What are some of the top start up business mistakes?

1) Lack of a solid business plan or strategy
2) Unrealistic financial projections
3) Lack of funding (due to above)
4) Inefficient infrastructure and/or legal contracts
5) Ineffective or inadequate sales and marketing efforts

One of the biggest mistakes you can make is thinking that you know what your market needs because you think yourself it is a great idea, but never on forehand, really ask if they want to buy what you will offer at he prices you will charge. Go out and do market research!

Another mistake a lot of (not only sart-ups, by the way) companies make is communicate in product features instead of customer benefits. People want to hear what they will benefit from your offer, not how it is made....

Last but not least, a lot of starting entrepreneurs do not make a realistic financial plan to support their business plan. Do so and in that, take the worst case scenario as a starting point.

And, looking at the fact that you are starting with some friends this company: decide on forehand who is good at doing what part of the business and let him or her do that. Find out if all aspects are covered with the people involved. Having 5 salesmen will not make a successful business: you need a financial person, a marketeer, a buyer, a retailer, a technical person, etc.

Lots of success,

Jaap

Good comments but!!!!
If you don't have an actual business plan, product plan and roadmap going out first couple of years in writing that you can analyse, follow and evolve as business and market conditions change and get your partners/teamates to buy in on..... you will... wait a minute and back up....of course as part of the plan you should also do a couple of simple but essential exercises...
1) What is your companies concept and with it the Value Proposition verses all the other people's with the same smart idea.
2) What is your specific product offerings VP verses direct competition and alternatives.
3) Find a company that you believe has similar goals, growth track and general business model and has succeeded (not a competitor of course) that you can emulate. Also it never hurts to pick up the phone and call that companies boss and get advice. Believe it or not he/she will probably be flattered to death and give you great advice...well as long as you are not competitors of course.
All of above is also essential if you want to get other peoples money to ramp up instead of your own.
----now back to first thought and what will happen if you don't do above and don't build a solid launch pad for your pretty new rocket....
You will crash and burn like nobodies business and you will all hate each other.

Some insights I've heard from VCs:
- Best beats first
- He/she who knows his/her customers 'wins'
- Hire the best people you can find
- First round investors ("friends, families, and fools") aren't always the best for long term
- Network like crazy
- Research your VCs as hard as they research you. If they're not working for you as hard as you're working for you...find new ones.

Terrell, here's a list which I hope will contribute to the debate.

Mistakes of new start ups are:
Overenthusiam if not targeted
No investment or cash
Little experience
Lack of a clear plan
Few resources to drive the plan and develop a sustainable business
No researched market
No USP
A "me too" product
Being seduced by the thought of making a fortune within the first 12 months

There are more but I'm sure they should get you started

Richard
www.rcbusinesssupport.co.uk

Defining each business partners role from day one is KEY !
Location ! Location ! Location !

There are many, many mistakes that business start-ups make - and most are discovered after the fact of the matter, and after the business fails. Not having adequate financials in reserve to cover at least the first 2 years of business development costs is critical. If you and your partners don't have this capital from the start, revenue should be generated from other sources, i.e., part-time jobs, until the revenue pipeline gets primed. Another huge mistake made is by not identifying the obstacles standing in the way of achieving the business mission/vision, and as a result, not having crafted a solid strategy to eliminate these obstacles. The likelihood of this happening is much greater if the business partners attempt to go it alone, as opposed to hiring a good consultant/business coach. 80 percent of businesses fail within 5 years. Good luck!

Bob DeMers
www.coaching-works.net

Lots of great advice here. If you find yourselves overwhelmed with what's been posted - I've got a postcard from a business colleague years back which puts great planning into perspective. It says "to be sure of hitting the target, shoot first, and whatever you hit, call it the target". Have fun!

Hi Trevor,

Jaap makes several good points. You should put together a business plan that includes not only a financial plan but a sales & marketing plan, projections, products and or services, etc. and an exit strategy.

Lastly, select strong partners and have contracts with them if you are outsourcing for products, technology or services. Be careful with friends in business - it's not a friendship, it's a business.

Best of luck!

Ken

For young people just starting out in business or their first business that they own, I recommend that you do the following:

1. Divide the work into the partners areas of expertise. Make sure you have what everyone feels is equal effort and contribution. Without it, the partnership breaks apart.

2. Concentrate a a few products in your categories. Don't over commit to the amount of inventory until you have some history of sales

3. Use the Nike slogan... Just do it. I think trying to build a beautiful business plan is not necessary until you have some success. Better to write small snippets on key areas such as how do sell on and retail, total budget that you can commit until revenue start to come in.

4. Listen to your customers. They serve the best indicators on your products and pricing.

5. Contract for everything possible vs. employees.

Hello Trevor,

I believe the most important steps you need to do when starting a buisness is make sure you have a good starting plan, expect to work long hours and make sure you research the area you want to do buisness in. You also need to make sure that you and your friends write down everyone's responsibilities and duties and that all of you are on the same page and stick to the plan and all of you need to work as a team. At the beginning you will need to reinvest most if not all your income back into the buisness. I also noticed that you mentioned you are going to have a website. I can recommend if you do not know of anyone that can create your website and you have a small budget for web development, I would start your web presence by using Microsoft's Office Live product. It allows you to create a website and register your domain at no charge for the first year. Another very important tip is word of mout is very critical always make sure the customer is satisfied, that will give your company and product a good reputation.

Good luck,

Erick B

All very good and very valid points raised in this thread. And being in the private equity field, I have to concur with Ken's point above, specifically, the exit strategy. Your plan has to identify whether your business is going to be a personal business, a lifestyle business, or if the end goal is to sell the business after x years/dollars/other target you've set. That choice will drive many of the decisions you make about developing and running the business.

Be sure you have a legally binding partner/operating agreement as well.

Great comments and advice! A couple of others:
--don't surprise your investors and run out of money
--do know your customers, listen to them and meet with them often
--get to know the industry analyst community (especially Gartner and Forrester) as they can provide great advice
--be sure you're ready to launch! Be sure your product works and you have Beta customers

All of the earlier entries have very good advice. After being a part of a couple of startups I would add the following:
(1)Talk to as many people as possible who are currently doing what you propose. There are lots of trade groups and associates in the shoe/clothing sector that can help. There are also retail trade groups specifically for shoe/clothing stores.
(2)Don’t cheap out on your website.
(3)Fantastic graphics may win awards but customers pay the bills. Your website should promote your product and produce sales.
(4)Remember this - the customer is NOT always right – but, the customer IS the ONLY person who is giving you money. (VC’s don’t give money – they invest).
(5)When think about opening a retail store front remember, location, location, location.
(6)Write a strong business plan
(7)Write a stronger exit plan. Write out specifically what will happen if you fail. This is not a pleasant task, but it is easier upfront than when everything has hit the fan.
(8)If you are doing this because you want to and you are all united in the cause you will most likely succeed. Enjoy the fun, the money will come.
(9)If you are doing it for the money – well, please read tip #6

Given your situation, I'd spot the following issues to address before doing anything else:
1. You may have a great idea but no plan to market it... in other words, who and how is going to sell this? Too many businesses spend a few thousand on a sign, get a long-term lease, and wait for people to start knocking.
2. Specifically in your case, I'd look at auction sites and your own website prior to getting a storefront. Once you put up a store front, you've got all kinds of recurring costs including the lease, utilities, signage, employee wages, etc. Not the lease of these is having stocked shelves. This can be extremely expensive; if the shelves aren't fully stocked, you don't look professional... if they are fully stocked, you've got $100,000+ of inventory sitting there doing nothing.
3. Find a niche. In your case, maybe it's selling to schools or non-profits or licensing to high-end boutiques.
4. Most importantly: Unfortunately, passion is not enough to pay the bills. You need to have a plan and a backup plan and a backup plan for that.

Everyone has had very pertinent suggestions but let me add some that have not been mentioned.

1. Pick a form of business and depending on the form, have the appropriate bylaws or agreements in place before you think about actually starting the business. Register with the state. Determine what the percentage of ownership is for every person involved. If you can't agree here, you are doomed. This is a huge step towards avoiding misunderstandings, conflicts, etc. that can negatively impact the start and growth of any company.

2. Study the state and local laws that may impact your business from sales tax licenses, environmental issues having to do with storage and disposal of
potentially toxic materials used in your business, permits of all sorts, etc.

3. Get appropriate insurance.

4. Check out www.2womenentrepreneurs.com. Although the website was designed to help women start and grow a business legally and ethically, the articles are for anyone starting a business. Membership is free.

As a writer of business plans, I can't emphasize enough the importance of having a really good plan as a blueprint for your business and potentially for seeking funding.

The biggest challenge of a start-up is prioritizing strategic planning vs dedicating all of your energy and manpower to reacting to those every day fires.

Such heartfelt advices! You know can get the points. One of the very important point you should bear in mind that is "A me too product". Be creative and unique to catch customer eyes. Do things step by step, don't jump! Good luck!

As an advisor to start-ups, one of the most common mistakes I see is the failure to develop an exit strategy. This is the key to developing a successful business plan and to ensuring all other business decisions will get the start-up closer to its target, rather than going around in circles that do not bring it closer to the exit.
The second common failure I see is the failure of the founders to take in specialist support to allow the founder to focus on their area of expertise.
A third common failure is the failure to monetize the great idea early. It may not be perfect, but you can refine it as you go. Early revenue flows allow a founder to do a lot of improvement and fund a lot of growth.
Other than that, make sure you network strongly and constantly and have fun. Lifes too short to drink bad wine, not enjoy whjat you do, or have fun.

One of the most successful business people I ever met gave this answer when asked the secret of his company's success:

"We bought a book on strategy and we followed it."

The next inevitable question from the audience was - which book. His answer? "We didn't care. We figured that if someone had gotten their book published they were probably pretty smart people."

Sound silly? The statistics show that even a mediocre strategy which is well executed will vastly outperform a great strategy with mediocre execution.

So spend some time on developing a strategy and then follow that plan.

And for bonus points, involve customers and potential customers in the development of that strategy. Strategies are focused on customers.

1.) Business and financial plan
2.) Risk assessment and mitigation plan
3.) Know and follow your market
4.) if all you have is a vision you will fail!!!! You must be able to execute and follow up.
5.) Who is your competition?
6.) What is your differentiation from others with the same product?
7.) How do you plan to capture market share and hold it?
8.) Do you have a price point for your product so people will buy it?

Wasting time and money hodge-podging different siloed business systems together to get the business data you need. A company works much more effectively when marketing, sales, fulfillment, and accounting all work off of the same central database and every employee sees one version of the truth.

Rob

Recognizing now that this post is nearly a year old, I had this to add. Everything that has been said is great information that should be sorted and used where applicable. A plan is great and also note a plan is adjustable. Elaborate business plans are wonderful...sometimes in the real world you only get to exercise 30% of it before changes need to be made. The best gauge of how you are doing is your customer base.

Did you do your research and found that the market is really ready for what you got cooking? You may notice things jumping off really slow....now ask "What can I do that would make _____ try me?"

Another thing, use your small wins to your highest advantage. If you got one customer, encourage them to offer referral to others. Don't let the sale be the last of your contact with that customer. You can stop and smile at your small wins but right now, you have to keep your head in the game.

Your money is going to be tight if you are a real entrepreneur. Who ever told you that you won't see any real headway until 2 years or so....THAT"S SOUND ADVICE! Very few start ups hit the ground with instant success.
The best advice, if you can afford it, is to hire a start up consultant like me. We deal with the start up processes, while you deal with what the business has to offer.

1) I create an ideal cleint profile --- IDEAL... and create your marketing around them. Way to often folks don't niche and they don't target their marketing and end up broke. OR worse, the target the wrong market.

2) create a business plan -- I recommend the One Page plan for creative entrepreurs for you. www.TheResourceQueen.com/businessplans.com It's concise and will get you thinking about things that aren't currently thought about.

Great question Terrell. It's natural to make mistakes and everyone makes a bunch when they start a business. It helps to have a business plan of some kind, it doesn't have to be complex, just a guide for who you are and what you're going to do. You might also think about really defining your product and target market as much as possible based on what you love doing. The idea is to attract people to your business because something inside them connects with you. You also won't need to worry about people who don't "get it" about you or your business because you'll be doing your thing. www.guyfarmer.com/businesscoach

I'm also in my first year of running my shop. But throughout this one whole year, I learned one practical lesson: never underestimate your marketing efforts. I'm pretty confident that I've prepared everything. I chose a strategic location. I create new T-shirt designs and assign reasonable prices for each. However, I can't still understand why I'm getting consistent low sales. I then realized that I have to apply what I learned, I have to launch marketing strategies. Due to my limited budget, I only attended trade fairs, gave special price cuts and tried custom sticker printing services from www.printrunner.com/sticker-Printing.aspx. Believe it or not, my sales improved.