For many entrepreneurs, the process of launching a company begins with the lightbulb moment when they conceive of a breakthrough idea for a new product or service. Very often, they are so passionate about the idea that they believe its merits will be self-evident to prospective customers—that the innovation is so obviously superior it will sell itself. Entrepreneurs who avoid that delusion may think of their initial sales as a chicken-and-egg problem: They realize that getting buy-in from potential customers is a top priority, but until they design and build the product (which often requires securing funding, assembling a team, and many other tasks), how could they possibly make a sales call?
Both attitudes fail to recognize a simple fact: Salesmanship is central to the success of any young company, and entrepreneurs ignore this at their peril. Yet many do ignore it, in large part because they have little sales experience and have probably not taken classes in how to sell, even if they have formal business education. For those in search of guidance, the research and advice on salesmanship may not offer much help: The vast majority of techniques, models, and strategies are aimed at large, established companies, not start-ups, which tend to face a unique set of objections from prospects. And when entrepreneurs get around to making those crucial first sales, they often make common mistakes, such as not considering the strategic advantages of a particular customer or extending a deep discount just to make the sale.
Regrets, We’ve Had a Few
More than half our interviewees fully developed their products before getting feedback from potential buyers. In hindsight, most viewed this as a mistake, echoing one of the mantras of Eric Ries’s “lean start-up” philosophy: Get in front of prospects from day one. As one CEO told us, “You’ll learn more from talking to five customers than you will from hours of market research [at a computer].” The goal should be to gauge customer reaction to the general concept you plan to build. “Don’t make anything until you sell it,” advised one entrepreneur. “Get people really interested in buying it before you invest too much time and effort.”
Failing to listen.
Even founders who started selling early said they were too focused on convincing prospects of the new product’s merits and not concerned enough with finding out what prospects thought of the idea. Some realized that their passion and ego made them respond negatively to criticism and discount ideas for changes that they later saw would have increased the marketability of their offerings. “Listen to the feedback from the customers and reshape your idea and your product to fit what they actually want,” one interviewee advised. Another described the process this way: “It’s really all about understanding what the pain point is in the marketplace, and the best way to do that is to talk to prospects and validate, validate, validate your idea.” As one U.S. entrepreneur who had approached the task correctly said, “The goal of our demo was not only to explain what we do but also to give the illusion of explaining what we do, while we really tried to extract information about their business and how we could help them.”
Some founders realized that their passion and ego made them respond negatively to criticism and discount ideas for improving their products.
Faced with pressure (from themselves or their VCs) to make early sales, many founders offered price discounts in order to close initial deals—often establishing unsustainable pricing precedents with those customers. Worse yet, news of the discounts spread around small industries, crippling the ventures’ long-term pricing power. In retrospect, the entrepreneurs wished they had found alternative sweeteners to close early deals—free shipping, say, or a discount on orders placed before a certain date. And if you’re going to offer temporary discounts, they told us, it’s smart to put the terms in writing.
Selling to family and friends.
Making early sales to family members was especially common among entrepreneurs outside the U.S. and for those in the restaurant, clothing, and wealth management industries. But you never know why relatives are buying from you—often their motivation is love, pity, or a sense of obligation, not compelling product quality. In retrospect, founders believed those sales created a false sense of validation and that they would have been better off pursuing arm’s-length transactions with customers who would have given them candid feedback.
Failing to seek strategic buyers.
For cash-strapped entrepreneurs with no sales record, the thrill of getting the first “yes” can blind them to other considerations. Can this customer open new doors or provide referrals? Can the customer supply usage data that could make my value proposition more compelling? Some of the founders we interviewed wished they had conducted a strategic assessment of their first buyers. Others chose their first clients deliberately in order to get feedback, perform beta testing, get referrals, or guarantee repeat business. These strategic first sales often led to long-term success.
10 common entrepreneur mistakes
1. Not writing a business plan
Writing a business plan is an important part of creating a sustainable business and standing out from the competition. A strategic business plan creates momentum, which means that because you have a clear and researched idea, you are in the best position to succeed. Running a small business is challenging enough as it is; you want to give yourself every advantage you can.
And yet, many new small businesses begin their venture without thinking about the big picture. They then have no understanding of the market, financials, business model , or logistics, and that lack of understanding can cost time, money, and effort when things go wrong. They also don’t have a mission statement to stand by when things get tough.
Avoid this common mistake by creating a business plan to help identify the unknowns and spot the gaps you need to fill. Do you need to work with a 3PL or ship manually? How will you manufacture products? Who are you selling to?
2. Not focusing on cash flow and profits
One financial mistake entrepreneurs make is not paying attention to cash flow and profit margins .
If you ask any seasoned entrepreneur what the most important skill in running a business is, they’ll say it’s math. Many entrepreneurs start their business as a hobby and don’t pay as much attention to the numbers as they should.
Business math works very simply. To see how profitable your business can be, use this formula:
Profit = Demand x (Revenue – Expenses)
And there are a lot of expenses to account for. According to our research , small businesses spend an average of $40,000 in their first full year of business.
3. Not validating your business idea
One of the biggest mistakes you can make when starting a new business is not doing market research. You want to learn about the competition and understand how you can differentiate yourself from them. Competition can be other small businesses carrying the same products as you, or it can be market giants like Amazon and Walmart.
Sometimes entrepreneurs dive into a niche market without determining if it’s a good fit or not. There are cases where a niche has low demand and too much established competition. If that’s the case, you may not want to build a business around it.
4. Spreading yourself thin with products
A big mistake new business owners make is selling too many products. Sometimes if one product doesn’t sell well, owners will add more products to their store to attract potential customers. This doesn’t always help.
Say you have a store that sells eco-friendly recyclable bags, but no one buys them. So you add more eco-friendly products from your supplier. Eventually, you have a whole medley of products with no relation between them besides being eco-friendly.
If your branding is about bags and not other eco-friendly products, it’s going to be hard to attract the right customer.
The error here is more of a branding error than a product error. Building a brand is just as important as the products you sell, since your brand is how people perceive your business.
5. Not investing in organic marketing
One common mistake a small business often makes is not focusing on organic marketing . The lure of paid ads like PPC is reasonable. You pay for an ad, someone clicks through and buys your products. Immediate revenue.
But imagine if you could get traffic to your site, for free. Despite the upfront cost of organic content marketing, 70% of clicks go to organic Google search results. On page one alone, the first five organic results get 67.6% of all the clicks.
Sometimes it’s difficult to write content for a boring niche. How much can someone manage to write about reusable bags, right? The key here is to do content marketing not according to a product, but according to your customers — effective market research plays a big role here.
Continuing the reusable bags example, who would potentially want reusable bags? Someone who was environmentally conscious, right? It’s also likely that they are into eating healthy, working out, yoga, and natural wellness. These are all initial hunches, but a little bit of research can confirm them.
6. Not thinking freebies and contests through
Businesses fail from overspending on stuff like freebies and contests. Some do very well giving away stuff for free.
Freebies, contests, and giveaways are an effective way to market a product , but they aren’t a good fit for every niche. Freebies could work on perishable or consumable products: skin care, foods, supplements, and the like. For all other products—even if it’s something that someone could order another one of, like a piece of clothing—it’s very hard to make work.
7. Not hiring or bringing on help
Doing it alone is the main school of thought for many entrepreneurs.
In economics, there is a concept of opportunity cost. Essentially, when you choose to pursue any one opportunity, the “cost” of that to you is that your time is no longer free for other opportunities. So the cost of one opportunity is actually every other opportunity you have.
If you are bootstrapping your own business, chances are you did everything yourself. You set up the website, you tinkered with it, you uploaded products, you wrote all the product descriptions , you did all the marketing. A spectacular one-person show.
The problem here is that while doing everything yourself is great, it’s also incredibly time consuming. This is time you could be using elsewhere—spending it with your family, cooking up new ideas, or building business relationships, just to name a few.
Menial tasks come in two varieties: necessary and unnecessary.
You want to try and automate as many necessary menial tasks as possible. This process will cost a bit of money, but the headache and heartache you save typically outweighs the money you’ll spend. Besides, you can often find people that will gladly do these tasks (inventory uploading, data entry, etc.) for you for a reasonable sum.
A business decision you’ll have to make is if you need to hire help. This could be a co-founder, a freelancer, or even a part-time or full-time employee to get tasks done and help you grow your business. You don’t have to do it all on your own.
8. Not knowing your target audience
Doing quality research comes in two parts: finding product ideas and knowing your customers. The tricky thing here is that you can have customers and then build a product, but it’s very difficult to have a product and then hunt for customers.
Most of the conventional wisdom says to look at numbers and analytics when researching a niche, and that’s absolutely necessary. But another critical step most entrepreneurs miss is finding an ideal customer and building a customer profile.
9. Not having a solid marketing plan
When you set up an ecommerce website , and you know who your customers are and where you can find them, setting up your marketing plan should be easy.
Whatever your plan is, make sure it is in place from the time you launch. New opportunities will naturally arise, but your foundation, if strong, will allow for steady and scalable growth.
10. Not securing intellectual property
Intellectual property is the right you have to anything created as a result of your original idea.
Your business may have intellectual property (IP) you’ll want to protect from competitors. This includes copyrights, trademarks, patents, and trade secrets—in addition to business property such as equipment. If your IP is stolen (infringed on), international regulations can be used to take your case to court and defend your IP.
Intellectual property rights vary geographically. So you must protect your rights in accordance with the IPR laws of your country.
THE PROBLEM: YOUR BUSINESS ISN’T GROWING AS FAST AS IT SHOULD!
Your sales have stagnated or decreased, and you can’t figure out why. Discover what’s holding you back from achieving predictable sales growth in your business.
If you want to grow your business, you need a proven plan and framework. That’s what you get with the 2X Your Sales Discovery Session.
Want to learn about a formula for Predictable Growth that will put your business on a 90-day path to 2X Your Sales?