Being an entrepreneur is hard. One day you’re a hustler with a big dream. The next, you’re the CEO of your own company. It can be daunting. Most business owners who serve as presidents of their companies have often never served as CEOs of other companies, creating a disconnect of best practices and behaviors.
I have coached many entrepreneurs, and I have witnessed a pattern develop among those new to being their own boss. Here are some common mistakes I’ve seen first-time entrepreneurs make, so you don’t make them, too.
1. They look for top talent instead of fostering it.
Everyone wants the best of the best to work for them. The problem with this, however, lies in the inability to support such top talent.
Without the leadership experience needed to manage people with strong core skills, a new CEO can’t necessarily support the wants and needs of these top performers. These same employees are also expensive, and in the early stages of a business where infrastructure isn’t present, this creates a position of loss rather than growth.
The better angle is to learn how to foster talent rather than buy it.
In the earlier days of one of my own businesses, we were in need of professional photographers, but all the big names charged loads of money. So I got creative and instead looked for photographers who had an eye for design but didn’t have any business experience. Although they had not yet monetized their talents, they were good at what they did, which allowed me to secure incredible work at fractional costs.
2. They don’t create a clear revenue model.
Who in business doesn’t want to make money? Most entrepreneurs know what they are selling and how much it costs to make it, but creating a revenue model goes much further than learning to facilitate a transaction. The lifetime value of a customer needs to be defined, as does a plan for how to capture that value over time.
Many people think that once customers buy their products, they have to find new customers. Instead, you should focus on how to optimize and prolong the relationship with your current customers. This residual revenue helps you grow faster.
The key to creating a good revenue model is no different than a business plan; you need to forecast all your products in the next 10 years and facilitate the customer’s journey through doing business with you. Although the model will change with time, the map and direction is set.
3. They take new directions without testing the changes first.
So many times when new entrepreneurs fail, they often blame that failure on the price of their product or the messaging on their site. They say that changing direction so late in the game would have made it impossible to sustain growth.
If you feel your price is too high, don’t look for ways to lower your costs, shipping and everything in between, only then to offer a discount to customers who never had an issue with the price to begin with. Instead, lower your price to just bare cost and test if there is an increased demand for the product at that new price. Testing the new option should be done quickly and without any cost to you. If demand is up, then spend time and resources to facilitate a lower price.
Base changes on data, not assumptions.
4. They fall victim to trends rather than establishing authority.
Early in a business, getting attention and following what others are doing might seem like a good idea. It’s obviously worked for others and should work for you the same, right? The problem with following your competitors is that your customers will see you as a copycat rather than a company with a unique identity and purpose.
Don’t fall victim to trends. Stick with your message, direction and finding ways to bring attention to it. No great business ever started from the beginning with immediate appeal. In fact, a lot of today’s biggest businesses started as a niche product or service that then evolved to a simpler, more mass-accepted service.
Let these four warnings keep you from making the same mistakes most first-time entrepreneurs make. Invest the time to grow your business and plan for the future the right way.