The statistics on new business failures is somewhat staggering. The most unfortunate part of the statistics is so many of the failures are attributed to ‘incompetence’, or what I would more softly term ignorance.
Having started a few successful businesses and as the current founder and owner of a marketing agency going into it’s tenth year of operation, I want to offer a little advice to new founders.
This is my list of top mistakes I have seen and have made in my journeys as an entrepreneur.
Underestimate How Hard it is to Get the Market’s Attention
When you strike upon that ‘killer idea’ your mind begins to see it everywhere–glaring and so obviously frustrating. The application of your idea becomes the apparent solution to so many problems. You might even get a few head nods from friends and colleagues in the markets you intend to serve.
Your logical conclusion is that it will be a snap to gain market dominance with your product or service. After all, you only need “1% of that billion dollar market” to make everyone concerned wealthy.
Here’s the reality…
Simply getting in front of the market is going to be a challenge in and of itself. Online used to be the cheapest path to awareness. Capturing a reasonably sized audience wasn’t terribly difficult–the competition in most channels was still sparse and inexperienced. Not so anymore.
In the early days search engine algorithms were less sophisticated and social media was simply and open megaphone. The game in both of these channels was easily ‘hacked’ to generate significant (free) web traffic and user acquisition.
Much of that has changed as these channels have grown up and become publicly traded companies–reporting to anxious shareholders. Platforms like Facebook and Twitter, and even Google and Bing need desperately to meet the earnings expectations of investors, every quarter. As a result, if you want attention for your new product or service, you’re going to have to pay for every impression.
When you try to enter the market not only do you need to solve a problem, you have to change behavior. Have you ever tried to break or change a habit? That’s the kind of friction that you’re facing, on a market-size scale.
I can’t tell you the number of decision makers I’ve talked to over the years that are willing (and will tell you as much) to hold the status quo, even if it’s harder, inefficient, and less profitable just to avoid the pain of change. It’s just part of the human DNA. Factor it into your planning.
How do you overcome these market obstacles?
Here’s my formula:
- Account for the time it takes to transform your markets’ attitudes and habits. Make sure that it’s factored into your startup’s runaway. That generally means funding and investor patience.
- Start conditioning the market. Aggressively introduce your new thinking long before the product hits the market. Talk about the problem. Talk about why it needs to be solved. And start suggesting conceptual solution sets. Don’t keep your solution secret. It’s a foolish and often fatal irrational mistake many new entrepreneurs make. Remember, at this point, chances are no one cares. If you want to see someone that is masterful at this and is always launching new ideas and products, start following Dave Winer and reading Scripting.com. You will see the model over and over.
- In the process of conditioning the market, make as many relationships as possible. You’re looking to gather in two types of people: users that are looking for or willing to test a solution like yours (i.e., early adopters, perpetual beta users, and loyal users and advocates) and people that are always curious and advocating new approaches (i.e., industry leaders, journalist, bloggers, and vocal VCs).
You should be working on these steps pre-launch, probably even pre-product development.
If you get comfortable with “narrating your work” you can leverage the army of beta testers that populate the Internet. This approach will give you an enormous advantage in conserving the finite time and money that can be invested in any new venture.
If you can accomplish these steps through the efficient allocation of brain power and brain writing you will net two huge advantage. First, you will have a better understanding of whether or not there is a market. Second, if there is a market, you will have a built in fan base of users and promoters.
If there’s no market, you will know long before you sink a lot of resources into the idea and are in a stronger position to pivot to a better approach or new idea.
Underestimate How Much Money it Takes to Run Any Business
Developing a new web application or opening an online storefront has never been easier, or cheaper. The proliferation of simple content management systems and website building platforms, like WordPress and Squarespace, make a professional web presence only a good day’s work.
The challenge comes when you need to start operating your business in a sustainable way. At that point profit straining overhead enters the equation: state and federal registrations, regulations, and filings; employees and their health benefits, 401ks, unemployment, workers’ compensation; managing the books, accounting, paying the bills, invoicing, and collecting; office space, software and tools.
It all adds up and quickly drains critical capital necessary to fuel ongoing product development and innovation, sales, and marketing.
However, you have to be careful not to starve out momentum by focusing on these expenses too closely. Business is a flywheel, it takes a lot more effort and cash in the beginning, but once the energy begins to build it gives off exponential returns. Just be mindful, though not consumed, by the cost of getting to scale with your new venture.
Stops Dialing and Answering the Phone Too Early
Letting go of sales and marketing too soon is, in my estimation, one of the biggest and most consistent mistakes founders make.
Rarely will anyone be able to capture the nuance and passion required to sell an emerging product or service like the founder. In the beginning, every product needs to be sold with complete confidence and a deep understanding of the most minor details. Every new market offering is inherently a complex sale–you’re selling not only the benefits, but also a change in an ingrained habit, belief, or attitude.
Despite the fact that the founder is often the best salesperson, most attempt to flee this post as early as possible. That decision can be fatal.
There are a few reasons this happens.
Most common is the flawed notion that you don’t know how to sell. I want to reinforce that this is an absurd and limited thinking. Selling is a survival skill that we learn from the moment we’re born. Observe any child interacting with their parents for any length of time and you will see a masterful salesperson evolving. Over the years we grow and perfect our salesmanship as we seek to get what we want. Everyone has some foundational sales skills.
Next in line is fear. Developing relationships is always a little scary. Lots of self-doubt enters our minds when we start thinking about approaching someone. How will I open the conversation? Will they accept or reject me? Will they simply shut me down because I’m selling? These are all rational fears, but you have to move them aside. Replace this anxiety with the confidence that you need to break through your own fear to help improve the business or life of a new customer.
Finally, and possibly the most damaging reason founders abandon selling, is the attitude that selling is ‘beneath’ them or somehow it reduces their credibility. You see it all the time, founders putting on airs of being inaccessible and too consumed with being King to sell. This attitude is not only damning to your sales, but also infects the entire DNA of a young company.
Your hubris around selling can quickly kill the ‘do whatever it takes’ mentality everyone needs to have to make a small enterprise grow.
Stays in the Day-to-Day Work of the Business Too Long
Much like sales and marketing, founders are often the best at executing the day-to-day business–at least for a period of time. At some point your business will necessarily grow beyond your skills and expertise.
At some point in the maturation of the company your growth curve will take you beyond the capacity of any one person to manage all of the operational areas of the company. At that point (hopefully before it becomes critical) there should be people and systems in place that give you key insight, but no longer requires your direct day-to-day involvement.
The other advantage to this disciplined release of operational control is that you can get refocused where you’re likely to have the greatest impact–leadership, vision, sales and marketing, and product development.
Gets Out of the Day-to-Day Work of the Business Too Long
As with most best practices there’s often an element of timing. So, although releasing daily operational control is often advantageous, it can be done too soon.
In my experience, there are some key elements that must be in place before you start this transition:
- The right people – Nothing is more important to sustained success in a business than recruiting, growing, and fulfilling the best people. You need to develop in these people the same passion for the company. They also need to possess the expertise and curiosity to grow themselves as the business. These are the people that you will eventually give the keys to and trust completely.
- Defined systems – This is one of the most common weakness in the transition. There is a tendency for a lot critical knowledge to be locked away in your head. If it stays there growth we be nearly impossible. You need to, from day one, begin to document and template everything possible. This will enable the business to scale beyond your personal capacity.
- Emotional readiness – This may sound like soft science, but it’s terribly important. You, as a founder, must be ready to let things go and have the confidence your team can win and leverage, as well as fail and recover, completely without you. The worst thing you can do when someone else is trying to learn to drive is to keep yanking on the steering wheel. If you can’t keep your hands off the wheel, then it’s too soon.
Mistakes are Part of It
Hopefully, this gets you thinking about your current or future startup. I’ve highlighted just a few of the mistakes that plague us founders and the businesses that we run.
I’m sure, as there are in my own company, adjustments to be made for improvement. Take the time to write down one or two things to focus on in the next week.
And always keep this top of mind:
Mistakes are part of running a business. How you respond determines what happens next.