Many are the battle wounds of the overly enthusiastic and unseasoned entrepreneur. And just like one proverb puts it, zeal without knowledge is just not good. From my experience in starting different businesses (and failing at them), I’ve come to see the treasure of listening to others who’ve gone before me. I mean, if hindsight is 20-20, then why not listen to others’ hindsight and get some corrective lenses for your astigmatic foresight, right? Right.
To that end, here’s 5 ways to fail at starting a business. Keep or trash:
Run ahead of yourself and literally start the business to meet your actual needs for today.
Did this back in 2014. I had been tooling with life coaching for about a year and some change. After leaving a stable job for different, yet unstable/toxic one, I decided to quit and go full-time with my business endeavors. In reality, I split my time working for two small business owners on project work to keep the lights on and use my left-over time to work on my own gig. Money was really tight. And instantly, I saw the glamour of entrepreneurship is not all that it’s cracked up to be. For sure, to own your own time is great. But you can’t actually own your time, when you haven’t saved up enough coins to work your passion. And you can’t actually feel at peace working on your dreams when you can’t see how you’re going to eat, let alone pay a bill. The moral of the story is – it’s not good to start a business when the cash you need to run it, is the cash you need to eat. Better to start the business with personal reserves of at least 5-6 months (if not a year; and not emergency savings). That way, you can focus on enjoying the process of learning and creating your products and services while making money and re-investing the money into your business.
Not doing a business plan.
I don’t actually think anyone needs a lengthy prospectus of what their business is and will be. You literally just need to know exactly what problem you’re solving, who your audience is, and how you’ll market to them. Maybe that’s an oversimplification. But I think not. From my own experience of trying out different business opportunities, I didn’t actually dedicate time to planning out the first year in business, understanding the potential clients, and really think about how much marketing is a huge role in business, point blank. Doing a business plan helps you own this. However, the biggest benefit I’ve seen in proper business planning is just visualizing your first year and factoring in your lag period. As someone with a business development (sales) background, this is standard. When you’re just starting out, 90 days is the conventional timeframe to ramp-up your first round of prospects. I even had one of my bosses tell me one year should be allowed for all salespeople to really get the swing of things. (Wow!) Not to mention, the learning curve is steep and there’s lots of different things you’re getting used to. The moral of the story is: it’s not good to start a venture without substantial planning in the investment it’ll require and how you’ll get your customers. Better to have a plan, course-correct along the way, and have peace about the fact that your lag period is baked in. But while we’re talking about planning…
Spending too much time planning.
There is a such thing as paralysis of analysis. And let me tell you, many procrastinators are paralyzed under the banner of “business planning.” Friends, I’m chief among procrastinators. But seriously, this is like a sin in business. To be planning, more than executing is a main problem in actually getting started with serving people who actually will pay you. Which is the focus: to get paid. Friend, let me tell you from my own failed experience. It’s super tantalizing to come up with different financial models, different marketing strategies, different content ideas, and create to-do lists on to-do lists of what you’re gonna do, but spend 1% on actually doing it. A business mentor of mine said recently, you always want to focus on the “2/3rds” of the business, not the “1/3rd.” The 1/3rd are the things like planning that only affect so much. The 2/3 are the actual meat of the work; it’s how you get paid and keep things moving. The moral of the story: Don’t confuse business planning with business doing. Better to vigorously execute on your goals, knowing that you’re going to have to make changes along the way, than to waste time trying to overanalyze your business.
Overvaluing branding and image.
This one is very hard to admit for me, because I am a believer that branding can do so much. I wish I could tell you from personal experience of how super cool my branding was on a former business venture I pursue, but I just don’t have one. In fact, I never had one. I never actually had a brand that was fierce, perfect, and reflected some kind of attractively sharp image of a business idea I had. What I do know though is how many small business owners and entrepreneurs who make six figures annually without a shiny brand. And that’s where the rubber meets the road. As millennials, it’s attractive to have a personal brand that speaks to how you want to be perceived. I see this and live this. I even allowed my value of branding set me back in launching a blog months ago. But I’m also the product of two hard-working entrepreneurs whose 25-year-old insurance business put food on the table and sent me to college. Their brand wasn’t shiny, but it did the job. And delivered in insurmountable ways. People knew to call them for any type of insurance needs they had in the tri-county area of South Florida. Moral of the story is: Sometimes working on branding is like working on painting a house you haven’t built yet. Better to work on building your house (read: serving the people you need to serve to get paid), than to think that branding is the work and think you’ll get paid more because of imaginary paint job. Think again. The house is worth more than the paint.
Not thinking big enough like an entrepreneur would.
It’s very easy to think small. Said differently, it’s very easy to think in terms of what is “enough.” In my experience of failing at business start-up, I used my personal budget for what I need to live as a ruler for my price points right out the gate. The problem with this is myopic thinking: You’ve decreased costs of living (because that’s what entrepreneurial peeps do) to use your cush money for your business idea; and then refer to your cost of living for how much you charge your clients for your work. So if all you need is $1200 for rent, then you might charge your 3 new clients $400 each for X package. But, in reality, the cost of living as an independent adult in ____ market, might actually be wayyyy more than $1200. In fact, you’re trying to get married, have kids, go on vacation in 2 months, pay for resources to better serve people, pay off your student loan debt, save for a down payment on an investment property….get the picture? You don’t start a business using your personal expenses to connect the dots of how much you should charge. Your fees need to be based on market rate for your services AND for how *you* want to live. This takes into account a little metric I made up from my latest business endeavor called Return on Effort. (It’s a play off of Return on Investment which is normal language for any real estate developer/investor). If the return on effort from serving 3-5 clients can’t cover you for at least 3 months, then maybe you’re under-charging and over-working. Or maybe you need to rethink your audience. Or think about other avenues for income that are less labor-intensive. One of the biggest mindset shifts I had to make is that I want to build a business where the amount of effort I put into the average client/service would profit me for at least 6-months or more. To do this, you’ve got to think bigger than your needs. Moral of the story: Don’t think small with your price points for your business’ products or service. Think about the vision for your business + lifestyle desires and create a price point based around that.