Setting up new business – do not assume anything!
In my practice I regularly advise entrepreneurs about how to start out properly and how to deal with particular issues that are likely to arise, and this piece by small business expert Rhonda Abrams could not have said some things better. Below are seven things that she says entrepreneurs should never say, and I agree:
I have come up with seven things I have heard entrepreneurs say over the years that make experienced entrepreneurs and investors wince.
1. “I have no competition.” OK, let’s get this one out of the way right now. You’ve got a novel product or innovative service and you think no one has ever done something like this before. But whatever you’re trying to sell, you (and investors) need to know that customers have a proven need or desire for what you’re selling — even if they currently settle for inferior solutions.
The first Apple iPod was groundbreaking, but it still competed with lower quality, less expensive MP3 players; people wanted music. When the first automobile hit the assembly line, it competed against horse and buggies; people needed transportation. If you truly don’t have any competition, there’s no market for what you’re selling — or you just don’t understand what your competition is.
2. “We don’t need a partnership agreement.” Lawyers have gotten rich as a result of people thinking this. A business partnership is like a marriage — at the beginning, it’s natural to think everything will always stay rosy. But people change and things happen. Sooner or later, most partnerships hit a rough patch.
Having a clear agreement makes it much easier (and cheaper) to deal with disagreements. Write up an agreement spelling out roles and responsibilities, ownership and how to split up or end the company if necessary.
3. “I can do everything myself.” Entrepreneurs are extremely self-sufficient — often too self-sufficient. But you can’t grow alone. Even if you’re not ready to hire employees, team up with consultants, advisers and strategic partners. They can balance your skill sets, give you guidance, serve as a sounding board and give your company more horsepower than you can achieve on your own.
4. “If I build a better product, customers will come.” Remember the old saying, “If you build a better mousetrap, the world will beat a path to your door?” Well, it’s only true if you have an effective marketing plan in place to let the world know about your mousetrap. Most entrepreneurs are driven by their desire to create a great product or service. But marketing — how you’re going to get and keep customers — is absolutely critical for small business success.
5. “There’s no need for lawyers.” No one likes having to use — and pay — attorneys. And let’s be honest, sometimes, lawyers seem to make simple agreements more complicated. But often, a few hundred dollars spent on a lawyer at the beginning of a business or an important deal can save you thousands of dollars and loads of headaches later on.
6. “I work smarter, not harder.” Sure, it’s definitely possible — and desirable — to work smarter. One way is to streamline your business processes so you spend less time on administrative tasks and repetitive work. Another is to go to the cloud, so you can manage things wherever you are, any time. But when most people hear someone say that they work smarter, not harder, it will probably be taken as an admission that you just work less.
7. “This is a sure thing; it can’t fail.” New ventures always come with a high degree of risk. Sophisticated investors and lenders will quickly shy away from anyone who doesn’t comprehend the risks involved with their new undertaking.
If you’re raising funds from friends and family, you need to make sure they understand there’s a real possibility they could lose their money — even though you’re going to work hard, and smart, to make sure you succeed.