Demotivation is what oftentimes follows a quick start of a new company whose inexperienced management has just left the ranks of regular employees. The reasons why young entrepreneurs burn out quickly are diverse, but all of them result from a lack of good advice that veteran entrepreneurs might give to novice startupers.
Sharing entrepreneurial experience with beginners can be even more important than funding their fresh startups. Knowledge is a long-lasting investment in any kind of project.
We have compiled a list of typical mistakes beginner entrepreneurs make with the general message of “Don’t do that unless you are ready to sacrifice a lot of your time to the painful trial-and-error approach.” Pointing out mistakes without reasonable suggestions on how to avoid them, however, would be counterproductive. That’s why we added some discreet recommendations – aka ‘know-hows’ – that might help turn errors into trade-offs.
1. Don’t focus on profitability, view your income flows in a holistic manner
Setting up systematic work to get a decent gross income is crucially important. You will make a profit in any case. Later on, you will always have time to make the necessary corrections in your business processes. Focus on sales since they are the oxygen for entrepreneurship. Remember that any business is about money. Start selling your product/service before searching for investments, credits, and other non-direct sources of funding. Who knows: maybe after a little while investors can become irrelevant for your project, capable of growth due to your trade turnover. Self-sufficiency and financial independence are privileges worth cultivating from the very beginning.
2. Don’t pursue low prices
Stop looking up to those competitors who are trying to reduce their sales price too much. They are most probably in a hurry to enter the market by all means. Besides, beginners tend to suffer from low self-esteem. Remember that it is much easier to make a discount than to raise the prices afterward. Make necessary financial calculations first: assess your costs, compare prices charged by competitors, don’t forget to include your time and labor in the final price.
Look at the business strategy inherent in the luxury segment: cheap products are merely ignored in it. Even though the strategy is not universal, it has a certain rationale: it is not in every case that the lowest possible price meets appreciation from consumers. Learn to respect your work and your product, otherwise, nobody will believe in your business.
3. Don’t ignore competitors
Even though a famous business maxim claims that a small monopoly is much better than the vast competition, competitors help you stay alert. Continuously study your competitors, and you will always have an up-to-date picture of your market. Bottomless markets don’t exist, but oversaturated ones do.
Beginners usually have difficulty in winning their place among old sharks. Competitors’ knowledge provides valuable insights regarding a unique niche that can be created even in seemingly overheated markets. For example, the sector of professional photography is too old to lack severely competing players. But taking photos of, say, newborn babies only might be a blue ocean for a startup. Monitor your competitors to figure out what fresh impetus you can bring to your sector.
4. Don’t act at random, always have a plan
Many beginner entrepreneurs dive into business with no preparation in the hope to swim up somehow. But preparation in the form of a clear business plan is what every startupper needs the most. Understanding the viability of your project is hardly possible without a careful study of market demands. By creating a step-by-step business plan you can avoid dangerous pitfalls at the earliest stage. However, a downside of any business plan is in following it blindly.
Circumstances may change rapidly to affect even a brilliant business plan. Be ready to make necessary corrections, try something new, and take risks. After all, tactical reconsideration of your business strategy is a part of successful entrepreneurship as such. Don’t forget to prepare an emergency plan as well: many newcomers lose their business due to the absence of thoroughly prepared escape routes. The recent COVID-19 lockdown is a good lesson on how important having a plan B is.
5. Don’t create new products, solve problems
Misinterpretation of your product entails rejection by customers. Try to see what it is in your offer your target audience is looking for. You sell hand lotion, but what exactly are your customers buying from you? Hand lotion? No! They are buying beauty and health. A properly created selling proposition should emphasize not the product as it is but the positive outcomes your customers get if they buy your product. At the end of the day, people look for results, not for the means of achieving the results. Hand lotion is the means, beauty and health are the results. Always try to meet the expectations of your customers and modify your offer accordingly.
6. Don’t overlook innovations
They are keystones to the prosperity of any business sector in the present economy of knowledge. Monitor your sector for new technologies and inventions. Stay in the same line with the developers and manufacturers of your product. In doing so you will always be informed about the burning trends firsthand. By offering your clients the most demanded products and services, you will always get ahead of your competitors. Since this world is obsessed with innovations, try to remain on the front line of innovators, and success won’t be long in coming.
7. Don’t try to make all the money in the world
This is very personal, but by thinking of business only, you put yourself at risk of losing many other aspects of life – family, friends, hobbies, health, etc. Finding yourself one day a sick old person who can recollect nothing but an endless contest of money-making is not a thing worth risking day by day when running your business.
It is highly probable that at least one of these things is going to come up on your way sooner or later. Remember to keep a cool head, think about long-term perspectives, and always have a plan B. Forewarned, after all, is forearmed.