When beginning a business, there are many pitfalls to avoid. An overwhelming process, entrepreneurs must create a sturdy foundation for their startup while also planning ahead. Although, as an entrepreneur you, want to forge forward with your bright idea, you will thank yourself later if you deliberately set in stone the details of your business.
In seeking to learn how to create successful startups, the Lassonde Entrepreneur Institute at the University of Utah provides regular Workshops in marketing, investments, accounting, legal consulting, and other topics. Experts presenting these topics have outlined the following eight mistakes that trip up early entrepreneurs and how you can avoid them:
1. Undervaluing your product
The most common mistake is undervaluing your product or service, said Anne Bastien, the program director at the Lassonde Entrepreneur Institute. When pricing your product, it is important to consider all costs within its production. Do research to see how other similar products are priced on the market, and then combine this knowledge with an evaluation of the cost of conception, production, and materials.
Especially in the case of services, entrepreneurs should avoid regularly discounting as a means of marketing. Whether premium or bargain, cater your product’s pricing toward the customer that best suits your revenue model and keep your prices consistent. It may take time for you to find the correct price point for your product. This is normal according to Bastien — “The act of entrepreneuring is the act of continually figuring it out,” she said.
2. Assuming you should raise venture capital
Raising venture capital may seem to be the next logical step once you have established your startup. But Dalton Wright, partner at KickStart Fund, cautioned against this assumption, prompting entrepreneurs to evaluate what is right for your business. “It is important to know yourself and know if there is a fit between who you are as a founder, what you are trying to accomplish with your startup, and what those investment funds’ objectives are,” he said.
Maintaining the control you have as a small-business owner may be more appealing to you than conforming to the expectations of investors. Whatever phase your startup is in, you should not assume that venture capital is the only way forward; consider the benefits and costs of business growth at a large scale.
3. Doing all your accounting yourself
With an entrepreneurial mindset, you may convince yourself that you are capable of handling all of your startup’s accounting needs without outside involvement. Ashley Christensen, tax manager at Tanner LLC, counterintuitively recommended that entrepreneurs seek the service of accountants to make their preliminary accounting more easeful. “Outsourcing can show you new methods and perspectives,” she said. Having a second pair of eyes check your work will ensure that your accounting is in order and secure for future development.
4. Waiting to involve a tax attorney
Similarly to Christensen, Todd Reece, partner at Ballad Spahr, recommended that entrepreneurs involve a tax attorney or CPA (certified public accountant) early to consider future financing. He described this preventative care as “growing little trees before big trees.” Creating a plan at the formation of your startup will give you clarity in how you approach your product and its legal protection. More importantly, verifying that your taxes are properly filed will help you avoid an accumulation of legal issues. “If you don’t do the right thing in the beginning, you may never get to your great idea,” he said.
5. Giving the same pitch to every investor
From the perspective of a venture capitalist, Wright expressed his interest in hearing startups’ stories. He recommended using a narrative-based pitch that established who you are, what you intend to become, and how your business will impact the market. Using evidence to support your narrative will establish why you are prepared for growth, where you are currently on your trajectory, and how your startup has an advantage over other startups.
A perfect pitch includes all of these details, while catering to the values of the investor. In researching investor’s interests, you may decide that their funds are not right for your business. “Save yourself time by doing the work to find aligned investors,” Wright said. Use the time saved giving poorly aimed pitches to create individualized approaches towards your ideal investors.
6. Only using social media for marketing
Although social media is one of the newest methods to push your startup’s marketing, it is not the only one to achieve engagement. Thad Kelling, the marketing and public relations director at the Lassonde Entrepreneur Institute, recommends using different methods to reach certain demographics of customers. Using social media in conjunction with email outreach, website maintenance, and search engine optimization will create a holistic approach toward marketing and engage a wider audience. “Always be speaking in different mediums,” he advised.
7. Using ‘napkin agreements’ to consolidate founder equity
Neglecting to establish founder equity can cause substantial issues for the future of your business. Reece explains the creation of a business with multiple founders as a marriage — “When founders come together it is like dating; the company formation is the honeymoon,” he said. It is important that you document expectations for one another legally during this time, in case of a future “divorce.”
Reece emphasized that unofficial statements, described as “napkin agreements,” will not be enough to legally protect your company. Creating contracts for you and your partners will ensure your business is both stable and sustainable.
8. Overproducing marketing content
Content is a principal aspect of digital marketing — “Content is the fuel to drive engagement and other digital media initiatives,” Kelling said. To spur engagement, you need to supply content with substance for customers to interact with. Kelling recommends that you use “quality over quantity” as a guideline for your approach towards content creation. Being systematic in how you plan content and engage with your audience will show customers that your business is reliable and consistent.