Deciding to start a new business can be pretty exciting. The mind is overflowing with possibilities and your imagination just goes completely bonkers picturing all the money you’re about to make… with little to no effort.
If you’ve managed to get beyond the idea phase and actually implement on your grand plan, let be start out by congratulating you. Taking the plunge and branching out on your own can be downright terrifying. So much so, many never get beyond the “what if” stage so you’re already part of the entrepreneurial elite.. unless of course you’re not.
Much like a new romance, when the make-up has washed off and the politeness has worn thin, the ugly truth about launching and running a profitable business can be… well… ugly!
As the reality of the day-to-day sets in, new business owners can suddenly find themselves face to face with issues they could never have dreamed of back when they were fantasizing about their dream business not so long ago.
Thankfully because of well documented stories of stratospheric successes and cataclysmic failures frely available to all, you don’t have to follow the stereotypical ebbs and flows of the startups of yester-year. Oh no my friend. Instead we get to learn from the mistakes of those who came before us and do our best not to make them ourselves. God bless ’em.
Here are 5 of the biggest mistakes you’ll want to do your utmost best to avoid:
1. Solving A Problem No-One Cares About
If you’re guilty of this one don’t beat yourself up too much. Even the great success stories of our time are guilty of this one. I just finished watching a video where Steve Jobs of Apple fame talked about the challenges of breaking himself out of doing this very thing.
The details vary across industries but the underlying theme is usually the same:
- You come up with something you think is amazing
- You build it
- THEN you try to find an audience to sell it to
Seems pretty harmless but this strategy is a recipe for disaster and is about as entrepreneurial as dropping coins into a slot machine on the Vegas Strip.
Because with this approach you’re building something in the HOPES that someone will want it. You’re making assumptions with no real basis other than what you feel in your gut. And unless you happen to be related to Dr. Spock from the Starship Enterprise this is not a sustainable strategy.
Instead, when creating a new product or service you need to be looking to:
- Solve an URGENT problem (that already exists)
- For a SPECIFIC audience (who you’ve already identified)
- At a REASONABLE price (based on comparable products already selling well in the market)
See the difference?
With this smarter approach you don’t create anything until your research has shown you who your market is, what their most pressing problems are and how much they’re willing to pay to solve them.
This not only gives you a framework within which to come up with product ideas, it also give you the data you need to figure out whether or not you can come up with a solution that will satisfy your audience and allow you to make a profit.
This is a much more strategic approach that won’t guarantee success (nothing can do that), but will definitely stack the odds of success in your favor.
2. Using Regular Email For Customer Service
This is a mistake I see many business owners making. And it’s not confined to those just starting out either. I see plenty of businesses who have been around for a while, sometimes even decades, still shooting themselves in the foot with this incredibly costly mistake.
Gone are the days when you just stick with the same ‘ole plumber because he’s the guy you’ve been using from before your children were born. If Peter the Plumber takes too long to reply to your email request for a quote on the rain shower feature you just saw on that episode of Property Brothers, he may just have lost out on a potential bathroom remodel – for a long time, loyal customer no less.
Have you ever noticed how a lot of the larger companies (be they plumbers, web developers or ecommerce sites like Amazon) all deal with your enquiries in a very similar way? The steps are usually some variation of this:
- You email support
- You get an automatic reply comfirming receipt of your email and letting you know approximately how long you should expect to wait to get a reply
- You get a ticket number
- If your issue involes multiple departments (pre-sales, billing, tech support etc), the emails will often come from different support agents with different areas of expertise. However, the support email address remains the same.
- The email exchange doesn’t stop until your issue is solved, and once it’s over you’re typically encouraged to provide feedback.
The serious players all handle support this way because it flat out works.
It’s a very efficient way to handle customer support and it can sometimes feel quite magical but rest assured there is no magic at work here. These companies are simply using Help Desk Software.
Unlike regular old email, which is notorious for losing your emails either in the SPAM folder or the dreaded conversation format that services like Gmail like to use, Help Desk software is designed to ensure that every email is seen and, more importantly, acted upon.
If you’re a solopreneur handling all the customer enquiries and also providing the service your company sells, a help desk is like having a Personal Assistant who comes to work each day, compiles a list of the customer enquiries you’ve received for the day, organizes them by urgency and then neatly categorizes them so you know exactly which ones to tackle and which ones to delegate to someone else.
And this all happens without you having to remember to buy Christmas gifts or endure the endless sob stories explaining why this PA deserves a raise for all of the late nights and holidays you made him/her work – got nothing but love for you Mrs Finnigan… nothing but love.
The other great thing about a help desk is that once your business starts to grow and you either don’t have time to monitor support requests or you’re just ready to hand this off to someone else, you can easily add customer support agents to the system and even keep track of how well they’re solving customers problems and make informed adjustments to make improvements where necessary.
You can automatically assign specific types of requests to particular departments/agents, add canned responses, set up a Frequently Asked Questions (FAQ) section, and in many cases keep track of it all on your smartphone.
If you’ve never considered Help Desk Software but think you can’t afford it rest assured that, while many of the really good solutions out there require a monthly subscription (a very worthwhile investment btw), you do have some excellent free or one-time payment options to choose from. Here are a few to get you started:
- FreshDesk is a great option that has continued to evolve over the years and they have an excellent free plan. It’s changed from when I first signed up back in the Stone Age but I believe you can can still get many great features and unlimited support agents without having to even pull out your wallet.
- OS Ticket. If you have a self-hosted website then this free Help Desk is probalby included with your hosting service. Now I have to admit it’s not fancy looking but it works pretty well so I had to include it here.
- Sonic Reply. I only recently heard about this one (although it turns out I bought it years ago in a bundle from Plugin Results and just didn’t realize it was included). The feature set is quite impressive considering it sells for a pretty low one time fee. The one thing that I didn’t see listed was canned responses. I’m not worried though because, having bought multiple products from this developer in the past, I wouldn’t be surprised if it isn’t already included. And if it isn’t, he’ll probably add it if you ask.
3. Not Knowing Your Numbers
How much can you afford to pay to acquire a new customer?
If you have no idea how to even begin to answer this question then you are in very real danger of putting yourself out of business much faster than you realize. In fact, even if you can come up with a ballpark figure you’re still very much at risk.
I should throw in a quick disclaimer before I move on, so here goes:
If your business runs purely on word of mouth and, in spite of never spending any money on marketing, you’ve always had customers seek you out to buy your products or services, then you’re probably thinking this doesn’t apply to you.
SPOILER ALERT: You’re wrong because even if you don’t have marketing costs you most certainly have fulfillment costs (raw materials, rent, utilities, staff etc). Additionally, not having marketing costs now doesn’t mean they’re not coming.
In this Google searching, Facebook scrolling, smartphone toting world we live in right now, more and more businesses are finding that they have no choice but to jump in and start marketing because the competition is getting fierce. And unlike the days of old (aka the 90’s), the battle is now being fought in the digital realm where math is now your friend (WHAT?!)
It’s now becoming critical that you constantly keep track of the LCV of your customer.
LCV simply stand for the Lifetime Customer Value and is literally the average amount of money each customer that enters your store (or your marketing funnel) spends over time. If you can get your existing customers to spend more with you then their LCV will increase.
But why does this matter? (WARNING: Here comes the math)
If a typical customer enters your store and initially purchases a $10 product but over the next 6 months spends an average of $120 more, then you can afford to spend $10 acquiring this customer because you know you have an average of $120 coming your way once you’ve got them on the hook.
If you’re super fancy and you’ve been keeping track of this data for a long time with a large number of your customers, then you may know that over the span of a year they will spend on average $500 dollars after that initial $10 sale, then you could easily pay $120 to acquire a customer knowing you’ll make it back and have a nice little profit within 12 months.
The key here is to keep track of this data which is arguably easier to do with an online business but definitely doable with a brick and mortar establishment.
The illustration above is a simple example of a web based business where the owner sends say 500 visitors to a website offering a free guide in exchange for opting in to his list.
As the visitors are taken through the funnel multiple offers are made. This can be in the same day or spread out over a period of weeks or even months. Here’s what ends up happening in our hypothetical example:
- Of the 500 visitors 100 decide to opt in (leads)
- 5 of them buy the $10 product
- 2 of them buy the $100 product
- 1 of them buys the $1,000 product
- The 100 leads generate an income of $1,250
- Each of these leads is worth $12.50 to this website owner i.e the LCV is $12.50
So in other words this business can afford as much as $12.50 to acquire each lead and still break even. After that point they simply need to make more offers to make a profit.
If you’re buying traffic from a Pay Per Click vendor like Google or Facebook you now know that on average 500 visitors makes you $1,250 so you can afford to pay up to $2.50 per click ($1250 / 500) and still break even.
Math is always fun when it puts the bank balance is into the black.
4. Doing It All To Save Money
So when you’re first starting your business, whether it’s virtual or physical, it’s a very good idea for you to understand how the various moving parts work.
You need to think of your business like a machine. Each part serves a different function and as long as each different part works together to achieve the common goal of driving your business forward then you can confidently say that each part is important.
So when you first start your business it’s not a bad thing to learn how to:
- Build a landing page
- Set up your email autoresponder
- Write sales copy
- Create a membership area for product delivery
The problem arises when the strategy of “you doing everything” becomes the way your business continues to run. This will eventually stunt your growth because:
- You’re limited by the amount of time you have each day (we all get exactly 24 hours – no exceptions)
- You’re not an expert at everything and you never will be. Technology and techniques simply change too fast for this to be possible.
- Your time is best spent on profitable activities, not “housekeeping”
If you’re doing everything in your business then you don’t HAVE a business. You ARE the business.
Running a business like this means you’ve limited the potential for growth to whatever you can manage on your own. You’ve limited the number of customers can serve to only those you can personally attend to, and of course this also means that you can only make as much money as you can spend the time to earn i.e. only when you actually work. If this sounds suspiciously like the 9 to 5 you started your business to escape… guess what?
You’re dead wrong! It’s far worse. Much more like a 5 to 11 and you work for the worse boss imaginable – you!
To escape this trap you have to plan for success and design your business in a such a way that it will ultimately run without you. You need to plan for growth. As your customer base starts to grow you’ll need more hands on deck to attend to them. And of course for the extra fancy amoung you, setting up your business like this will give you the option to sell it when you’re ready to move onto something else.
If this sounds like the kind of machine you’d like to build I highly recommend you read Michael Gerber’s classic “The E-Myth Revisited”. This truly inspiring read will help you to map out your business this way (whether it’s already up and running or still in the idea phase) and teach you the timeless principles you’ll need to apply to build a successful business.
5. Not Starting Until Everything Is Perfect
I’m sure I don’t need to spend too much time on this one. We’re all guilty of this in some form or another.
We keep really busy learning all about every aspect of every marketing strategy out there. We’re always on the cutting edge (at least in conversations about marketing and business building) but we never actually get our hands dirty as it were and take some risks.
While you can and should spend some time learning about how to build and run a successful business, the continuous study eventually gets to a point where it becomes counter-productive. And like it or not, there are certain things you will only learn by doing.
There’s no way to dive into any new venture, whether it’s starting a business, trying some new marketing tactic, mastering a sport (or whatever else you can imagine) without making mistakes along the way. The process is always the same:
- Repeat until successful
There’s simply no avoiding the failure part so do what successful people do – fail early and fast so you can get to the fun stuff as quickly as possible.
Using the diagram above as a typical path from idea to success, most people get stuck in the first 2 stages. This even applies to people who have already set up and launched a successful business. This path applies to every step of building anything, including a business, so the potential for getting stalled is pretty significant.
A select few brave souls will stick their necks out and start crafting a strategy but it takes a whole different mindset to get from Strategy to Success because of what links these two toether.
It’s not shown on the image above but in order to bridge this gap you MUST be willing to accept that there will be failure and you will need to make adjustments and jump right back in.
There’s simply no avoiding it so if that’s what you’ve been trying to do please follow the example of the very long list of success stories who’ve come before you and get to failing… it’s the only way to succeed.
6. Next Steps: Use These 5 Free Tools To Help
You can simplify your business significantly by using readily available tools to help. Some are free, others are really cheap. Regardless, the time and money savings can be life changing.
Let us know where you are in your business right now by clicking the button below that best describes it and we’ll do our best to help you get where you need to be: