It’s been 27 years since I started my last business. Although I was a solo entrepreneur working out of the basement of a small, dingy office building when I started, I worked (and I’m not exaggerating) 80 to 90 hours a week, so the startup mistakes I review in this blog are common entrepreneurial mistakes that I made. And I still see entrepreneurs making the same startup mistakes today!
Over the course of the last 27 years, the business grew, and new responsibilities came with that growth. My involvement in most projects went from tactical (which involved doing some or all of the work myself) to strategic (which involved managing and advising a team of people on various issues and decisions. The larger the business grew, the more strategic and less tactical I became.
I’ve often wondered how difficult it would be to start a business in 2018, in light of all of the social media tools available, compared to 1991, when sales were made one-on-one. I spent countless hours pounding the pavement in downtown Toronto and canvassing thousands of businesses. In fact, I was thrown out of more buildings than I can count.
Now fast-forward to 2019, and I find myself in a new role.
I’m semi-retired, and I’m not content to sit around and watch the paint dry, play golf, sleep, or watch TV all day.
I’ve come to realize two things about myself:
– A few years ago, my wife told me that she doesn’t think I’ll ever officially retire. I told her she was crazy then, but it turns out she was right. In some capacity, I will keep working until my body won’t let me anymore. Sure, I’ll take vacations and travel more. BUT I’ll always be involved in some business venture.
– For me, starting a business is a heck of a lot harder than running a business.
So let’s talk about my second point.
It’s been a year since I launched my book, blog, and new website. The initial purpose of the blog and book were to engage with other entrepreneurs, pick up a few new clients, and stay engaged in business. Although I’m really enjoying the writing and minor consulting I’m doing, I must admit, it’s harder than I thought to do all of the tactical work, and build a business and brand.
From a marketing perspective, building a business in 2019 is very different than building a business in 1991. So on that note, I’ll review what I’ve learned so far, and also tie it back to the common entrepreneurial mistakes I see entrepreneurs making when they start their business.
I’m in the early stages of starting this blog, and I recently launched my book. Nevertheless, I receive at least five emails a day from struggling entrepreneurs who are having a tough time growing their businesses. And those who have successfully grown their business past $1 million aren’t making profits.
When I started my business in 1991, I had a business plan. I knew exactly what I was going to sell, how many units I needed to sell to cover my costs (and make a profit), and how I was going to market my business. I was very clear about my vision, and my ultimate end destination. Granted, there were many bumps along the road, including almost running out of money six months after I started, and having to strongly pivot the business’ direction, but I was still quite clear about where I was headed.
I am now in the fortunate position of having experience and hindsight, which gives me the perspective about the biggest startup mistakes that entrepreneurs typically make. I’m not proud to say that I made these mistakes, but fortunately, I learned from them. I’ll share some of them with you, in the hopes that you won’t make them as well.
Ironically, one of my favorite business tools is Excel (or Google Sheets now), but it’s also the reason I nearly ran out of money only six months after starting my business. The startup mistake I made is also the same common entrepreneurial mistakes I see other startup entrepreneurs making all the time.
STARTUP MISTAKE #1 – The Excel Factor
You can plug anything into Excel, and make an otherwise crappy business plan look amazing. If you need an extra 2,000 widgets to reach profitability, then stick that into Excel. Bingo. Your business now looks better. If you need 4,000, go for it. Stick 6,000 into Excel, and you’re a millionaire.
And back in 1991, that’s what I did.
Although extremely detailed, my business plan was also quite flawed.
I entered the business market with the intention of selling voicemail boxes at $19.95 a month. At the time, voicemail was new technology, and I was effectively selling a cloud product. The problem is that it takes a heck of a lot of $19.95 mailboxes to keep the lights on and grow a business.
The number I plugged into Excel had me selling 700 mailboxes within the first six months, and 1,500 mailboxes by the end of the first year.
I didn’t have a large marketing budget. (In fact, I barely had a marketing or advertising budget.) So the sales were all done one-on-one.
After six months in business, I came to realize that:
– I was almost out of money
– Unless I did something fast, I was going to be out of business.
So I pivoted.
Rather than sell individual mailboxes, I sold voicemail systems. At the time, the sales price of a system was about $15,000, with a healthy gross margin.
Here’s my point: Just because it looks good in an Excel document, that doesn’t mean the business is viable. And I still see a lot of startups making this mistake today. Fortunately, I was able to pivot before it was too late.
So would things have been any different if I’d started my business in 2018?
Here’s what I’ve learned so far while marketing my new business. In some respects, it’s actually harder to start a business in 2018 than it was in 1991. Yes, we have the internet and social media, but what I’ve come to realize is that there’s a lot of noise, and it’s difficult to cut through that noise.
And that brings me to:
STARTUP MISTAKE #2 – My Product/Company is Great. Of Course, They’ll Come.
I touched on this situation in a blog post I wrote last year titled “The Single Most Important Business Lesson for a Startup Entrepreneur.” Here’s the problem.
Many entrepreneurs believe they should open their business first, then figure out how to sell and market their product, well after the business is open. Why is that?
This decision is analogous to waiting to learn to swing a golf club until you’re standing above the ball. You wouldn’t do that, would you?
Here’s the thing: If you’re trying to figure out how marketing and sales work after you’ve opened your business, your business will struggle.
Just as a golfer needs constant practice to perfect his or her game, an entrepreneur needs to study for countless hours to perfect the art of marketing.
I made this classic mistake when I started my first business in 1991: The business model was probably flawed from the outset because I was selling the wrong product.
I assumed the classic startup philosophy: “If I build it, they will come.”
Wrong.
Reality check. No, they won’t.
Unless you have a lot of marketing dollars to pump into starting your business, it’s going to take a lot of effort to get things going.
While we do have social media and the internet, there’s a heck of a lot of noise out there, and it can be really difficult to break through it.
Stay Tuned.
I have eight more startup mistakes to share. Yes, believe it or not, there are other common entrepreneurial mistakes to share! I’m going to break them into multiple articles, so stay tuned for the next one in this series.
Here’s a related article you might be interested in: What is The Peter Principle, and How Can You Rise to Your Level of Incompetence to Win in Business?
And another: Why Being an Entrepreneur is Hard, But Here’s Why You Should Do it Anyway!
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Want to know more about me and read some of the other interesting small business growth, profit and wealth stories I’ve written.
Here’s one of the first articles I wrote: My Journey Post Business Sale as I Sail Into a New Harbour.
Are you a younger entrepreneur? Here’s another interesting article I wrote:
My Response to an 18-Year-Old Who Wants to Become a Millionaire by the Time He’s 30.
My goal is to help entrepreneurs scale their business, improve profitability, and then, use those profits to create massive wealth. Subscribe to my blog to receive my latest thought on scaling your business and creating wealth.
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