I spend a good bit of time doing research, staying up-to-date on the latest happenings, reading about new studies, finding and reading new books…all in all it’s time well spent. However, I come across a lot of “to do” type books and lists that walk you through things step-by-step. There’s definitely a place for those, but what I rarely see is a “not to do” list…
So here it is, my personal not to do list: 5 things not to do when starting a business
#1 – Create a Product You Don’t Know How to Sell – As many a start-up company can tell you, this is a very bad idea. Twitter would be a great example….brilliant product, but no clear means of making money. They have been and continue to live on outside investments, and likely will for years to come 🙁
When you begin contemplating starting a new business, follow this one piece of advice and you will go far: Find a niche about which you are passionate, identify a need within the niche, and then fill that need. It really is that simple.
Sure, the size of the niche and the need are important, but when you start by identifying a niche and a need, knowing how to monetize that becomes so much easier.
#2 – Write a Business Plan – Never, ever write a business plan. What would be the point? Unless you’re a legitimate psychic, it’s an educated guess at best. Don’t get me wrong, the research aspect of a business plan is great, and no good entrepreneur should ever skip research, but deciding in advance exactly what will happen with your new business 1, 3 and 5 years down the road? Not a good idea.
From a psychological standpoint, once you have made a decision (and what is a business plan but a bundle of future decisions, made in advance?), it is difficult to un-make that decision. We tend to cling to our decisions, and conveniently find supporting evidence to back them up, even if the decision is a bad decision.
People don’t like being incorrect…so avoid making decisions before you have enough information to make good decisions.
I hear this often: “But what about getting funding? Don’t you need a business plan for that?”
Which brings us to…
#3 – Secure Outside Investment Money from Angels, VCs, etc – This is something you never, ever want to do if you can possibly avoid it. The moment you get outside investment, you are no longer working for yourself. You are now working for an investor, and they now have a say in virtually every aspect of your business. Depending on the size of the investment and the terms of the agreement, they may have more of a say than you do. Ouch….from boss to employee just like that.
Even worse, when you get seed money, venture capital, or any other form of outside investment, you run the risk of becoming bloated. When bank accounts are flush, and you don’t yet have to worry about profits, you are in la-la land. Investments often lead to bloating, i.e. too many employees, fancy offices and tech toys, too much marketing, etc.
If your early days are spent spending someone else’s money, you likely won’t spend it as wisely, and it is going to be hard for you to cut back when it runs out (and if you have fallen prey to issue #1, it will run out)…at which point, your options are to either close shop or go begging for more investment money, neither of which is good for you or your business.
However, if you make the effort to bootstrap, to carefully self-fund the business, you will learn to be lean and to get the most for your money. This leads to an efficient structure, and usually one that will scale well. Then, if selling your company is something you want to do, that efficiency will likely bring a higher sale price. Remember, bootstrap!
#4 – Build a Company Just to Sell It – In my mind, this is the worst thing a company can do. It is fine to have an exit as a goal, but if you build a company solely for that purpose, it is unlikely that the company will have a vision and a product/service that extends beyond the hoped for date of sale. This is not good.
If, on the other hand, you build a company with a vision that spans generations, treating it as if your grandchildren will be running it, you will likely create something that is truly excellent, and that will stand the test of time. Once again, if you still want to exit, this approach will often reap far greater dividends. Remember, Built to Last, not Built to Sell.
#5 – Only Hire People with College Degrees – In the world of business, if you are being honest, you know that degrees are often worth less than the paper they are printed on. Sure, there are exceptions, but for many, many industries experience often represents a far better education than a degree.
Now, this one is personal to me, since I don’t have a degree, but if you need an example, look to the Fortune 500. There are quite a few individuals on that list who hold no college degrees, including Mark Zuckerberg, the founder of Facebook. His current estimated net worth is $4 billion, making him the youngest self-made billionaire in the world. And he has no degree.
When you implement an arbitrary restriction, like hiring only degree holders, you are clinging to mindless tradition that may well cost you some of the best employees in the world. Bad idea. Instead, hire people who have experience, drive, and who will work well with you and your team. Don’t be a puppet or a mindless follower…think for yourself, and think outside the box, and hire people who will do the same.
And that is that. 5 things not to do when starting a business.
If you need a bigger list of things you shouldn’t do, read Rework. While I’ve been thinking and talking about these things for years, it was reading Rework that inspired me to actually write this post, and their list is a lot bigger than mine 🙂