideas or accomplishments with them. It’s too late to draw up a contract to protect the business at that moment. So, you should do it beforehand.
Here are some things to consider:
- Protect intellectual property through trademarks, copyrights, etc.
- Draw up a contract before things get hot and heavy, explicitly outlining what stays with the business and who gets what during a split
- Create similar contracts for partners, vendors and investors
- Consult attorneys, accountants and bankers for advice and support — don’t do everything yourself
- Acquire the necessary insurance or emergency financial support
4. Don’t Incorporate Too Early
Many companies and business owners will decide to incorporate when they’re running low on funds, which opens up their business to public investments and incredible growth. It’s a good idea, and it’s a great source of capital — but that doesn’t mean it’s the best option for your business.
Do not incorporate until your business has a clear foundation and it’s apparent whether you’re going to sink or swim over the coming years. That might sound vague, but you can predict relatively well through past performance how a business will do on its current trajectory.
There are many requirements of an incorporated business you may or may not be able to deal with. For example, investors are going to want the company run the way they think is best, which means making decisions that please them — not necessarily how you would want your business to be shaped. This can completely alter the planning and design phases, as you must incorporate what your investors want as part of your decision, as opposed to only what you or your team might want.
5. Undervaluing Your Products or Services
The price you charge for your goods when you enter the market sets a precedent for your business. In most cases, it’s difficult to raise prices or change a payment plan after your company is in operation, even with iterative product updates. You’d have to make substantial changes to warrant the increase, and many customers are going to be against it or upset by it.
That doesn’t mean you should never change prices, but the critical point here is that you don’t want to undervalue what you have to offer when you’re just starting. A lot of businesses set their price points too low because they aren’t confident or they fear failure.
Before launching anything, explore the market thoroughly to review comparable products. What are similar companies charging? What do your products or services have that others don’t? What’s a good price range for your industry?
6. Avoiding New Technology
For any business, the adoption of new technologies, systems and tools is going to be a costly endeavor — that’s just how it is. The bigger the team, the more time and resources it will take to roll out a new solution — which includes higher costs.
Money aside, you should never be afraid to adopt new technologies or solutions. Many will help teams do their work more effectively, increasing output and ultimately lowering operating costs. In other words, it’s almost always worth the investment.
Do your research beforehand. Also, don’t adopt too many new platforms at once, just work on a single upgrade at a time. When assessing what to try or what to install, consider what parts of your normal day-to-day operations could do with a little improvement.
7. Know Your Ideal Customer
You could have the greatest idea ever for a business or product, but it won’t make a difference if you don’t know who your customer is. That also means understanding what they want, how they live and how they might interact with your business in the future. Will they be willing to upgrade to a new model as soon as it’s available, for instance?
Knowing your customer is not just vital for regular business operations and development, it’s also crucial to marketing. You need to speak directly to your customers through your marketing campaign, including those that have yet to invest in your business.
8. Need Strong Marketing
Speaking of marketing, you won’t see a lot of growth if you aren’t continually promoting your business. Marketing takes many forms from online and social media content to word of mouth referrals. Furthermore, as a local business or new startup, your marketing campaigns are going to look a lot different than large organizations.
You won’t succeed at marketing, however, if you don’t understand your market. That means getting to know your customers, understanding your competition and knowing the current market sentiment. Are people just not interested in the products or services you wish to sell, for instance? How can you change that?
If you don’t learn to market early, you’re going to have a much more difficult time later on. Not to mention, you won’t have a consistent way to bring on new customers and clientele.
Mistakes Happen, So Learn to Correct Your Trajectory
Even armed with these incredibly helpful tips, you’re going to make a few mistakes. That’s okay. What’s important is that you correct your trajectory as soon as you realize what’s happening and that you learn from any errors, so you don’t repeat them.
Running a startup business is not a simple or easy feat. It’s challenging, there will be lots of obstacles and it takes a lot of time, patience and money. But you can make it happen. Just stay focused on your goals, trust in your support and keep pushing forward.
Entrepreneur is one of those sexy buzzwords. Mark Cuban embraces it, Richard Branson lives it, and individuals all over the globe struggle every day put their own unique stamp on the world.
Being an entrepreneur is both exhilarating and sometimes, depressing. It can often lead a lonely, isolating state of mind where you have to discipline yourself to plow through the lean years while seeing little or no return. Now that I am an adult, I find it easy to self-discipline because it’s what I learned to do at a young age.
The circumstances you once find as a setback ultimately become delayed blessings.
Before the age of Shark Tank, incubators and accelerators, most of us learned about life at the kitchen table – that is, if we were lucky enough to have a supportive family who ate dinner together and communicated frequently. As divorce rates increase, the nuclear family becomes less familiar. Coming from a single-parent household (my brother and I still saw our Dad every other weekend, which will come into the story later), I now see my upbringing as a latchkey as a real blessing.
My parents were actually divorced four years before they had me. Their on and off again shenanigans led them to having me, born eight years after my brother – so growing up I only knew the split-family system. My brother and I stayed with my mom during the week, and every other weekend our dad would have us. We did fun stuff with our Dad like attending sporting events, climbing trees and going to the movies, but the real observations and takeaways came from an unlikely place, AA meetings.
My Dad entered the program in April of 1985 and to this day remains sober by the grace of God. I remember whenever he walked into an AA meeting, people lit up as they approached him. Even if he had a rough day at work, as Ironworker, he always felt at home at these meetings. Though I was only a child, I remember each meeting. One particularly strong memory was alway hearing ‘The Lead’, which was the featured speaker of the evening who shared his or her story about alcoholism, hitting rock bottom and how AA had come into their lives. Years later, I would stumble into stand-up comedy (literally stumble, the first year of stand-up is excruciating for just about any comedian). As I look back now, it’s apparent that my first introduction to public speaking was going to these AA meetings. AA meetings in the late 1980’s were funny because in my mind every guy in the room looked like Bob Seger (bushy bears, gravely voices and some flannel pattern) and what did men and women do when they stopped drinking? They started smoking! Addictive personalities I guess.
On the weekdays with my mom I would go to school, ride bikes with friends or spend hours playing with my action figures or reading (dabbled in video games a little, but my action figures and books became my closest friends). My mom was beat when she came home and I couldn’t blame her, she was working full-time and providing for two boys; I need a nap right now just thinking about it. She did the best she could providing for us and keeping us in a good school system. After work she would make dinner and then shortly retire to the couch. With my brother being eight years older, I was often challenged to entertain myself. And that’s what I did.
I would fly through books (mostly sports and music biographies) or play with my action figures and create stories with antagonists and protagonists and get lost in them for hours. I entertained myself, and my own company was just fine.
In 2007, I started doing stand-up at the request of a supervisor who told me I was an inadequate intern, but possessed some comedic talent (a back-handed compliment that changed my life forever). Stand-up led me to Laugh Staff (located in Cleveland, Ohio, home to yours truly, premier website designers, Go Media), where I and a partner manage 13 comedians from around the country to help best men and maids of honor write heartfelt and hilarious wedding toasts. No, really we do!
Comedy in itself has been extremely rewarding and challenging, but now being 32 years old I see the seed was planted when I was young. Creating the stories with my action figures would later translate to creating a stand-up set with storytelling and tension. Going to those AA meetings, and seeing my Dad talk to people with enthusiasm and respect was tremendous training for my professional career. Most people seek out MBA’s to further their career, but I like to think I got my MBA from Mom and Dad and the experiences I was lucky enough to be exposed to.
In the startup world there will always be challenges to overcome, but if you can take a few seconds and realize your weaknesses as strengths, you’ll better for it.
Writing and performing stand-up is a great thrill and writing speeches for others is just as fulfilling. My company Laugh Staff has had a slow but steady rise and I really don’t think I could have stuck with it unless I had the past experience to draw from.
I’m glad my parents got divorced. They gave me the best of both worlds (cue Van Halen).