As the economy slowly improves and technology rapidly advances, there has never been a better time to start your own business. But while entrepreneurship can be an exciting and profitable experience, it can also be quite challenging and even downright miserable if you don’t know what you’re doing. If you don’t want to join the ranks of the 90% of businesses that fail in the first five years, there are a few crucial mistakes you need to avoid.
MISTAKE #1: FAILING TO VALIDATE
Every business, successful or otherwise, begins with an idea; however, even good ideas will not translate to success in business if you fail to validate that idea with your target market. In other words, before you decide to sell, you need to make sure that people are willing to buy. In his book, Nail It Then Scale It, Nathan Furr suggests a few important things to validate before getting into the market:
Nail the Pain: Before getting into business, ask yourself, “What problem in the market will my idea solve? How many people have and recognize this problem? Is this problem a mosquito bite, or a shark bite?” Understanding the nature, breadth, and severity of the customer pain will help you know how to design your product (or change it if necessary).
Nail the Solution: If you decide that there is a real problem in the market, be sure that your solution will actually fix it. Test your products before launching, and make necessary changes as needed.
MISTAKE #2: GOING DOWN WITH THE SHIP
In that same vein of validation, you’ll probably come to find that your original business proposal and what ends up being successful can be two very different things. Many times in business, particularly entrepreneurship, you will need to pivot to keep the business alive. Times change, the market changes, and your ability to address different customer pains also changes. Not adjusting to change is business suicide, so keep these golden tips in mind:
Don’t Kill the Golden Goose: If your business is even a few dollars in the black, you’re doing at least one thing right. After validating your solution, focus most of your efforts and resources into making it perfect.
Lose the Golden Gut: At the same time, don’t let stubbornness hinder progress. The Golden Gut is a common problem among CEOs who rely more on their gut instead of the changing environment. This can be dangerous, especially when your business has developed.
MISTAKE #3: SCALING TOO FAST
So, let’s say you’ve done your validation, gotten rid of the things that don’t work, and focused all your efforts on the things that do. The likely result is that you’ll see some growth; you can start paying yourself, move your startup out of the garage, and maybe even spend more money on optimizing your website.
While there’s nothing wrong with success, you should still be careful about how you spend it. Scaling your business before you’ve really developed a sturdy foundation is an easy way to become over-stressed and lose money. Unproductive meetings, over stretched resources and higher employee turnover are all signs this is happening. Make sure you’re being responsible with your profit, using it in ways that will strengthen your business at the core first.
MISTAKE #4: NOT PAYING FOR PROTECTION
Believe it or not, starting your own business is not always glamorous. Sometimes—in fact, most of the time—you need to be willing to do the nuts-and-bolts labour to keep your business from collapsing. Business is an investment and you need to protect it.
Business Insurance: Whether you’re located in New York or Halifax, business insurance is an important way to protect against lost or damages sustained in the business. General liability, product liability, and key person insurance all protect your business in the case of faulty products, death or disability of key persons in the business, or any other kind of damage that will inevitably take place.
Intellectual Property: Patents, trademarks, copyrights, and other forms of intellectual property all need legal protection. Make sure you are going the extra mile to protect your ideas, especially if they are truly unique and profitable.
In all honesty, starting a business is the easy part; maintaining a successful and sustainable business, on the other hand, is quite difficult. Avoiding these pitfalls will do more to ensure that success than anything else you can do.