5 things that will kill your startup...and how to avoid them
by Adam Koppes, Iowa Farm Bureau Federation
Photo by Pixabay
Building a business is no easy task. There are no instruction manuals or step-by-step guidebooks on how to create a business. You, the entrepreneur, are literally creating a business from an idea. There are a handful of early mistakes I see entrepreneurs make time and time again that are easily avoidable. Pay attention to the five below, and you will be well on your way to building a successful business.
Go it alone – Many entrepreneurs try to build their business on their own and make common mistakes that could be avoided by working with good mentors. There are plenty of folks in your community who have embarked on the same adventure of building a business as you are on and now live to tell the tale. Seek them out. They know what it’s like to stand in your shoes. They have likely made some of the same mistakes that you are about to make, and odds are good that they will be willing to help when you have questions. Surround yourself will quality mentors who truly want to see you succeed.
Forget about your customers – Great, you have a good idea and you are ready to start your business! It’s easy to focus on your good idea and forget about the customers. Don’t forget that the only way to build a successful business is to have others, hopefully many others, think your idea is great too. Identify and talk to your potential customers. Ask them if they need what you are building. Ask them if they are willing to pay for your idea once your idea becomes a reality. Continue to fine tune your idea as you learn more from your customers’ feedback. Paying customers are the lifeblood of any business, after all.
Don’t know the financials – Too many entrepreneurs spend time building their product or service but fail to invest the time to learn the financial aspects of running a business like costs of sales and margins. It’s on you as the entrepreneur to build a business around your idea. You need to understand how much it will cost to build your product or provide your service. You should know how much cash you will need to begin building your first products or begin providing your service to the first customers. You need to understand how much cash you will need to keep the lights on as your business grows. If this is too challenging to figure out on your own, seek out help from others. Taking the time to fully understand the entire financial picture of your business upfront will pay off in the long run.
Turn to fast cash instead of smart capital – You are growing your business and you’re likely going to need some cash to get started. Entrepreneurs often turn to quick sources of cash like credit cards, mortgaging their homes or borrowing from friends and family. Those may not be your best options and could overextend you with a heavy debt very quickly. Be strategic about how you go about finding the cash you need to build your business, especially early on. What sources of capital are available? How do those sources align you best with your goals for your business? What sources available to you represent some additional intangible benefits beyond just capital? For example, business competitions could also provide mentorship and visibility for your business. Remember the axiom, “Smart money is better than dumb money is better than no money.”
Stop being scrappy – Entrepreneurs in the early stages of developing their businesses are incredible at finding solutions to tough problems, using inexpensive and creative tactics to gain their first customers, and working cheaply – we’ll call it “being scrappy.” Sometimes as entrepreneurs taste some success they start to lose their scrappiness and start to rest on their successes. Building a successful business is a continuous process. Entrepreneurs who remain fearless, determined, and persistent throughout the process create dynamic, strong businesses that are constantly evolving to meet new challenges. These entrepreneurs ultimately end up as Quality Mentors for the next You who comes along.
Adam Koppes is the Investment Manager for the Iowa Farm Bureau Federation and the Rural Vitality Funds. Adam sits on a number of private company Board of Directors in addition to overseeing all portfolio investments. Adam is also an active volunteer mentor with Iowa’s three accelerators: the Iowa Startup Accelerator, the Ag Startup Engine, and the Global Insurance Accelerator. Adam holds a B.B.A. in Finance from the University of Iowa’s Tippie School of Business, a J.D. from Drake University Law School, and was previously Vice President and CFO of Harrisvaccines, Inc. (now Merck Animal Health).