8 Common Mistakes To Avoid When Starting A Business

group meeting

 

While there are approximately 2.5 million trading businesses in Australia, there are only approximately two thousand businesses listed on the ASX representing some of Australia’s most successful businesses.
 
These two data points indicate that it is very easy to start a business in Australia and that approximately 9% of our population are owners of a business.  What this data also indicates is that it is very hard to create a successful business that truly rewards business owners with the financial, time and growth objectives that they desire.
 
Being the owner of a successful business in this era is one of the hardest things on the planet to achieve given the hyper competitive nature of most markets, and the unpredictability and complexity of people, regulations, technology and the economy.
 
However, one opportunity for business owners in the current environment is access to information.  There is no MBA that really teaches you how to do sales and how to start a successful business despite everything in business having already been done before and the many Australian’s that are happy to give back and share this information with the business owner community.
 
This blog will cover the most common business mistakes new entrepreneurs make and provide tips on how to avoid them.  It is intended to reduce the trial-and-error aspects of most people’s journeys in business and increase your chances of achieving your objectives and business success.
 

1. Not having a competitive advantage

How will you win? How will you standout in a crowded market? What will be your secret sauce?  Knowing these things is the difference between successful seasoned business owners who have several businesses under their belt and have had to duel the market for many years, and the unsuccessful, naïve but eager new business owner that launches a new business hoping that the market will recognise the product solely on its features. 
 
Will you be the best value, the cheapest, the best service or the most premium option?  This is what people think about when it comes to competitive advantage but it is a lot more than this and often way more subtle.  For example, one legal firm that we know does more prospectus documents than any other firm in Australia.  They make it their business to be the cheapest and best value option when companies are undertaking a stock exchange listing.  The competitive advantage is that this process allows them to understand and know almost everything about the business and they then become [unless they botch it up in some way] the default lawyers for the company for the rest of that company’s life. The lifetime value of these clients is many times the revenue that is forgone when working in the early stages of a prospectus.  Another small firm of graphic designers have focussed on annual reports for organisations that are required to do one.  They do the annual reports cheaper, faster & better than anyone else and then because they now understand the clients and have all their content in their systems it is very easy to do websites, marketing campaigns, social media and so on and in doing so flank all their competitors.  Another finance business that we raised capital for many years ago factored commissions for real estate agents.  The fees were very high and made no sense at all but because agents don’t really understand short term lending, the documentation requirements were low & the finance company made it their business to speak the language of real estate agents they preferred to work with this finance company rather than chase a better deal
 
If you look at every successful business, they will have an edge like this, i.e. a way to win that has led them to become a successful incumbent in a market sector.
 
 

2. Not Knowing Your Target Audience

A laser sharp focus on who your perfect client is and their needs is critical to creating a successful business.
 
You can take two service businesses that provide identical services but one has a more refined and accurate definition of their target audience that then informs every aspect of the business, and the business with refined target will always outperform the one that appeals to a broader more generic market segment.
 
Most businesses that do this well have a very clear definition of their target client.  They know their likes, dislikes, how they communicate, what social media platforms they are on, how they make business decisions, and so on.
 
Feedback surveys, asking and listening, and testing the market continually with well-constructed experiments is the key to knowing this information.
 
Once you know this it is then a lens that you see everything with.  What is the language you use on your website?  Do you use words or images? Do they like to get emails or do they prefer texts?  Do they do their browsing on a mobile on the way home on public transport or are they car owners that listen to podcasts and radio on the way home instead?
Detailed audience research creates a strong foundation for every successful business.  
 

3. Trying to Do Everything Yourself

Like all business owners my default is to do as much as I can myself and just work harder.  Unfortunately with most businesses there is no end to the work or how hard you can work. There is also no point in having the freedom of owning your own business if you have no time to do anything except work or if you sacrifice your health to meet the objectives of the business.
 
One of the beautiful things about owning a business is that you can create your own reality.  A team can always achieve more than an individual could, but it does take some learning.  Learning how to recruit the right people for the work that needs doing rather than the person you like the most; learning to support these new hires so that they can be successful, learning how to keep these people accountable and keeping them from acquiring poor work habits and the learning how to create opportunities for them to progress so you can make space for the new people are all skills that need to be learned in order to delegate successfully.
 
 

4. Not Having a Solid Marketing Plan

 
A common business mistake is to plan out the budget for the business and then add 10% for marketing.  A good example is the Apple iPod.  When this was rolled out Apple spent 10% of their budget on making the product and 90% of marketing and sales.  
 
Most businesses fail because they don’t spend enough on marketing or spend it in the wrong areas. A well-crafted highly targeted marketing plan is essential for attracting clients and for encouraging clients to make referrals and introductions.  One legal firm that we know of for example has committed to a number of years of regular repeatable SEO marketing in a specific geographic area.  It took 3 years of spending $2.5k per month to achieve a great result but the firm now makes over $500k per year in revenue that can be traced back directly to the website & the SEO work.
 
 

5. Ignoring the Competition

Most of us work in hypercompetitive markets.  For example Sydney is one of the toughest markets not only in Australia but also the world.  One café owner that we know has multiple cafes in Sydney, Australia and around the world with two in New York.  He claims Sydney is more competitive and tougher than NY.  Interestingly in a recent study I heard that Sydney siders walk faster than New Yorkers that is how competitive things have become.
 
Generally your competitors or alternatives to what you provide or what your solution is have been around longer, they have better established supplier relationships, they have trained staff and understand the space really well.  It doesn’t mean that incumbents have all the answers but it does mean that it is a mistake to underestimate the competition and to not plan for their response to you entering the market.
 
A simple sector analysis and market research is a good way to start to understand the competition.  List all the alternatives and generate some data on them.  How long have they been around for? What are the products and services they provide? How many staff do they have?  Are there any ads on Seek for staff where you could learn about the people they are seeking? Who are their suppliers?  After you uncover all of this, analyse the data and see where there are gaps, where there are overlaps, and figure out where the opportunity is for you?
 
One very successful CEO that ran one of the most successful retail chains in Australia used to take 3 weeks off every year, gather his partner, rent a car and visit all the leading stores in his sector in the US.  He would buy a coffee and spend as much time in each store and simply observe and experience how these businesses operated.  He would take copious notes and the data from each of these trips would then inform his business plan & list of continuous improvements for the company every year.
 
 

6. Hiring the Wrong People

80% of the success of any business can be attributed to getting the right people on the bus and making sure they are sitting in the right seats.  Many business owners complain about their staff but the reality is that in most cases these problem people were created by the business owner hiring someone that didn’t have the skills or the temperament for the role.
 
Unless you have a very good radar for people this is where you should develop a relationship with a person that has human capital skills.  If you are in a lifelong business relationship with these people you will find them support helpful in hiring new people for your business.
 

7. Failing to Strategize (lost in the weeds)

 
Most small business owners are lost in the weeds doing the work, delivering the service, meeting the outcomes and don’t peek above the tall grass to check on where they are going with their businesses.  There are times to react but you should be planning and driving your strategic direction. 
 
Taking regular time outs from your business e.g. at HUBB we meet one afternoon per month 8x per year, to catch your breath, get your perspective back & to talk with other business owners is critical to staying strategic.  If you cannot afford one afternoon per month or more ideally, it’s time to get a business coach to restructure how you deliver your outcomes to your clients and your pricing structures so that you have some down time.  Even Boeing jets have to spend at least 30% of their time on the ground to maintain the plan so that it doesn’t crash.  The same is needed for the business and the business owner.  This is not wasted time, it is essential to be able to think strategically and create a solid business plan.
 

8. Hanging on too long

 
I think we as business owners have amazing perseverance.  I’m continually amazed at how long people will stick with something hoping that it will change and they will be successful.  When you have an underperforming business most people hang on too long.  It’s a bit like the people saying, we all hire fast and fire slow when we should do the opposite. 
 
Some of the most successful business people I know are defined by what they let go of rather than what they persevere with.  My own personal experience of this was a business that I had that on the surface looked very successful but financially was not really there and I had no power to change it or make it better.  I loved this business and it took an accomplished Director colleague making me promise to divest out of it before I could move on.  In hindsight it led me to two even bigger and better opportunities that allowed me to surpass the benefits of this business many times.
 
 It’s important not to give up easily but when you have done everything you can and if you honestly cannot improve things or if it always feels like you’re pushing water uphill, sometimes it is often better to let go and try your hand at the next thing.
 
 
Business Coaching or Mentorship

Leveraging Business Coaching or Mentorship

Every business person should have a mentor and they should have many and multiple mentors during their career.  A leading & very successful company Director shared this with me when we were talking about mentoring.  He also felt that it had been his greatest mistake in his career not having a business mentor.  He felt he could have been a lot more successful with a mentor.
 
Someone to talk to about your business, who is qualified, who understands the journey and who has your best interests at heart is a gift that we all need.  Interestingly there are now numerous people that can fill this role and who are available at the HUBB community for example.
 
A coach or mentor can keep you accountable, it can give you someone to test your business ideas on and it can be someone that injects some realism in your day when you are too high or low on the rollercoaster of owning a business. It is also a way to avoid the many and expensive trial and error mistakes new small business owners make on their growth journey.
Seek out mentors.  It is a vital activity and skill for every business owner.
 

Conclusion

Being aware of these common mistakes when starting a business is the first step to avoiding them.
 
Everything in business has been done before and while everything can be found in Google, most of the time having a conversation with someone and asking a question is the fast track to resolving every challenge or opportunity.
 
Organisations like HUBB are designed to give you these relationships and the support to resolve your challenges and take advantage of opportunities in a more energising way than you may be able to do on your own.