While speaking at Entrepreneur magazine’s Growth Conference in Atlanta this week, I spoke to small business owners in a talk I’m calling 3 Weeks to Startup after the book that I co-authored. I went over the basic assumptions behind starting a business in three weeks – that it’s a tight schedule, and very quick, but doable with tools available online today – and I shared some of my favorite common startup mistakes to avoid.
Here are the top 3:
1. Starting a business with no real customer need.
You know the type: all businesses should be built on what the founder wants to do, but that has to be tempered with consideration for what people need, want, and want to pay for. And the image on the slide is the Apple Newton, which is a good example. There was a need – the success of the Palm Pilot four years later proved it – but the Newton didn’t meet it. Don’t just count on pride and persistence, make sure there’s a need for what you’re selling.
2. Running out of cash.
Starting costs are predictable, they depend on what you need to buy, the early expenses, your marketing costs, your strategy, resources, and so on. Some cash flow dynamics are predictable. For example, you need to know ahead of time if you’re going to have to wait for customers to pay you after receiving the goods or services you give them. You need to know if you have to stock a lot of inventory.
Cash flow is easiest to understand if you lay it out into rows and columns. It isn’t as simple as profits, because profits are an accounting concept that takes liberties with the timing of sales, costs, and expenses. A good cash flow plan will focus on the money, when you get the checks to deposit, and when you write the checks, regardless of the technical timing of sales and such you need in accounting.
3. Failing to plan.
There’s so much uncertainty in any business, now and since forever, that it’s just foolish to not break that all into a plan that puts it into perspective. It doesn’t matter that a plan will change – and it will – because just getting started with the planning helps you understand all the factors involved. And when you have a plan, you start immediately to review and revise and track results, so having the plan makes it easier to correct it as needed. Plan, and keep that plan alive.