Don’t Make These 6 Big Mistakes When Starting a Business

By Kendra Martin

There are so many different articles on how to be successful when starting a business. Most of them, in my experience, are either too long or they are outdated. I am a millennial female entrepreneur—I don’t have the patience for lengthy documents and I think that most of what worked for a company that started 20 years ago is antiquated (sorry, but it’s true).

The biggest mistakes I made in starting my own company were not any of the things I could have read in one of those articles. In fact, they were random, big mistakes that have cost me a lot of time and money to correct.

So here it is, for all you nuevo go-getters out there, a short and not-so-sweet list of my six biggest mistakes when starting a business. Please don’t make them.

Mistake when starting a business #1: Not solving a real problem

Lots of people have lots of great ideas. A new technology, a contraption that saves you time cleaning your house, etc. One of the fundamental check-the-boxes you need to do before you invest in your great idea is to make sure you are solving a real problem that NEEDS to be solved. Ensure the problem that needs solving is intuitive, so that when people hear about your great idea they will intuitively agree that they need help solving that problem, because it is, in fact, a problem for them.

To be fully transparent, I’m living in this mistake right now. I started a company that has a unique value proposition through product experiences that have never been sold before. I thought that was enough for success. What I’m realizing, three months into my startup venture, is that what I’m selling isn’t exactly a necessity, and the problem I think I’m solving isn’t intuitive to my target demographic. They come to the website, they look, but they don’t buy. I thought they would get it immediately, but sales are not where I want them to be.

So now I’m in a position where I have to shift my philosophy and think about how I can market what I’m selling such that people feel my product is solving a real problem that they have. It’s not enough to have a cool product. Why should they spend their precious dollars with my company instead of at the grocery store to buy food for their family? There’s more work I need to do in order to connect the dots.

Mistake when starting a business #2: Don’t take “the bro deal”

As you share with people that you’re an entrepreneur and tell them about your business, people will want to help. They will offer you discounted pricing, AKA “the bro deal,” which will be extremely tempting when you’re bootstrapping your way into launching your company. Every dollar counts, and a deal from someone you know may sound like a great idea, when it’s not.

Select your help with extreme caution before committing to a vendor. More often than not, if a product or service is more expensive it’s because the quality is better, and in most cases, that is worth the extra cost. Don’t penny-pinch and cut quality corners, because it could come back to bite you.

I made the mistake of hiring a photographer that I knew through mutual friends, and it was a disaster. I was quoted one price from my friend, then a different price from the photographer, then an even higher price from the photographer at the last minute before the photo shoot. I agreed to pay, begrudgingly, and was thoroughly disappointed with the work, from start to finish. The truth of the matter is I didn’t really know the guy; I just trusted my friend when she said “he’s an amazing photographer,” and I paid the price.

Mistake when starting a business #3: Pay attention to compliance

This part is not fun; in fact, it’s an excruciating part of the job, but it is essential to your success. When I say compliance, I am referring to laws, which could be anything from collecting the proper amount of sales tax all the way to annual greenhouse gas emissions. The last thing you want is for your production to be interrupted or a huge unplanned expenditure due to an oversight in the realm of compliance. Get it right the first time.

I underestimated the importance of this topic when I first launched my website. I thought filing for business and sales tax numbers with the state would be straightforward, and I didn’t think it would be required BEFORE I launched my website. I thought I could figure it all out later, and truthfully, I just didn’t want to deal with all that bureaucratic nonsense.

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As I started to develop my website and get ready for launch day, I realized that in order to properly collect sales tax and purchase supplies without paying taxes twice, I would need both. I went into “expedite mode” and hired a company to file all the paperwork to get these things completed so I could launch my company properly. But had I known ahead of time, I would have prioritized this sooner.

I also had these grandiose ideas about launching products that involved regulated goods (e.g., alcohol and CBD). I quickly was put in my place when I started researching these industries and realized it takes a long time to get the appropriate permits required to sell regulated products. Those product dreams are now on the back burner. I had to pivot quickly and start developing products that I knew didn’t require additional compliance steps.

Mistake when starting a business #4: Do your research BEFORE you choose a website platform provider

I’m embarrassed to admit this, but I totally screwed up when I chose my e-commerce platform. I spent weeks developing my e-commerce website, and then just as I was about to launch my business, I realized that the platform had a major flaw if you are selling products—it didn’t auto calculate the local tax rates for the state(s) requiring businesses to collect sales tax. For me that was California, which meant that in order to collect sales tax properly, I would have had to enter over 2500 lines of unique sales tax rates for all the zip codes in California.

This was so demoralizing to discover just as I was getting ready to launch my website. I am currently in the process of switching over to a new platform, and basically had to start from scratch and build an entire new website.

Mistake when starting a business #5: Lessen your assumptions to the lowest common denominator

This is going to sound harsh, and maybe it is harsh, but don’t assume ANYTHING about your customers. For example, if you are providing instructions for a product, do not assume people are going to understand what you provide.

Reality check: We live in the generation of ADD, and most people are distracted by at least 10 other things at the same time as they are reading your instructions. Keep all written text extremely straightforward and simple. Think of everything you write as if you were writing the “[Insert product here] for Dummies” guide. There is nothing more frustrating for a customer than attempting to read your instructions but not being able to understand them. They will feel defeated, and that’s the absolute last thing you want your customers to feel. Use guinea pigs (ideally), but at a minimum use research to validate all assumptions before making decisions you can’t reverse.

My company sells experiences—hands-on activities that require the customer to follow instructions to make something (e.g., a candle, a necklace, etc.). I made the mistake of assuming that my customers would easily be able to follow my instruction guides that I put in my product kits. This was not the case from the get-go. I went through iteration after iteration of the instructions until I stopped getting feedback that people were confused.

Mistake when starting a business #6: If you have to choose, focus on profit over revenue

Okay, of course both are important, but it frequently happens that huge companies go out of business because they make the mistake of driving revenue over profit. Think of it this way: if my company makes $1 million per year in revenue but it cost me $950,000 to get that revenue, then is that really a lucrative business?

The answer is probably not, because the chances are that $50,000 of profit is already spoken for, in the form of expansion cost (e.g., buying new equipment, investing in R&D, etc.). Focus on building out impressive margins from the start. This will be HUGE for you in later years, because typically, through economies of scale and efficiency, your productivity and margins will expand as you grow. If you bake in a solid margin from the beginning, then all that additional margin is icing on the cake that makes your company very attractive to investors and gives you the ability to pay yourself.

This has been a hard lesson learned for me. I am embarrassed to admit that I am currently struggling with the outcome of not focusing enough on profit over revenue. I knew that I should because I read an article about the founder of Spanx, and she shared that from day one Spanx focused on profit over revenue. I wanted to emulate this model, which is why I set up my supply chain with low quantities from the start so that I’d be able to show margin expansion over time as the company grew.

Now this puts my business in an extremely uncomfortable position financially. I should have built out more solid margins from the beginning and invested in larger purchase order quantities. I didn’t, and I’m currently in the middle of trying to figure out how to remedy that.

Like I said, embarrassing, but if admitting my mistakes helps someone else avoid them, then it’s worth it.

RELATED: 14 Startup Tips From Small Business Pros: Time-Tested Small Business Advice

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