This article was created as a stream of consciousness regarding “gotchas” or pitfalls that I have seen trap many entrepreneurs in the past. They are not listed in any particular order, and most seem obvious when read. As the title of this article says, most are avoidable. None-the-less, entrepreneurs, especially first-time entrepreneurs often miss them and then spend a significant amount of time and money recovering from them – if they can.
Probably the fundamental reason that most occur is the very nature of an entrepreneur: They are visionaries, focused on their idea, envisioning their future success. Without that mindset, they probably would have never started on the new business journey. Also, if they objectively examined the odds of success for startups, they would probably be discouraged enough not to make the plunge. Thankfully, most are not “burdened” with reality and DO take the plunge. Perhaps it would be best that a would-be entrepreneur not read this article until they make the commitment but then immediately read it after they have started! As another recommendation, entrepreneurs should read this article every Monday morning to help remind them of what NOT to do!
The list is, by no means complete; each entrepreneur will discover their own set of issues that become clear only in hindsight. The previous article, 3.010005 “Do Differently,” captures many of these issues experienced by myself and others that I have worked with. Many of the items listed in that article are a direct result of the gotchas listed below. I have found that the majority of items listed apply to all businesses whether they are product or service companies, focused on business-to-business or business-to-consumer, or one-shot or recurring revenue models. Interestingly, most also apply to non-profit organizations as well; substituting donations for revenue and target recipients for customers.
- They don’t know what they don’t know and are too optimistic about their business to ask and listen.
- Grossly underestimate the effort to find and secure customers.
- Do not realize that revenue is always delayed, but expenses occur right on time.
- Worry about spending money, but not their time (which is their most limiting resource).
- Do not focus on a single market or application for fear of missing a market segment.
- Jump from task to task without thinking how they can leverage others to help them.
- Grossly underestimate the time and effort to raise money.
- Think they can raise money based on their idea only.
- Do not spend any or adequate time on customer discovery and pivot or respond accordingly.
- Rely on the opinions of friends who want to be supportive and do not provide honest feedback.
- Hire their friends and relatives, which often do not work out, making family gatherings tough.
- Focus on the development of their product or service while neglecting other business elements.
- Grossly underestimate the length of time and the effort associated with the sales cycle.
- Attempt to obtain profitable revenue before they have referenceable and scalable revenue.
- Do not rely on or listen to objective advisors who have applicable experience.
- Do not think through if their business can ever scale, should it, and what will be required.
- Do not spend adequate time with outsource groups (developers or marketing companies) to guide their efforts.
- Underestimate the power of incumbency and the prospect’s unwillingness to change.
- Discount competitors’ capabilities, neglecting to plan for what they might do next.
- Do not understand their true cost of building and placing their product or service with customers.
- Do not understand that their timing and urgency are not necessarily the same as their prospect’s.
- Reacting instead of responding to issues (focus on apparently urgent instead of important tasks).
- Do not differentiate between what they “could” do versus what they “should” do.
- Have not developed short (12 word) and memorable elevator pitches and messages that resonate.
- Do not realize that if a prospect “doesn’t get it” it’s because they “didn’t give it.”
- They focus on what they want to say instead of what their audience wants to hear.
- Create presentations that are too long and too wordy and not focused on the particular audience.
- Focused too much on the creation of their website and not enough on how to drive people to it.
- Do not understand what they plan to offer: A feature, a product, or the basis of a company.
- They reach the wrong conclusions based on their initial “Rolodex” customers instead of “anonymous” customers.
- Attempt to hire sales reps before they have the necessary tools and materials available to support them.
- Do not focus on the investor 3Rs: Risk, Reward, and Relationship.
- Do not understand that they want investors to put money INTO the company, while investors want to know how they will get their money OUT and when.
The length of the list may be scary but is probably best captured by number 23, differentiating between what “should” be done versus what “could” be done. Following that simple statement will avoid most of the gotchas listed. As one final thought that every entrepreneur needs to keep in mind that there will be obstacles directly in front of you every step of the way. Keep your vision clearly in mind but do not forget to look at the ground along the path.