I enjoy starting new projects. I do it all the time. And I fail all the time. The few successful projects keep me going and enpower my enthusiasm to start new ones. And, what’s more important, they help me learn what works and what doesn’t.
What makes some fresh project or business idea fail and other idea succeed? This topic is beaten to death and still has no clear answer. There are so many possible reasons and you can never know which one exactly turned the things upside down. There is no sure-fire recipe for business success. You can however avoid the most common reasons for failure thus making your chances for success two or three times better. Would you reject this? I wouldn’t.
Based on my experience and observations, the following five early stage mistakes are responsible for more than 50% of the failures in small business projects:
1. Spending Money Too Fast
Feeling the rush to rent a shiny office or buy new furniture for it? Don’t. With exception of very few niches like banking your customers won’t be impressed by your office. So why exactly do you want to invest in it? Why exactly do you need to buy the latest “ultrabook”? To look successful and cool maybe. Let me tell you something: if you are doing this when starting a new business with a tiny budget, you are a fool. You are letting your ego kill your business.
Another common way to spend your cash too fast is to hire a lot of people. I’m sure you are expecting to grow and I wish it to you, but why don’t you wait the growth first and then hire people? Every startup business should use the people on hand fully before hiring more. Even if “the people on hand” means only yourself. Firing people is not cool and costs money. Avoid it by hiring only when your current resources really can’t handle the business you have.
In short: be extremely frugal when starting and let spending grow naturally when business grows. Unless you want to be yet another so called entrepreneur burned his savings (or worse: his second mortgage) while faking success for few months.
2. Losing Focus
It’s easy to get distracted at the beginning especially when you aren’t sure what you want to do. Maybe you have an idea to build a product but someone is contacting you for custom work. You may be tempted to take it for the cash flow, but think what’s going to happen with your product development. If you want to be a service company, that’s fine. You just have to know what you are doing and not get distracted in several unrelated areas from the beginning.
Stay on focus until you get your first products and customers.
3. Delaying Marketing
I’m ashamed to share how many hours and days I’ve wasted developing projects that no one cares about: software that no one wants to use, sites that nobody wants to visit, or tools that people like but don’t want to pay money for.
Don’t stay in a cave working for months on something that people will not want. Your marketing should come before your products. Such a big number of businesses fail because of bad marketing! And then the founders say “I made such great product but I can’t deal with the marketing!”.
If you start with marketing first you will be able to figure out how hard it will be before you spend months of efforts and thousands of cash in development of products no one wants.
Now when everything is on the Internet starting early marketing is even more important. Build your site and start promoting it and building links and traffic slowly over time. This way, once your business is alive it will be much easier to promote your products or services on your already established site.
4. No Data To Work With
This mistake is very much related to the one above. You must start early marketing so you can gather data. For every business that sells anything over the Internet, it’s very easy to do this. Build a site and set your “buy now” or “request a quote” buttons even if you aren’t ready with your products or services yet. Track the number of people who visit your site and the number of people who click the target buttons. This way you will know what percentage of your traffic converts. This will help you understand the potential of your idea, whether your price is good, and whether your site is made well to sell.
For example when I build a new software product, I no longer want to spend an year in development in the dark. I first set up a site selling the product and place my “buy now” buttons, and start marketing. Then I learn how many of the site visitors have clicked on these buttons so I know whether it’s a good idea to continue or not.
5. Trying to do it all yourself
Doing this can delay your new business forever. You can increase your productivity using some time management techniques but even then you’ll spend too much time and get behind competition. And on top of that you’ll get burned out. There are things you are good in, and others which better someone else do. You should delegate part of your tasks to someone else.
When doing this, don’t forget the first mistake – spending money too quick. Don’t hire new employees for everything. You can outsource some of your work on per-project basis. See how I do it online. Outsourcing on per-project basis often turns into long term strategy and a way to run the business even when it’s established. And you can always hire employees if you have to.
Do you have experience with failed business projects? Have you done any of these mistakes when starting them?