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How to Avoid Common Startup Mistakes
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Chris BleesPresident & CEO |
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Austin BuckettManager |
An Interview by John Gachiri
Editor’s Note: Entrepreneur Richard Branson regularly shares his business experience and advice with readers. What follows is the latest edited round of insightful responses.
Q: What are some of the most common mistakes entrepreneurs make when starting out? — John Gachiri
A: Making mistakes is part of the process of building a company; quickly recovering from them is what’s most important. It’s all part of the adventure of entrepreneurship, which will require all of your stamina, drive and determination.
But your way forward is not entirely uncharted: When you notice an opportunity that has never occurred to anyone else, there are certain steps to turning your vision into reality. You must formulate an innovative business plan, find funding, hire the right people to carry out the plan, and then step back from your role in the business at exactly the right moment.
Let’s take a look at these steps, and also at ways to avoid some of the most common mistakes new entrepreneurs make.
Step 1: Stay on Target
A mistake often associated with the first step is signaled by an entrepreneur’s inability to clearly and concisely convey his idea. You have to be able to generate buy-in from investors, partners and potential employees, so nail down your “elevator speech” — what you would say if you ran into an important potential investor in an elevator. Try using a Twitter-like template to refine the essence of your concept into just 140 characters. Once you’ve done that, expand your message to a maximum of 500 characters. Remember, the shorter your pitch is, the clearer it will be.
An associated error is lack of focus. If your start-up has been tagged as “the next big thing,” the adrenaline rush that comes with building buzz can lead to impetuous decisions and a loss of a sense of purpose. Many entrepreneurs end up sprinting in many directions instead of taking assertive steps toward their target. Clearly define your goals and strategies, then establish a timeline. Don’t let the other possibilities or hazy dreams distract you from achieving your goal.
Getting too far ahead of yourself is also dangerous. If your product or service is still on the drawing board, don’t get sidetracked by plans for future versions. As a general guideline, looking two or three years ahead is best, but the nature of your business and feedback from your investors will help you determine just how far ahead you should plan.
Be flexible, because just as a lack of planning can be a problem, adhering blindly to your plan is a surefire way to steer your company off a cliff. A successful entrepreneur will constantly adjust course without losing sight of the final destination.
Step 2: Be Realistic About Costs
Don’t shortchange your start-up when estimating the funds you will require — you’ll just diminish your chances of success. Keeping your expenses under control is vital, but don’t confuse capitalization with costs. The playing field is littered with undercapitalized start-ups that were doomed from the outset.
In the late ’90s, David Neeleman told me he needed $160 million in start-up capital for JetBlue — a huge sum, far more than most entrants to the industry manage to raise. Most of the so-called experts scoffed at the notion that he would be able to find the money and launch a low-cost airline when established companies were failing one after the other, but he stuck to his guns and raised the money. As a result, JetBlue had one of the most successful airline launches of all time, and turned a profit only six months after its launch in 2000.
Step 3: Hire the People You Need, Not the People You Like
As tempting as it may be to staff your new business with friends and relatives, this is likely to be a serious mistake. If they don’t work out, asking them to leave will be very tough.
When Virgin starts any new business, we always hire a core team of smart people who already know the industry and its inherent risks. Take full advantage of the knowledge pool you’ve created; when a problem comes up, remember that nobody has all the answers, including you._One of your goals should be to find a manager who truly shares your vision, and to whom you can someday confidently hand the reins so that you can carry out the next step.
Step 4: Know When to Say Goodbye
A great entrepreneur knows when the time has come to leave the CEO role. It’s seldom easy, but it has to be done: few entrepreneurs make great managers. In my own case, managing the daily operations of a business simply isn’t in my DNA. (Or, as I’ve said to friends, “It’s not bloody likely.”)
Stepping back doesn’t mean turning your back on your business. At Virgin, I’m always involved in the launch of a new business, and then I gradually hand over control to the new management team as it starts to jell. But no matter how long it has been since I was at the helm, if I see something that I don’t like, I’m not at all shy about making my thoughts known and asking some very pointed questions.
Founders shouldn’t hesitate to re-insert themselves into their businesses when necessary — look at Larry Page, who temporarily returned to the CEO role at Google in April. That said, I had to laugh when I heard this news, wondering how many managers at Virgin businesses had thought, “Wow, I hope this doesn’t give Richard any ideas.”
This article was published by Stellar Risk Report & Journal.
If you have any questions about what it takes to start a company, please contact us.
Entrepreneurial Corner | The Seven Key Numbers You Need to Know to Succeed in the New Economy
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Kurt KoffordDirector |
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Austin BuckettManager |
This morning’s Entrepreneurial Corner presentation covered the seven key things you need to know to succeed in the new economy.
You can find the PowerPoint presentation here.
If you have questions about specific areas where your business might need an extra focus or about the presenation, please contact Austin Buckett or Kurt Kofford.
Interested in attending our future events? Contact Stephanie Johnson.
Entrepreneurial Corner | What Are the Seven Key Numbers You Need to Know to Succeed in the New Economy?
What Are the Seven Key Numbers You Need to Know to Succeed in the New Economy?
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Led by:
Kurt Kofford, CPA, is a director at BiggsKofford. He plays a major role in the management of the firm’s clients, overseeing all of the firm’s auditing and accounting engagements, as well as consulting clients on long-term planning. Austin Buckett, CMA, CM&AA, is a manager in BiggsKofford Capital, BiggsKofford’s Investment Bank department and also acts in an outsourced CFO capacity for clients, providing consulting in financial performance as well as developing growth and exit strategies.
We’ll discuss:
Thursday, October 27, 2011 7:30 – 9 a.m.
BiggsKofford, 630 Southpointe Court, Suite 200
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Know Someone Who Is Starting a Business?
August 05, 2011
Are you or someone you know thinking of starting a business? Starting a business is both exciting and stressful. Our services, specific to the needs of a new business owner, are designed to answer your questions, like:
A good place to start is to take a look at our Small Business Start Up Kit. If you have questions about starting your own business, call or e-mail Austin Buckett at (719) 579-9090 or abuckett@biggskofford.com. Diagnosis: How Does Your Medical Practice Rank with the Competition?
July 12, 2011
When it comes to benchmarking your practice, there are many ways to look at performance levels and how your practice operates compared to other practices within your specialty. What you don’t know about the business and financial aspects of your practice can hurt you. Benchmarking your practice can help reveal areas for improvement to ensure that you meet your goals. Comparing your practice’s health to others can help you:
Once you have comparable data you can start to measure results and create goals specific to your practice. The old saying is that you can only manage what you can measure. By creating and monitoring key performance indicators, also known as KPIs you can measure, monitor and improve various aspects of your practice, such as gross charges, collection rates, number of new patients, no-show rates and other important indicators. Keeping your pulse on trends within these KPIs is vital to continually improve the health of your practice. BiggsKofford has the tools and database to benchmark your practice within your specialty. If you have questions about setting up key performance indicators and comparing them to other top performers in your practice’s specialty, call or e-mail Deborah Helton at (719) 579-9090 or dhelton@biggskofford.com. What Every Entrepreneur and Family Business Owner Should Know When Selling Their Business
June 29, 2011
Recently, a very informative white paper was published that covered what every entrepreneur or family business owner in the process of selling their business should know. To get the full article, click here. If you have questions about selling or valuing your business for sale, contact Chris Blees or Austin Buckett. How to Build Value in Your Company | Rob Slee
June 16, 2011
In case you missed Rob Slee’s engaging presentation about “How to Build Value in Your Company” on Tuesday, you can find the presentation materials here. If you were unable to make the presentation or have questions about the value of your business, please contact Chris Blees or Austin Buckett. Interested in attending our future events? Contact Stephanie Johnson. You’re Invited: Rob Slee presenting on Creating Value in Your Company
June 02, 2011
Call or e-mail Stephanie Johnson at (719) 579-9090 or sjohnson@biggskofford.com for more information or to reserve your seat! How Can You Prepare to Exit Your Business | BiggsKofford’s Entrepreneurial Series
May 31, 2011
Last week at BiggsKofford’s monthly breakfast, Entrepreneurial Corner, Chris Blees, CPA, CM&AA, and Austin Buckett, ACA, CM&AA, presented on how to garnish the most value out of your business when the time for transition is right. You can find the PowerPoint presentation here. If you were unable to make the presentation or have questions about preparing to exit your business, please contact Chris Blees or Austin Buckett. Interested in attending our future events? Contact Stephanie Johnson. 
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