17 August 2015
3 common mistakes made by small business founders and how to avoid them
On the Business & IP Centre Innovating for Growth programme, we have met more than two hundred and fifty business founders in London. We have worked with them to help their businesses grow. I'm responsible for helping them to make a great offer for their customers and deliver amazing products and services.
It's hard to start a business and these business founders never fail to inspire me. But I've noticed some common themes that can hold them back while they are trying to grow from a start-up to an established company. Here are three mistakes that business founders often make, and what you can do to avoid them.
1. Thinking like a craftsperson, not an entrepreneur
This is all about priorities. When you start a business, it’s often in order to sell a particular product or service you are passionate about: something you just couldn’t find anywhere else. You want to focus all your time and energy on crafting that idea. That’s great, but the priority of a business founder – or entrepreneur – is to create firm foundations for the business itself. In that sense, the business is the product: it’s the thing you are making.
As an entrepreneur, prioritise your time toward checking your riskiest assumptions and making sure your business can thrive. Is this the best market for me to sell in? Who are my first ten customers going to be? Can I establish the partnerships I need with suppliers or retailers? Can I compete on price as well as quality? Crafting your passion-product shouldn’t be the first thing you do. That should come when you’re ready, with all the other elements in place.
2. Not talking to customers about what they need and why it matters
So many business founders avoid talking directly to their customers or, if they do, they only pitch the things they want to sell. I'm not sure if this is because people are shy or over-confident, or perhaps a bit of both. But the gap between what your customers actually need and what you think they need is often huge. Non-delivery, under-delivery and over-delivery all cost you money and slow down growth.
This trick never fails: make ten appointments to meet ten customers and talk to them for an hour each about their desires, anxieties and unmet needs. Buy them a coffee near to where they work. You're not allowed to talk about yourself or your ideas, only about them and theirs. After just ten interviews, you'll have a level of insight you've never experienced before.
3. Valuing goodwill over cash
I often hear “It didn't make any money but we learned a lot, and the customers loved it”. Or, “We nearly broke even but at least the client is keen for us to do more”. I bet they are. But you should value cash over goodwill, not in the sense of trying to rip people off, but because profit is the measure of your business's success.
While you are testing your ideas and building your customer base, find ways to discover which customers will pay you what you are worth, and which ideas they are willing to pay for. If you discount or give away your product or service to early customers, you'll lose the chance to learn the only important lesson: is there a market for this? For a business founder, money is information.
About Christopher Pett
Christopher runs Makersco, a business growth agency working with small and medium sized business owners. Makersco helps clients to find deep customer insights, run fast product development projects and build useful management information systems. He also advises business owners on the Innovating for Growth programme at the British Library Business & IP Centre.
Want to grow your business? We can help. Apply for our Innovating for Growth programme today.