Here are five expensive mistakes to look out for, along with expert advice on how to avoid them.
1. Expensive mistake: Hiring the wrong team
Irfan Pardesi and Hina Kassam, founders of ACM Gold, made this mistake a few years into their business, once it was already hitting a turnover of hundreds of millions of rands.
“We thought it was time to bring in an experienced management team, and we hired from top-tier investment companies,” says Pardesi.
“What we hadn’t taken into account was the fact that large corporates operate differently from entrepreneurial organisations, and that top managers in particular will implement the structures that worked for them before. The whole culture of our organisation started shifting. It was an extremely expensive mistake to make, and took us months to rectify. Today we’ve learnt: Always hire for a cultural fit, whether you’re established or a start-up. Attitude is everything.”
Bill Aulet, managing director of the Martin Trust Center for MIT Entrepreneurship and author of Disciplined Entrepreneurship, says choosing the wrong team is the single costliest error entrepreneurs make, resulting in not only lost income and time but depleted morale.
“Choosing who to hire and work with in a start-up is like playing sports at school: You can pick your friends and play for them, but if you want to be good and continue to be on the field, you have to carefully pick your team,” he explains.
It’s crucial to choose people with varying skill sets. However, Aulet says: “Much like a great sports team, they must also share some common values and the ability to trust each other in tough situations. That’s why past experience working with your co-founders and early employees in stressful times is much more important than being friends.”
Be like this guy
When Justin Stanford first launched ESET Southern Africa, he did it out of a garage. His very first hire was an intern, Carey van Vlaanderen, and together they pretended the company was much bigger than it actually was. Today, van Vlaanderen is CEO of the company, while Stanford heads up the holding company, 4Di Group. That first hire made all the difference, particularly because they both cared about the business and its growth.
2. Expensive mistake: Bad pricing
“My single biggest mistake with my first business – a handbag company – was in pricing,” says Sarah Shaw, CEO of consulting firm, Entreprenette.
“I didn’t understand that with any kind of clothing or accessories, you have to calculate the square footage of fabric, including the wasted fabric,” Shaw explains. Its a common misstep for product manufacturers. Without an accurate understanding of her costs, she couldn’t price her products correctly.
“I thought you sort of doubled everything, but that’s not correct,” she says. “It’s a 2,5-times mark-up from cost to wholesale, which covers marketing, the showroom fee, all your expenses.”
By the end of her first two years in business, Shaw had put in more than $100 000 of her own money. Thanks to perseverance and media buzz (celebrities loved her bags), she ended up with $1 million in annual revenue and attracted investors, but she couldn’t recover from the downturn after 9/11 and closed the business in 2002.
Home Truth: Remember the price you charge must take into account all the labour at the market price of the labour. According to Bertie du Plessis, author of Your Business Nightmares and How to Wake Up, when you’re selling services for which you need to invoice in order to get paid, you must ensure your price includes everything that goes into delivering the service and getting the money into your bank account. This is where many new business owners and SMEs fail. The price you ask can’t take into account only the time spent executing the task.
How many different steps are required?
Let’s take something as simple as a logo design:
- First market your service
- Then you will get a brief from your client
- You have to travel to the client and back to your studio again
- You have to offer a first concept or, usually, more than one concept
- The client will propose changes
- You apply these and resubmit the concept
- The client will make alterations for the last time, which you will implement
- Now you have to invoice the client
- You have to follow up on the invoice
- You have to make sure the money is paid.
When you quote a client, have you taken each and every step into account, or is the job actually costing you money?
3. Expensive mistake: Waiting for perfect when good will do
Be like this guy
When Greg Schneider launched his online job referral site, Hiring Bounty, he wasn’t inventing something new – he was formalising what people were already doing.
“People were already tweeting jobs, or posting them on Facebook. Referrals have become an important part of the hiring process. We just formalised the system. Busy people aren’t checking their social media feeds 24/7, which means a lot is missed. Through our platform we’ve pulled everyone together – you can look for jobs, refer your friends and colleagues, and advertise jobs. When someone is placed, everyone receives a bounty – it’s that simple.”
To get his business off the ground, Schneider started by working on the idea, and then launching an MVP (minimal viable product), which was literally the bare bones of his idea.
“Once I had the MVP I could then add the bells and whistles based on my experiences of what the market actually wants (versus what I thought it wanted), how to market each job, how much a bounty should be, how to source candidates and so on.”
Of course, getting Hiring Bounty off the ground took much longer than expected, because the lead time for actually hiring people was longer than Schneider had originally anticipated.
“On top of that, the revenue model only pays out three months after a successful placement, which lengthens the whole process. I spent longer setting the business up than I thought I would, and it’s a big lesson to learn.”
If Schneider had waited to get his product off the ground instead of starting with an MVP, it would have taken even longer – and might not have happened at all.
Lesson to learn
When you’ve got a killer idea, it’s natural to want to introduce it to the world in a fully formed state. But it doesn’t take a chartered accountant to figure out that the longer you take to launch, the longer you go without money coming in.
“This is a common mistake, especially for tech people,” says Drew Williams, co-author of Feed the Startup Beast. “Many want to build an app and won’t let it go until it’s perfect, but then you take too long and spend too much.” Specifically, this error will probably leave you with no ‘runway’ – the cash you’ll need to sustain you as you’re trying to get your product off the ground once it’s ready, but before you have customers.
“You need to come up with the simplest, basic version of your product that gets the idea across and try to find someone you can sell it to,” Williams says.
“Find one or two clients who are willing to do a pilot where you build, test and iterate it. Inevitably, your product will be different than what you expect, and then you build it. If you get a real, live client, you create a better product in a very cost-effective way.”
4. Expensive mistake: Skimping on lawyers
Kerryne Krause-Neufeldt launched her first business when she was 23. She was young, full of energy and passion and had a knack for making things happen.
Those same traits had their downside as well though: She did things too fast, had no staff discipline and didn’t look at the fine print. The result? Industrial sabotage. Krause-Neufeldt lost everything, and had to start painstakingly from the beginning, with no money in the bank, and having lost the agency for Karen Hertzog Oxigenated Creams, a local market she had personally grown.
Today, it’s a lesson the founder of I-Slices Manufacturing has taken to heart, and she’s now the first to admit that paying an expert to look over every contract is worth the expense.
“Dot every ‘i’ and cross every ‘t’. My reps were able to conspire with my investors to take the agency because I hadn’t carefully evaluated the original contract. It wasn’t a good contract and I had no idea. I was desperate for cash and never questioned it until it was too late.”
Lesson to learn
Tobin Booth, CEO of Blue Oak Energy, an engineering and construction firm for solar photovoltaic power systems regrets skimping on legal fees in his company’s infancy.
“If I could do some of the early stuff over, it would have been to pay a few thousand to have a lawyer write up a proper contract,” he says. “I didn’t have the right attorney who really understood my business.”
A few early customers simply didn’t pay up, so Booth tried to move matters to a collections agency. “I found out that there were some clauses [in the contract] that didn’t allow me to collect on legal fees,” says Booth.
Sarah Shaw, of Entreprenette, meanwhile, unknowingly signed a contract that gave her handbag company the trademark to her name, so when investors came in, her name belonged to them. “I can’t use my own name in business again,” she says. “I wish I had hired a lawyer to watch out for me.”
5. Expensive mistake: Being cheap about marketing
After launching Traklight, Mary Juetten found that her website wasn’t indexed properly for search engines.
“No one was finding us,” she recalls. So she decided to invest in an inbound marketing programme. “That initial payment is scary for a small company, but we don’t have to pay developers to make changes to our site, and they do email marketing and CRM,” she explains. So far it’s working: In April 2013 the Traklight site recorded just 100 visits per month; by the end of the year it was getting 2 800.
How much does Juetten estimate she lost early on between the missteps in software development and inbound marketing? “As far as money thrown away – actual cheques written for useless things – that would be in the tens of thousands,” she admits.
“As far as lost time [and] products not developed on time, it’s in the hundreds of thousands. We would be much further ahead now.”
In the end, the best way to avoid costly mistakes is obvious: Save and spend wisely. “Keep spending really, really tight,” Drew Williams advises.
“Leverage everything you can and give yourself as long a runway as possible. You’re going to need it.”
Be like this guy
Mongezi Mtati launched the marketing campaign for his start-up, Wordstart, in a cheeky and unusual way. He and a friend stood on two busy intersections in Joburg and gave away suckers and pamphlets begging for two spare tickets to the upcoming Ramstein concert.
The pamphlets included a press release introducing Wordstart and what the company does (which is word-of-mouth marketing).
It was a cheeky, irreverent move, but Mtati wanted to prove that word-of-mouth marketing has legs, provided you give people something to talk about, laugh about and share.
“We got a lot of attention with our marketing stunt. People were videoing us and posting the clips, the media noticed us, and at the end Ramstein actually heard about the stunt and invited us to the concert as their guests.”
The start-up had proven two key points: Word-of-mouth marketing works, and it pays to market your own brand.
“We suddenly had two important case studies. First, we could show potential clients what we could do. We weren’t just pitching an idea; we were pitching a successful campaign. And secondly, we had proven to ourselves how important it is to market your own brand. A lot of businesses in this space forget that. They concentrate on their client’s brands, but they forget they need to also build their own brand as well.”
Related: Building A Brand On A Budget
4 Tips To Secure Funding For Your Start-up
Here are 4 tips to help you secure funding for your start-up.
Entrepreneurs seek to create new and ingenious ideas. Successful business owners are adept at looking at things in new and interesting ways. Their creativity fuels everything they do. Blazing through the initial steps of opening your own start-up can seem like a breeze if you’re endowed with this creative mojo, but you still may find yourself stuck at the very last step of starting your business.
Finding funding is undoubtedly the most difficult part of starting a business, and securing it requires the most creativity of all. Still, you can only stretch your creativity so far. Luckily, there are a few ways you can improve your chances of getting the money you need, regardless of whether you decide to attract angel investors or venture capitalists, or if you decide to apply for small business loans and grants.
Here are 4 tips to help you secure funding for your start-up:
1. Seek alternative funding opportunities
Before taking out a massive bank loan, consider these other funding options:
The vast majority of entrepreneurs either use their own funds to start their business or borrow money from friends and family. According to Forbes, 90% of start-ups fail, with 25% of them failing within their first year of operation. Due to this rate of failure, if it really is impossible for you to attract investors or secure venture capital, it is still best to avoid putting up your own money. Before draining your personal savings account, look into other options, such as crowdfunding. Research small business grants as well, as these can help cover gaps in funding.
2. Write a top-of-the-line business plan
If you’re interested in attracting investors, you’ll need a solid business plan to lure them in. Regardless of how wonderful your idea is, you must communicate that idea effectively and back up your claims with thorough research. A tightly organised business plan has the ability to assure investors of your industry know-how. It will give them a picture of how you plan to run your business and how accurately you can assess and address risks.
An entrepreneur who has a business plan with a punchy executive summary and a precise market analysis in hand is more likely to attract shrewd investors than one with only an inspired (and undeveloped) idea.
Related: Business Plan Format Guide
3. Network, network, network
The absolute best way to find investors is to network. Generally, you never want to cold call investors with your business ideas. You want to build relationships naturally with those in your industry and in your local community. Talk with other business leaders and go to local events. Offer to help other entrepreneurs and established business owners. They may return the favour by introducing you to reliable angel investors or they may steer you to a venture capital firm that helped launch their start-up. They may even offer to pitch in some of their own cash, if they really take to your idea.
Moreover, to make sure your networking efforts are effective, try to pinpoint the audience who would be most interested in your idea.
“Network selectively,” advises American author and entrepreneur, Steve Pavlina. “Take the time to build a profile of your ideal customers, and target your networking activities to reach them. Speak to those who are already predisposed to want what you offer.”
Building connections is a vital part of creating your business. You’ll need to build new ones and strengthen existing ones, not only to get the funding you need in the short term, but also to survive as a business in the long term.
4. Be prepared to compromise
Asking for funding for your startup means experiencing failure time and time again. Most of the investors you’ll encounter will pass on your idea. You shouldn’t take this to heart. It’s all a part of the process. You may find that in order to get the funding you need you’ll have to give a small piece of the business over to an angel investor.
Your first crowdfunding effort may fall short, and you might have to incorporate feedback from backers and implement changes to the core of your idea to crowdfund successfully the next go around. Don’t be too rigid with your vision. If you’re willing to make some slight changes, you could have a much better shot at landing a deal.
Securing funding for your start-up is no easy task, but it is certainly not one you have to do alone. Enlist the help of friends, family, and business associates to help you craft a superb business plan, meet other entrepreneurs and investors, and make revisions to your idea. Use their input to help you find other ways to fund your start-up, such as small business grants and crowdfunding. Use these 4 tips for securing funding for your start-up, continue researching your target market and refining the way you approach investors. Without a shadow of a doubt, if you’re willing to seek the advice of others and compromise when necessary, you’ll find a way to fund your start-up.
7 Strategies For Development As An Entrepreneur
What follows are seven simplified yet key strategies to develop yourself as an entrepreneur which are a hybrid of the authors’ practical experience and what he has learnt from very successful entrepreneurs, coaches, and consultants over several years.
What lies behind you and what lies in front of you are tiny matters compared to what lies inside of you” – Ralph Waldo Emmerson
I am an entrepreneur, I surround myself with business minded people, I am privileged enough to be mentored by great leaders. I speak to visionaries, I write about them and learn from them.
What follows are seven simplified yet key strategies to develop yourself as an entrepreneur which are a hybrid of the authors’ practical experience and what he has learnt from very successful entrepreneurs, coaches, and consultants over several years.
A wise man once told me, “A higher level of consciousness does not mean you are better than anybody else it just means your mind sees from a higher vantage point and therefore you see clearer than most.”
Those wise words lead us into explaining the first strategy:
1. Expand your consciousness
Simply put your consciousness is nothing but what you are aware of. By increasing what you are aware of through experience, study and honest self-reflection and by inquiring deeply into every aspect of your business as to increase the quality of your awareness you are enhancing the quality of your experience as an entrepreneur.
The second strategy often referred to as priming or framing is commonly used by successful entrepreneurs:
2. Priming or framing
Priming or framing is creating a positive mindset first thing in the morning which builds mental strength and the capacity to face the day with a very good attitude. This is, in essence, done by creating a morning ritual or habit for yourself which can take whatever form you prefer, as long as the outcome of it is a stronger and better you.
Some prefer meditation and/or prayer. Others repeat affirmations in the mirror. Some take the quiet early morning hours as the opportune time to read and learn more about their craft. Exercise is another way to start your day in a positive way. See this exercise of Priming or framing as an investment earning compound interest over a period of time.
Google whom any famous leader or entrepreneurs’ mentor was and a name or many will most certainly pop up. Nelson Mandela’s’ mentor was Oliver Tambo, Warren Buffet holds the Dale Carnegie certificate proudly displayed on his office wall in high regard, the famous investor Ray Dalio is still coached by Tony Robbins.
That explains why you should:
3. Be willing to be mentored
When I facilitate training or a coaching session a common objection to being mentored is: “ Yes , but I do not know anyone that could mentor me.”
Honestly, what a lame excuse. Most servant leaders understand that it is part of their duty to society by leaving other servant leaders and/or entrepreneurs behind and are actually just waiting for your call.
It is really as simple as that, make your list of people that you look up to and want to be mentored by and call them, sincerely tell them how much you admire them and ask for guidance and mentorship. To those whom knock sincerely a door will be opened.
There is no such thing as a “self-made man” as everyone has received some help in some shape or form along their journey of entrepreneurship.
It is much harder to give up on something that you really have worked hard for over a long period of time as opposed to something that you have approached with half-hearted intent and little effort.
4. Hard work compounded by smart work
Hard work is not only something that you should do to stay ahead of the competition but a necessity in order to build resilience.
When you have lost sight of your purpose and vision as an entrepreneur decision making becomes drastically harder, your morale might be affected negatively, and your bank balance might suffer as a consequence.
5. Ensure that you have constancy of purpose and a clear Vision
A very effective way of priming and/or framing is to remind yourself of your purpose and vision every morning. Make your Vision and purpose visual by displaying it clearly at your office. An entrepreneur cannot talk regularly nor enthusiastically enough about his or her vision and purpose. When you have not wholeheartedly bought into a vision and purpose how can you expect your team to?
Those whom embody servant leadership of which the founder of Sorbet, Ian Fuhr is a prime example know that unconditional giving as a principle not only builds character but empowers others so that we can not only grow as businesses but as people.
That is the reason for:
6. Giving without expecting anything in return
When you give of yourself unconditionally you have a true servant heart and your clients will not only be loyal, but they will love you in general. Giving unconditionally feels good and receiving unconditionally places no burden on you and creates a wonderful and vibrant work atmosphere, generally speaking.
When you only take a stand on your principles and values during good times yet allow them to crumble in the face of challenging times “your house is divided and cannot stand”. Your principles and values must become ingrained practises and not just frivolous words.
Taking the aforementioned into account:
7. Have non-negotiable principles and values that you live by
As an example, if when respect is a non-negotiable value that you live by you will refrain from losing emotional control and will be willing to walk away from a conversation where someone dis-respects you.
7 Ways A Tech Start-up Is Like Starting A Band
Building a successful tech start-up and putting together a band are more similar than most entrepreneurs and musicians would like to admit.
Building a successful tech start-up and putting together a band are more similar than most entrepreneurs and musicians would like to admit. The truth is that both of them require a lot of hard work, sleepless nights, self-induced poverty and other big sacrifices. Like a startup, says Alex Grossi of Quiet Riot:
“The process that once entailed a songwriter or record label spending countless hours and dollars recording, manufacturing and marketing music is gone. It is now up to the artist to figure out what the next move is in the industry.”
Succeeding in the music or the business worlds can also bring a number of great benefits. Becoming a successful entrepreneur can open up doors to new, more fulfilling projects and rewards. Moreover, you will have more control over your future ventures and have a big role in the success of any project you work on.
Visualising your tech start-up as a band can help you get creative, and may even help catapult your company to success. Because of this, I’ve put together a list of seven ways a tech start-up is like putting together a band, so you can put on your inspirational hat and make your company more than just a one-hit-wonder.
1. Be honest with your skill set
The first thing you need to consider when starting a band is the instrument you can play and at what level. The very same can be said for tech start-ups. Technology now influences virtually every single part of modern society, so you need to consider the skills you have available and determine how you can use them to create a good product.
“The idea of a rock band is selling this dream of the ultimate creative journey and endless freedoms. Yet, things like showing up on time, knowing your role (and respecting the roles of others!), disciplined practice, marketing &; promotion are as much part of the band experience as getting onstage and rocking the house each night.
I learned many years ago that just because I was successful in music didn’t qualify me to be an expert in other fields, too. My successes came as a result of discovering my passion and honing in on skills that came natural to me. That led to relationships that opened doors for my success. We’ve all been blessed with certain skills, talents, and abilities and having success (and happiness!) usually lies with our passion allowing us to be the best we can be with those abilities in a chosen field.”
The good thing is that you don’t only have to focus on your particular expertise. Each band member offers a valuable set of skills that contribute to the quality of the music. In this case, your band members will be your start-up team. Take a look at what each team member brings to the table and make sure you are applying them to their full potential.
2. You need to be driven by passion
Just because you love music doesn’t mean making music will just happen, and in the words of Phil X the guitar player of Bon Jovi:
“There are no short cuts. You have to kick your own ass before you kick everyone else’s.”
Once you have identified your passion, the next step is acquiring the skills to realise your dream. This may seem tricky at first, but try to get creative and figure out a way to combine your skills and passions to build a valuable business.
If you are preparing to launch a tech start-up, you should definitely find something you are passionate about. Not only will this make your work easier, but you will always find motivation to give your best, even on bad days. Moreover, you may find that working on something that you really love will actually bring you joy and work as extra fuel when your tank is running low.
3. Put together a stellar lineup
If you were building a band and you knew the best drummers and bass players in town, you would definitely reach out and try to recruit them, right? Well, the same thing goes for your tech start-up. You should review all your options and scour your connections until you find the combination that best suits your vision.
Now, remember that putting together a killer lineup isn’t only about finding the best of the best. You also need to find a balance and make sure that the talent you bring on board will compliment the whole team. If you have two great candidates, but you think they won’t work well together, you are better off choosing the one that works best with the rest of your ensemble.
4. Practice makes perfect
One of the most important aspects of having a band is practicing frequently. Musicians already have a high level of dexterity, but that doesn’t mean the band will sound good right off the bat. By practicing together, you can make sure everyone is on the same page and organise your act.
As a start-up, the equivalent of having band practice is working as a team. Although everyone learned the skills needed to carry out their specific tasks separately, you also need to work as a team to make sure everyone is in sync.
A good way to do this is to give everyone individual tasks, and also assign at least one communal task a week. This will give you time to sit down with your team members, gauge that everyone is on the same page, and clear the air if they are not.
5. Networking is the KEY
Any successful musician will tell you that networking is as important as the quality of your music. Networking with the right people can help you land gigs, get your music to the right listeners, and make a name for yourself by rubbing elbows with established industry giants.
The reason why I say that networking is KEY to any tech start-up is because it’s what will enable you to Keep Expanding Yourself. Building connections with established tech companies and influencers can help you get your name out there and land significant contracts. Not only this, you will also be able to gain valuable insights from the people that already thrive in your industry.
6. Find your audience
Most bands already have a good idea of who their followers are or will be, and they focus on getting gigs in venues that will attract these fans. This makes their promotion easier and increases the chances of hosting a successful event. Not only this, in order to adapt to your audience’s changing needs and preferences, you must be ready to diversify wherever necessary.
Marq Torien from BulletBoys put it beautifully “Always know at some point you have to reinvent yourself in your music career. It’s a must, if you want to keep your audience and fans who love what you or your group does. All the great musicians and artists have done so at some point in their careers. Don’t have fear of diversity”. Marq stayed true to his words as their highly anticipated March 2018 Frontiers Records release “From Out of The Skies ” is truly one of their most diverse album to date.
Although it’s a bit more complicated, you should identify your start-up’s perfect clientele in the form of fictional buyer personas. This requires a good amount of market research, but it will give you essential information about your potential customer base. You’ll be able to create marketing campaigns that speak directly to your buyer personas through the channels they use the most as well as diversify based on changes in consumer demand.
7. Use all available promotion channels
It’s no secret that the most popular bands are featured on radio, television, the internet, and just about any other channel you can imagine. Besides boosting their collective egos, bands tend to take advantage of all promotional channels they have available because it guarantees it will extend their reach as far as possible.
You should also consider all the marketing channels you have available and take advantage of every single one of them. Now, if you start-up is in its early stages, you may not be able to invest huge amounts into advertising. That being said, you can always get creative and use free marketing channels such as social media platforms, blogs, and YouTube videos.
Launching a tech start-up may not sound as glamorous as being in a band, but they are more similar than you may think. Always remember a successful tech start-up requires patience, a lot of behind-the-scenes work, the ability to adapt to change, and a well-organised team. Follow the tips outlined above to pave your way to success and enjoy the perks that come with it!
This article was originally posted here on Entrepreneur.com.
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