When you start something new, making mistakes is unavoidable. Entrepreneurship isn’t an easy road to take and there will be many challenges ahead. If you’re a first-time entrepreneur, here’s a comprehensive list of 25 common mistakes you should avoid and how to solve it if it does happen.
” I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.”Jeff Bezos, Amazon Founder and CEO
1. Setting your prices too low
Like any business, the number one objective is to turn a profit. Pricing is one of the most important factors when launching your business. Set your prices too high and you’ll lose out on customers. Set your prices too low and you don’t have enough money to grow your business.
My recommendation: Total up your monthly costs to run your product. Multiply by 2 and set that as your starting point. This way, you’ll make at least 50% margin on your product and you can continue to raise your prices down the road.
2. Underestimating how much it cost to run your business
Running out of cash is one of the top 3 reasons businesses fail. If you have received investment, it’s easy to lose track on what you’re spending on. Another financial consideration most entrepreneurs forget is the cost of acquiring a customer. Take consumer goods as an example. On average, it costs $22 to acquiring a paying customer. For other industries, it can get as high as $300+ for a paying customer.
My recommendation: Invest in an accounting software like Quickbooks that can automatically track your credit card expenses and financials. Do your bookkeeping monthly and run expense reports to track your cash flow.
3. Mindless spending without doing any research
You ran into a snag with your product and need a freelancer to help with the work. The worst thing you can do is rush to get a quote to fix your issue. This can end up costing double to triple times what you could have paid if you just compare other providers.
4. Launching a broken product to meet deadlines
You only have one chance to impress the customer. Deadlines are important, but launching a broken product or service will end up costing you a lot more. You won’t just lose the customer, but all the costs to process a refund or return, and all the negative brand impact with poor reviews.
My recommendation: Invest a lot of time in quality assurance. Make sure to have a solid framework to test your product. This includes writing test cases, requirement testing, performance testing and much more. See this article for a solid QA framework. If you don’t have a huge QA budget, try to recruit friends or family or run Google ads on a small segment to users to test out your product.
5. Lack of an easy to understand on-boarding process
The purpose of any product is to make a customer life easier. If the set up process is long or difficult, the customer will end up giving up before even using your product. This also increases the chances of the customer contacting your support team, adding unnecessary cost to your operation.
My recommendation: Break down the on-boarding process into easy steps. Make sure to include pictures and simple language. If your product is complex, break out the on-boarding process into sections. If possible, add video content going through how to use or set up the product. Look at IKEA assembly page as an example. It includes both comprehensive videos on how to build the product as well as PDF copies of the manual incase it was not included with the box.
6. No process to gather feedback from customers
Reviews can skyrocket or sales or completely demolish it. Research shows, 84 percent trust online reviews as much as a personal recommendation. If you’re like me, you always look at the reviews and read all the negative comments before making an online purchase. But as an entrepreneur, reviews and feedback is the best way to gather free information on where you can improve.
My recommendation: Ask for feedback either via email or social after a week of purchasing the product. If you’re not sure if you’ll get positive reviews since the product is new, asking for feedback privately is the best way to gain insight without impacting your brand. This can be accomplished using tools such as Google Forms or premium tools such as Typeform.
7. Your website is not mobile optimized
In 2018, 58% of site visited was through a mobile device. This percentage is continuing to grow as more users are adopting to mobile devices with larger screens and faster speeds. Another interesting fact is that 87% of users now begin product searches online.
My recommendation: Make sure your landing pages are mobile optimized. If possible, create a separate mobile theme to shave off a few seconds on loading time. Amazon found that for every 100ms of latency cost them 1% in sales. This means 1 second in extra load time can cost up to 10% in lost sales.
8. Not taking advantage of free marketing channels
Marketing on advertising platforms is super expensive. Take Google ads for example. One click on the low end will cost you $1. This is just a click, not a sale. Luckily, with social media marketing and organic search marketing, these clicks can be free.
My recommendation: Immediately create a blog and become an expert in the field you’re selling. Become the go to point for information in the industry. In terms of content strategy, I highly recommend following this blueprint from Gary Vaynerchuk to grow and distribute your brand’s social media content.
9. Waiting too long to market your product
I’ve seen some people wait until their launch to start building attention for their product. By this time, it’s way too late. You might be worried about your competitors stealing your ideas if you market your product earlier but more likely than not, your competitors won’t even hear of you until you gain traction.
My recommendation: It takes over 3 months for Google to rank your articles and even more if you want to appear on the first pages of your search terms. My recommendations is to begin marketing your product as early as you can. Marketing does not mean building a generic landing page and asking for emails. You will need to build up a content strategy plan to continually deliver value to your customers, so when the time comes to ask, you can convert your list to paying customers. Building a landing page is also extremely easy with services like SquareSpace and LeadPages.
10. Marketing to the wrong audience in the wrong channels
Hindsight is 20/20 and this is really true when figuring out your target audience. Out of experience, it’s very difficult to understand your target audience right from the beginning. This is especially true for software services that cater to a large demographic of users. But if you’re launching a company for dog food, it’ll be silly to buy ads on cat influencer pages.
My recommendation: Go grassroots. Once you have identified your target audience. Find the most influential and die hard fans for your industry. For example, if you’re targeting dog owners, try to partner with influence breeders, competitive dogs, or Instagram dogs owners and work out a strategy that can benefit both parties. Also make sure your website is connected to Google Analytics. This free tool can breakdown the type of users who are visiting your site by age, location income, and much more.
11. Hard to understand marketing message
KISS, keep it simple stupid. If you haven’t noticed, our attention spans have been dramatically decreasing year over year. Studies have shown that you now have a shorter attention span than a gold fish. In short, the average human attention span is less than 8 seconds.
My recommendation: Focus on the primary value of your product, and deliver that message in less than 8 words. Think of it as building an easy to remember slogan. Take Uber for example, their slogan is “the smartest way to get around”. It’s to the point, and the value is clearly presented. Here’s more examples of amazing slogans if you’re looking for help.
12. Not measuring return on investment
This was a simple error I’ve made myself on my first startup. I’ve only ran digital ads so measuring the return on investment was easy. The mistake I’ve made is that I did not predict that the cost of acquisition increases when you increase your budget. This means the more money I was willing to spend on ads, the more likely the ad companies will bid higher to gain more conversions. By doubling my budget from $10K a month to $20K, I’ve seen my cost per acquisition increase by 25%.
My recommendation: The first step is to actually measure return on investments. This means either creating conversion tracking on your ad platforms or you can use business analytic dashboards such as Databox. For print or traditional marketing, the only way to track these platforms is to compare the duration you had traditional marketing active and compare it to a baseline. Another great way to see which ad channel is most effective is by asking your customers “where did you first hear about us?”.
13. Lack of a support channel
Customers will always have questions, no matter how simple your product is. Not having a dedicated support channel ends up in a frustrating experience for your customers and a lost opportunity to save the customer.
My recommendation: Support is expensive, and from experience, a customer contact can cost upwards of $10. My recommendation is to provide as many self serve solutions as possible. This means well written support articles, an easy way to search for articles, and most importantly, an implementation of a chat bot before reaching an agent. Lot’s of chat companies offer chat bots that uses AI to suggest articles and answers simple questions. To list a few, you can check out Zendesk or Intercom.
14. Complicated refund or cancellation process
Because a customer is cancelling your service or asking a refund for your service, it does not mean that you’ve lost the customer forever. It could just be not a right fit at the moment. By making the cancellation process long and difficult, customers will feel cheated or scammed into your product and never return again.
My recommendation: The cancellation should be less than three steps: click the cancel button, promotion to save customer and lastly, ask for feedback. If the customer forgets to cancel and contacts you within a day, it’s often better to just refund or prorate the payment to avoid disputes. Credit card disputes will end up costing you more than the refund itself since it can add $20 on top of the charge for the bank to investigate. If the total disputes equals more than a certain percentage, you will be facing fines upwards of $10,000 and possibly a ban on accepting payments from major credit card providers.
15. Trying to keep all customers happy
“Customer is always right” has become an overused phase and it’s not necessary correct. Customer service is very situational and there is no process that you can put in place to account for every customer complaint. I have seen customers who abuse our free trials by signing up multiple times on different accounts and complains when a charge goes through.
My recommendation: Provide your support staff autonomy to read the situation and make decisions to keep or drop the customers. For those customers who are clearly abusing your service or product, there are no making these customers happy unless you provide your product/services for free indefinitely.
16. Hiring the wrong people
When you’re running a lean startup, what you don’t want is to hire mediocre employees that is only working for the pay check. Another mistake is to hire close friends and family. Because of the relationship, it makes managing these employees more difficult since you’re managing both a working and personal relationship.
My recommendation: Look for 2 key criteria when hiring: passion and drive. Your employees must share the same vision as the company and have the passion to pursue it to the end. Entrepreneurship has a lot of challenges ahead,s o you don’t want an employee that quickly jumps ship when things go south. I wrote an article to answer how you can hire right person for your startup here.
17. Doing too much, too fast
Ever heard of the story with the race between the tortoise and the hare. The moral of that story is that slow and steady wins the race. It’s the same when building a new business. Rushing through product designs and execution only ends in a mediocre job.
My recommendation: Proper planning is the key to success. My recommendation is to use a project management software like Monday or Trello. The objective is to gauge the capacity and effectiveness of each project and the project team. This will give you insights on how to increase productivity while still maintaining quality.
18. Poor prioritization of tasks
It’s human nature to do what is easiest first, and continue to push challenge away. I’m not immune to this. I have been trying to work out for years, and with each year pushing it off, getting started becomes harder and harder.
My recommendation: Prioritize on tasks that make or break the product. This could be legal requirements to get approved, or features that are must have in the product. Whatever they might be, remember if these challenges are unsolved, it can cause a crippling effect to your business.
19. Obsessive in getting the product “perfect”
Designing a new product is my favorite part of building new businesses. It’s all about finding creative and simple ways to solving every day problems. The real problem is the ambition begins to creep. You want have first designed the perfect dog chew toy. But then you think, what if we made it different sizes for different dogs, possibly make a hard and soft version. Oh maybe even digital sensors to track the health of the dog.
My recommendation: Avoid scope creep at all cost. When building your first business, what you want is a minimum viable product. This is a concept product that proves there is demand and people willing to pay for your product. Version 1 won’t ever be your perfect product, or be your last. Take GoPro for example. The first GoPro was an simple digital camera that you can strap to your arm. It wasn’t groundbreaking as a camera, but the was only testing if the market was ready for an action camera. Now GoPro is on it’s 7th version and valued at over $1B.
20. Thinking you can do everything yourself
You might be an industry expert with over 20 years of experience. The smartest person in the room at all times. But don’t let your ego get to you. You are not the expert in everything, or have the time to micromanage every step your team makes.
My recommendation: Lead by coaching, not doing. Your team mates might not produce the same level of quality of work you can, but taking over not only takes away time from your day, it also demoralizes the team. Schedule 1 hour every week with your team mates and make it a collaborate effort rather than a dictatorship.
Raising Capital Mistakes
21. Raising investment when you don’t need it
When I think of entrepreneurship, I think of shows like Shark Tank and Dragon’s Den where rich, successful people invest in small businesses. The cost of this becomes a substantial amount of ownership in your new business, essentially another owner. But before you even think of raising investment, the question always will be, how much money do you need and giving the amount of equity forever worth the cost?
My recommendation: This is highly situation because it depends on how much can you find, and what stage your start up is at. If you’re a brand new company, you’re better off taking a business loan because you’re at a huge disadvantage on the negotiation table with investors. If you have a viable product, the cash infusion might be worth it as long you have a solid strategy on how you’re going to spend it.
22. Bringing on the wrong type of investor
There are two type of investors: passive and active. Passive investors are those who put in the investment and expects a return after X years. Active investors acts as an owner in the business and actively engages in operations and strategy.
My recommendation: Another situational case because it depends on your business on what type of investor you need. Passive investors are great because you stay in control with a large cash infusion to your operations. Active investors bring value to your business such as connections to major retailers and expertise.
23. Raising investment from investors you don’t trust
Remember investors are owners. In the end, they will have influence on the direction of the business. Depending on how much they have invested, they might have the power to demote you to an advisory role, forcefully sell the company, or make short sighted changes for quick returns.
My recommendation: Take a lot of time to see if the relationship is a right fit. This means transparency in both ends of the table. This is one of those trust your gut moments. If you have a bad feeling about a person, you should keep looking.
24. Starting a business you’re not passionate in
The truth is if you don’t like what you’re doing, you’re not going to do it well. If things gets hard, you will most likely not push through. As founder and leader of the business, when you’re discouraged, the rest of the business will follow.
My recommendation: Work does not feel like work when you’re doing something you love. Do you wake up in the morning dreading to start the day? That’s a quick sign that the business you’re in might not be right for you.
25. Lack of work life balance
We have heard the 100+ hour weeks entrepreneurs put in every week into their business. This leaves no time with family and friends, a personal life, or any activities that can take your mind away. Remember, you’re putting the hours for a better life, but working those hours, you might not have a life to come back to.
My recommendation: Take at least one day off to spend with family. This means no work, no emails, and no phone. At the end of each work week, always reflect on how productive you were in the week. Did you need to spend that 100+ hours, or are there ways to do things more efficiently. Work smarter, not harder.
Thanks for making it this far. I hope by going through the list, you have realize some mistakes you have been making and are in the process of fixing them. If you have any friends that are making any of these mistakes, give this article a share!