Updated: Jul 2, 2020
As an entrepreneur and start-up mentor, I have been involved in several new small businesses and start-ups, and I discovered a pattern of mistakes start-ups make and it affects their viability in the long run. Many entrepreneurs have great ideas and can explain their business proposition very well. They are potentially expert in their field and know all technical aspects of that business, for instance, Maya from Mexico who I was mentoring. She wanted to start a bakery and café business and no one could explain the differences between various doughs and coffee blends etc. She was a passionate young lady who didn’t get No for an answer, but her business skills were limited as you can imagine. She didn’t know where to start and how to establish a successful bakery and café. Gratefully she spent long hours on her business plan and could start a successful business in Melbourne. I was honoured to be able to assist this determined lady to set up her business.
Here I write a summary of the most common mistakes startup make before establishing their business:
1- Not setting the right goals
Setting goals is very important in any task you want to do and complete. We set goals nearly every day in our lives; a shopping list for supermarket, booking hotels and accommodation before a holiday, throwing a party for weekend etc, these are some of the things we do by setting clear goals without even knowing. It is surprising that people set goals for many things, but when it comes to a business they have no clear or specific goals and leave it to the chance and circumstance to decide what they would do.
Studies show people with clear and written goals are dramatically more successful than the ones who do not have them. First thing you must consider when setting your goals in to be specific. People tend to say I want to be wealthy, or more brand awareness, but these are open to interpretations. You must specifically mention how much you must earn each month to be wealthy, or how many people should recognize your brand in order to have good brand awareness.
The other thing is goals are meaningless if they do not have a timeframe. You should set a deadline or timeframe around what you want to achieve. Otherwise, you don’t feel the obligation to reach or finalise your task. The shorter timeframe is better, like in the first month of starting a business, or withing next quarter.
2- Not having specific target markets
Your business is about serving a group of people with similar interests who need your product or service. Not everyone is your target market and it is a mistake to believe you can be serving everyone. For example in the car industry, the meaning and usage of cars the same, but different manufacturers making cars for different kind of people. Toyota Yarris and Jaguar F-Type are two cars made for completely different target markets. They are not trying to tap into each others market, because customers’ need in each segment are met by them separately.
So, it is important to specify your target market and their needs and offer something compelling to them. You don’t need to worry about people who are your target market, but focus on the target market and be the best available option for them.
3- Not clear competitive advantage
Selecting your target market gives you focus, but you also should provide a reason for those people to choose you over your competitors. You must differentiate your business from other ones in the game and make sure your proposition is substantial enough for them to move from an existing provider to you. Businesses with no or limited competitive advantage struggle to survive and have to drop their prices all the time to be competitive, and as you can imagine, dropping prices can make your business not viable and profitable.
There are so many ways to work on your competitive advantage, my favourite one is Blue ocean strategy.
4- Not knowing your legal issues
As much as everyone can be passionate about their business idea and novel ways to promote it and find new customers, spending time on legal, government and statutory requirements are not appreciated. This is a boring fact that we need to work and operate within government and legislation boundaries which is beneficial to everyone, however, many startups just ignore these and prefer to stay in denial until something happens. Startups must check federal and state laws in their field as well as checking required licenses, Permits, Registrations and special requirements.
Nearly all businesses in Australia need some level of business insurance as well and not being insured put your business in big jeopardy. You need a proper investigation and planning before operating your business commercially.
5- Not knowing your industry
It is very important to identify and understand which industry your business belongs to. Sometimes your business can be under two or three different industries and studying all of them can be extremely helpful to make you understand the present state and future prospects for the industry. You should ask yourself these questions when researching your industry: is the industry growing or declining? What are the key success factors in this industry? Identify the major players in it and also what are the barriers to entry?
In the end, startups should decide if this is a promising industry to walk into or just re-think and find a better option. To research your industry, check the trade magazines, government websites, university publications, experts in the industry or checking the IBIS World.
Obviously there are many more items you should think about and consider when starting a business, but the above list is the ones that can be ignored or not paid enough attention to it occasionally. Preparing a business plan is the best way to ensure startups cover all required items.
And don’t forget, Failing to plan is planning to fail.