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
How To Turn Your Side Hustle Into A Full-Time Gig
It will be scary, but also incredibly rewarding.
Few people are lucky enough love their 9-to-5s, and more and more people are finding themselves doing something else on the side, either to add to their income or to feed their passion. Sometimes, those “side hustles” start to feel more and more like “the real thing,” and suddenly these people are dreaming about running a business of their own. Sound familiar? If you’re one of the thousands of people dreaming about turning your side hustle into a true business, you’re not alone.
Moving away from a steady, full-time position to being on your own is the scariest, yet most invigorating feeling in the world. I’ve found most people consider entrepreneurship either unattainable or, honesty, highly romanticised. The reality is that neither is correct. Being an entrepreneur is a ton of work, but it’s also completely possible.
1. Be clear and honest with yourself about when it’s time to make the jump
Giving up the benefits and security that come with a full-time job is scary, and sometimes unrealistic, but it’s also dangerous to keep waiting until the time “feels right.” Ask yourself exactly what you need to have before you can make your side gig your new reality. A good rule of thumb is to have enough savings to live for about six months without income, and/or with the income you already have from your side clients.You should also have a clear idea of who your potential clients might be and how to connect with them.
After taking care of the logistical considerations, try to avoid dragging your feet. According to the British Psychological Society, you’re 91 percent more likely to accomplish something if you give yourself a deadline. So do it! Hold yourself accountable. Maybe you’re not willing to stay at your current job beyond a certain date, or maybe there will be other indicators that will make you certain that it’s time to go.
If your current role isn’t fulfilling and the passion is gone, it may be the perfect catalyst for making the jump.
Both of my businesses came to fruition because of my own realisation that I wasn’t flourishing in my current roles. I wasn’t the best, I wasn’t seeing the success I wanted and instead of feeling defeated, I changed directions. For me, the clearest signal that it was time to leave was that I didn’t believe in the goals I was supposed to be working toward.
2. Before you quit, put the processes in place to help your side gig scale
Early on, business organization and strategizing is a huge component of success. You’ll need to limit stress and create as much efficiency and ease as possible in your daily systems. This could mean scheduling things carefully, or using free software to make your work more effective. I try to divide the week into days assigned to different businesses tasks. Try as best you can to not switch back and forth between your different focus areas within the same day. Going back and forth between tasks that are not related is inefficient and breaks focus. Give your brain a break and keep yourself on one straight road each day.
Digitising your work can help, too. According to Accenture, companies that use cloud collaboration tools with their teams improve productivity, have greater clarity about what’s going on in their business and save money. When you first start out, it can feel silly to keep documents in a shareable cloud space (like Google Drive, DropBox or whatever option you like best), but you need to have the structures in place so that you’re organised and ready for the time if/when you hire a team to support you. This is a good thing to play around with before you quit your main gig. Having the tools and processes you know work well for you ready to go when you make the switch can make ramp up time easier.
It’s long hours, it’s always being “on,” its wearing too many hats, but it’s also incredibly rewarding. So, how do you successfully turn your side project or passion into a prosperous business? What are the steps? We all want the “1, 2, 3 and voila, here it is, a company of our own,” but realistically, how can we make it happen? I can only speak to my own experience, failures or what I like to call “directional pivots” and successes. There have been a few true catalysts that have helped me turn my two side gigs into full-time gigs.
3. Work hard, and be humble
Your time is valuable, but as new entrepreneur you can’t treat it like currency. What I mean is, be prepared to put in lots of hours with minimal return. Initially, time may not correlate with financial success; this is an incredibly important mindset to remember. Your time isn’t money, yet. It’s groundwork. Building a side gig up from the ground requires wearing a lot of different hats. If you want your business to succeed, you have to be ready to play customer service rep, salesperson, individual contributor and HR.
If you’re feeling overwhelmed, break the work down further. Spend more time working on the day to day tasks, checking things off the to-do list. These are all working toward your big vision, but in small doable pieces rather than hefty overwhelming ones. Try not to consider any task “beneath you” and take some time to truly understand what goes into each part of your business.
You won’t have a boss telling you what’s right or wrong, so you’ll need to build a sense of self-accountability – one of the toughest parts of being an entrepreneur. Take notes about the challenges you face in each aspect of your business so that you’ll know what anyone you might hire will have to cope with. It’s your best chance to uncover important considerations and think about what resources might need to go where, down the line.
4. Surround yourself with smart people – even if you never plan to work with them
As much as entrepreneurship can be a solitary job, especially in the beginning, it’s vital to your success to remember how others can help you thrive. Invest your time in like-minded people. Take time to get to know others and their stories and create valuable relationships. So much of success is built from opportunities or inspiration from people we know.
Find people you connect with to talk about your ideas, write about your ideas online and build a community that empowers you. Take advantage of those around you who want to see you succeed. You’ll be surprised at how much people want to help!
The number of new startups and small businesses has dropped dramatically in recent years, nearing a 40-year low in 2016. The landscape has gotten tougher, which makes being an entrepreneur scarier. Turning a side hustle into the real thing is not easy, and I’d be lying if I said I loved every minute of it. But, just as with most other big decisions in life, there are always lessons to be learned no matter what happens. Be thoughtful, take smart risks and see where your “side hustle” can go.
This article was originally posted here on Entrepreneur.com.
How To Keep Big Ideas From Being Big Failures
Simple, Yet Effective Business Advice from Clients on Demand Founder, Russ Ruffino.
As an entrepreneur, it’s not uncommon to have big ideas. Ideas that, if worked properly, can take your business to higher levels.
Maybe you’ve came up with a way to enhance your products or services that would advance your company lightyears ahead of your competitors. Or perhaps you’ve thought up a new gadget or tool that, once developed and released, could potentially change the world as it exists today.
The problem with having these big ideas is that sometimes they fail. And they can fail hard.
Big Ideas Can Equal Big Failures
Take Coca-Cola, for instance. On April 23, 1985, this well-known company announced that it was changing its formula and releasing the “new Coke.” While its goal was to update a soft drink that had been 99 years in the making, it actually had the opposite effect. Consumers were mad. Real mad.
People had grown to know and love the taste of Coke, so the thought of it changing didn’t sit right with their taste buds. Many protested the company’s actions, creating such a stir that, in addition to being picked up by news sources everywhere on that day, it is still being talked about today.
Ultimately, Coke recovered and is still loved by many. However, it easily could have went the other way, potentially causing a revolt big enough to force them to close their doors.
So, what can you do to take your big ideas and turn them into wins versus risking them becoming huge failures capable of sinking your business? According to one entrepreneur, you simply do a numbers test.
The Numbers Test
In a People Stack Podcast, Russ Ruffino shares that his company, Clients on Demand, is on track to earn $20 million this year. This number is up from $4.5 million in 2016, just two short years ago, and Ruffino says that one thing has helped him reach this level of success is that he and his team use data to help them decide what to do. “We always run the numbers,” says Ruffino.
For instance, if your big idea is to recreate one of your current products, how much will it cost your company to make and test a prototype? What about manufacturing costs on a larger scale?
Think also about expenses related to marketing the updated product line and costs associated with creating enough buzz to get it to really sell. Put them all together and see what the numbers are telling you.
Sometimes New Isn’t Better
You may just find that newer isn’t always better. In fact, Ruffino says this is typically the case as, usually what he finds at Clients on Demand is they can typically “get to our income goals faster by just getting a little bit better at what we’re already doing.”
Benjamin P. Hardy, a former top writer for Medium.com in the self-improvement and entrepreneurship space, agrees and adds, “It doesn’t matter how good your strategy is, if you’re not skilled at what you do, that strategy won’t take you very far.”
That’s why Hardy recommends that you put yourself in challenging situations. “This is how you evolve,” he says. And be sure to follow your own path and keep your why’s in front of you along the way to remind you of what is driving you forward. Let these motivate you when times get tough.
It’s only natural to come up with big ideas in business. That’s what being an entrepreneur is about. Just make sure you follow your numbers and those big ideas can potentially become big successes.
Read next: 10 Business Ideas Ready To Launch!
6 Tips For Launching Your Global Brand
Here are six tips to help launch your business into exciting new markets.
Since sanctions ended, South African businesses have been spreading their wings and taking the plunge into global markets. South African brands are strong way beyond national borders and out of a list of 25 most valued African brands, 13 are South African, 11 are Nigerian and one is Kenyan.
But for businesses that have been restricted to domestic markets, making the transition to access global markets can present a number of challenges. Commonly, these include, but are no means limited to cultural differences, local tax laws, hr and payroll.
1. Keep you scope realistic
As a brand new to the global market, you are not going to be able to take advantage of every opportunity that comes your way. You are better served focusing your limited resources on markets that can provide a substantial customer base, cost efficiencies via less expensive labour and materials, or a business-friendly environment.
If an opportunity offers one or more of those advantages, it is worth pursuing. Above all, remain focused on your international business goals and do not go chasing after every opportunity that presents itself.
2. Build up a strong infrastructure with technology
Powerful personal technology allows regional teams or individuals to manage their workloads remotely from their laptop and smart phone.
Cloud technology allows overseas staff to work as effectively as if they were in the head office. Being able to provide service support at local times, in the customer’s own language gives you a huge edge on other small businesses and even allows you to compete for business from local competitors.
However, you’re dipping your toe into the international arena. Don’t buy expensive software systems that may not be needed until much later down the line. Look for simple cost-effective support for your in-country personnel. This strategy is much more cost efficient as you make your early transition into new markets.
You must also take into consideration that, as you grow globally, your data has the potential to be stored in more and more disparate places. Unifying your data stores and managing a globally standardized policy of data storage will keep you secure as your business expands.
3. Understand the obstacles and opportunities of overseas regulation
For companies looking to expand into European markets, the General Data Protection Regulations (GDPR) will need to be taken into consideration. These data security regulations put very specific duties upon any company that holds the data of EU citizens. This includes EU customers and any local EU staff you may choose to engage to do work for you on the ground.
There are also many options available to investors looking to do business in overseas markets. Many countries are excited about receiving foreign investment and have tax breaks and structures in place to make it easy for companies to enter the market. Having an understanding of these opportunities and the benefits you can help yield the direction of your investment.
4. Take advantage of foreign expertise
There’s no need to waste time learning the language, culture and legislative complexities in every country. Work smart and pick up experts to enrich your talent pool and give you a head start in global markets. Once you’re established, you can roll out a more in-depth training programme.
Picking up local talent is the quickest way to get unlock knowledge and understanding of the local business environment. Having boots on the ground, even one pair, can give you a huge edge in many markets, and help establish your international business.
5. Get a grip on paying staff overseas
The most straightforward way to enter a new country is to establish a commercial presence inside its borders by registering with applicable authorities, acquiring a local taxpayer ID, and putting overseas employees on an in-country payroll.
This option obviously comes with a significant upfront cost and may not be suitable for all businesses. However, there are many options available, including secondment to allied business interest, immigration or local affiliates. Part of the challenge in launching your market overseas is establishing a cohesive HR structure to ensure smooth running of your business all over the world.
On average, you need 14 pieces of employee information to process global payroll. These include employee name, age, pay scale, tax code, bank details and so on. More data means more complexity. In addition, you have to consider any regional reporting obligations you may face.
This is why France has the most complex payroll in the world. As well as needing 16 separate pieces of data to even pay someone in France, the French government demands much more detailed reporting than other countries.
Some payrolls change on a regular basis, so you need to keep up. Take Italy, for example. Collective Labour Agreements change frequently, seemingly randomly and are all unique. Contribution amounts, legal work hours, overtime rules and the number of pay cheques per year all vary according to CLAs. If that wasn’t complex enough, CLAs are renewed and renegotiated every 4 or 5 years. 25% of them are renewed annually. This means that pay runs can potentially differ massively year after year.
Getting a handle on these complex aspects of payroll compliance are essential if you want to start expanding into global markets with boots on the ground.
6. Immerse yourself in the culture
Every culture has a different approach to doing business. In order to cultivate lasting relationships with business partners and clients, you need to walk a mile in their shoes and embrace the way they do things.
For instance, the formality of address is a big consideration when meeting people for the first time. Do they prefer titles and surnames or is being on the first-name basis acceptable? While it can vary across organisations, Asian countries such as South Korea, China, and Singapore tend to use formal “Mr./Ms. Surname,” while Americans and Canadians tend to use first names.
The concept of punctuality can also differ between cultures in an international business environment. Different ideas of what constitutes being “on time” can often lead to misunderstandings or negative cultural perceptions.
For example, where an American may arrive at a meeting a few minutes early, an Italian or Mexican colleague may arrive several minutes after the scheduled start-time and still be considered “on time.”
Local companies looking to maintain growth rates will often expand into adjacent activities or verticals to avoid the natural limitation that comes with a singular focus in one geographic market.
Going global is an alternative that can allow you to retain your specialism and grow at the same time. Specialist companies exposed to large markets are valued highly by investors. So maybe it’s time your business made the transition into the global marketplace.
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