Customers don’t grow on trees. If they did, we’d all be farmers.
Lame joke aside, every entrepreneur is in business to acquire customers. But what if you’re the one standing in your own way?
If there’s one thing entrepreneurs have in common, it is a list of silly mistakes they’ve made while starting up. These mistakes range from the silly to the outrageous, and sometimes fatal (to the business, not their lives).
It might not be your website that ends up costing you dearly, but something will – it’s the Murphy’s Law of startups. There are a seemingly endless number of ways to spend money, and it’s impossible to be wise about all of them. But a few common costly mistakes can sink a bootstrapped business.
Here are pitfalls to look out for, along with expert advice on how to avoid them. You can use this article as a checklist. Work through it, and analyze yourself, your strategies and progress so far.
1. Choosing the wrong team
Choosing the wrong team is perhaps the single costliest error an entrepreneur can make. That’s because, if you have a bad team, the problems cascade. It’s like having your car refurbished but opting for a really shoddy engine. Your car may look good, but it won’t be working for long.
The wrong team will cost your business money, time and also depleted morale.
It’s crucial to choose people with varying skill sets. And these people must know their stuff. Even if some of your employees are just starting out in their careers (hence not much experience), their attitude is everything. The willingness to learn, to take correction and criticism, the ability to be proactive, all these are critical in employees.
Don’t just employ people you like. Employ people who can get the job done.
It’s also not just about skills. They have to “play well together” also. Imagine having to work every day in an environment where colleagues are always clashing or you’re always having to put out conflict fires. That’s energy and time you just can’t afford at a startup.
2. Undercharging or Overcharging your products/services
Nowhere is the entrepreneur’s lack of experience most evident than in pricing.
Bad pricing is a common misstep for product manufacturers but even service providers can fall into a similar ditch. This flows two ways.
First, without an accurate understanding of your costs, you can’t price your products correctly. So, you may be undercharging yourself. Sometimes, this is a result of bad accounting practices. It’s telling that some entrepreneurs just calculate the cost of production of goods, without taking into account other consequential expenses like the cost of marketing, office rent and so on.
On the other end, you could be over pricing/ overcharging your customers. If you have competitors, this is really bad news as they’ll be willing and happy to take your customers off your hands. Pricing is a bit easier for product based startups than service-based startups.
How much should you charge for your services? How much are your services worth?
If you’re on the B2B circuit and bidding for contracts, pricing sometimes can be the dealbreaker for companies to take you on. It’s also pretty easy for startups to underestimate how much work is required for complex projects, thereby undercharging and costing the company in the long run. Make too many mistakes like that and, Boom! You’re out of money.
Your lack of experience also means you’re prone to underestimating how long a project will take. All these will have an impact on your operating costs/expenses and that’s sometimes enough to kill a business, especially a startup.
3. Waiting for perfect time to act on your killer idea
When you’ve got a killer idea, it’s natural to want to introduce it to the world in a fully formed state. It makes sense. After all, everybody thinks the Mona Lisa is a masterpiece because they are seeing it in its final state. The consensus may have been different had they seen it while Da Vinci worked on it.
Nobody would like to be judged based on a work in progress. So, in an ideal world, you’ll wait will the product is good and ready. But this is actually bad practice in the 21st century. It doesn’t take a CPA to figure out that the longer you take to launch, the longer you go without money coming in.
This is a common mistake. Many entrepreneurs want to build an app and won’t let it go until it’s perfect, but then you take too long and spend too much. Specifically, this error will likely leave you with no “runway”–the cash you’ll need to sustain you as you’re trying to get your product off the ground once it’s ready, but before you have customers.
It’s better you come up with the simplest, basic version of your product that gets the idea across and try to find early adopters, people who badly need the solution you’re offering and are willing to overlook the bugs.
This is called the Art of the Lean Startup. This method is better because you get to improve the product on the fly and you also have money coming in from the early adopters. So in a way, the product has a chance of financing itself earlier.
4. Being cheap about marketing
One of the biggest concerns for entrepreneurs is money. Pre-launch cash flow is likely to be close to nil, so making and saving money will usually take priority over everything else.
You and your team are the number one cheerleaders of your business. But even at that, there’s just so much you can do on your own. Which is where marketing comes in. Every successful entrepreneur will tell you the impact a good marketing strategy had on their business. They’ll also tell you that stories of, “We achieved [X] amount of traction in 6 months with zero marketing” is more the exception than the norm.
If you’re not sure how much money to budget for marketing, a good rule of thumb is to aim for 10 to 20 percent of your targeted gross revenue. As you become a more established business, that percentage can drop to 5 percent to 10 percent of gross revenue, and for the largest businesses, it’s typically 5 percent or a bit less.
Hire a good marketing team. They usually don’t come cheap but the good ones are worth their weight in gold.
Still on the subject of social media…
5. Ignoring social media
Some entrepreneurs also overestimate the power of social media. That with a very minimal fee, you can rely on social media to build virality and attract customers for free. This is another exception to the rule. To win at social media takes unbelievable amounts of time, experimentation and it’ll typically take six months to a year before you’ve got even slight momentum. It’s not fast.
6. When you have a bad website
No, this doesn’t mean your website looks ugly. But there are a thousand and one things that go into a good website and ignoring just one for them could cost you money.
For example, not submitting your website to search engines will make it hard for them to index your website. If your site isn’t indexed, then it won’t come up in searches. Why is something this small so important?
The internet has made it easy to verify businesses. Most people now have a habit of checking out the website of new businesses anytime they encounter one. Even you. A huge fraction of people who hear about your business will visit your website. It could be to learn more about the business, to determine your level of professionalism, to get contact information, to get prices, to talk to a customer service agent etc.
What happens when visitors hit your site is all on you. Today, a website visit is as good as a visit to your physical store. So, what’s the “in-store” experience like for visitors?
Then again, your site could be ugly. Which may be why your bounce rate is so incredibly high. If you need your website fixed, this is a good option. Or if you’d like to join our webinar on how you can convert your website visitors into paying customers, you can join our ongoing webinar, Free.