I guess everybody is sharing how to make your startup a success. My article tries to attack that problem from a different angle, by telling you three sure ways to fail your business in your first year.
These mistakes if done, will put your business on the wrong track from day one. If you have done all or some of those already, then congratulation, you just made it to the “hard to succeed” zone in your first year.
First, let me tell you that I have done them all in various ventures I attempted, and to my experience, the one that’s most difficult to spot and to realize, is the 50/50 partnership. It’s very hard to get around it. So here is the list I have for you:
#3 Have 50/50 partnership and voting rights
I had this one breaking my plans many times, more than I can count. The worst business partnerships are those that are built on 50/50 voting rights. You are doomed to fail if you have this one on your partnership contract.
This type of partnership assume that you both have same level of thinking and same experience on every aspect of business that you will both resolve all problems seamlessly without issues. Wrong. Two people are two different entities, two different live circumstances, two different states of mind, two different upbringings, etc. and that translates to two different “agenda”, which will translate into conflicts and indecision.
You both will never go into agreement on every issue, and that disagreement will result into delays of decision taking which will lead to failure. And the worst part of this type of mistake, it usually involves bad feelings and bitter resentment.
#2 Spend your cash on income-nonconvertible assets
On starting up why the hell would you want to spend your hard earned capital on expensive assets that are not convertible to income? Stop the madness. That’s one of the common mistakes done by amateurs. You don’t need everything you think necessary. Bootstrap your business, spend the minimum required to reach the break even fast. Actually, this impresses investors more than anything else. And also frees you from needing anybody else’s money. You will have a profitable business fast enough to enjoy the freedom that running your own business brings about.
#1 Sell to everyone you meet
Seriously, stop selling to everybody you meet. Not every sale is a good business. Actually you will discover (with experience) that many customers you sell to are the wrong customers. Either they don’t know how to make use of your product, or they can’t understand your value, or they can’t afford your price.
I would advice to selectively find your right customer segment and focus on them. And to repeatedly shop off some of your clients based on:
- Profits they generate per transaction
- Volume they contribute to
- Total profitability per customer per year
Those in the lower 10-20% of your customer’s list based on those 3 criterion, you should, shamelessly, cut them off. You don’t need their business. And they will be fine without your business.
Actually I have written a whole post on “Firing some of your clients!”.
Running a business is a learning journey. You can spend your own time and money to learn or you can learn from someone else’s failures and mistakes. Or if you are lucky, you can spend someone else’s money and your time. In a nutshell, don’t partner with anyone with 50/50 voting rights, don’t spend your cash on non-income generating assets, and select your customers carefully.
If you like to read more about more business traps to avoid, you can find my article here. Enjoy!