The 5 Biggest Mistakes People Make When Starting A Business

Starting a business is an exciting time. It’s really fun. There’s lots of new things to learn and lots of things to do. Thing is, people have a tendency to set off at the rate of knots and often that speed means that mistakes are made. Each one of these mistakes can literally cost you thousands and could eventually lead you to failing in your business.

Obviously you don’t want that to happen. And neither do I. My name is Ray Lavery. I’m the co founder of how to start a business (amongst other businesses). And over the last 20 years, Helen Roberts (my business partner) and I have helped over 15,000 startups grow and scale their business. We’ve seen these mistakes repeated over and over. With a little preparation, all of these mistakes can be avoided.

Starting a Business

Mistake number one. People do not do enough market research on their business idea.

Market Research

Or, in a lot of cases, they don’t do any market research on their startup idea. What happens is that people get really excited because they get a business idea in their head and they just can’t wait to jump straight in. I can completely understand that. They are so excited about their business that they just have to get going and they just go for it.

Now, this is a bit like jumping off a cliff without a parachute. You’re immediately going at an enormous speed. You don’t have a plan as to where you’re going to land. And when you do land, it’s a very big mess and incredibly painful. So, we don’t recommend that. It’s far better to take more some considering your startup than just going for it at the beginning.

Another thing that people forget to do is ask potential buyers what they really think. They think that friends and family will tell them the truth. Startup owners just assume again, that because they like it, that their buyers will actually want it as well. Therefore, they don’t have the perspective of potential customers. And if you don’t understand that perspective, then how can you actually hope to sell to anyone because you don’t know what’s going on inside their mind.

Another part of market research is that people do not research their competition in any detail. They don’t know their top five business competitors; and they don’t know how they operate. And then that means that you don’t know what offers you can put out. You don’t know what pricing you should have. You don’t understand the business models and what you’re actually up against. That is very dangerous.

And actually if you can map out what the number one business or a number one competitor is doing in your niche, then all you have to do is to copy that and your life will be an awful lot easier. So that is mistake number one. People do not do enough market research when starting their business. So please, make sure that you do.

Mistake number two. People do not have enough money in order to fund their startup business.

Generally, people grossly underestimated how much cash that they actually need to get started. Now, people obviously will try and start a business with as little money as possible, because very often people don’t have a lot of money. And I completely understand that. A few thousand is often enough. But it’s very important that you understand what the real costs of your business are and that you don’t skimp on it too much.

You must also leave a budget for things going wrong; because things will go wrong. And in order to make sure that your business can survive. You need to have, if you like, a cushion for either expenses that you didn’t anticipate, or simply, to fix things when things go wrong. now

Business Funding

It’s also very important that you make sure that you don’t overspend on certain business tools. And this is particularly true for people who have funding or a decent amount of cash to get going. It is easy to spending a lot of money on websites and branding and stuff like that. When actually, that’s not necessary at all. You can literally build your brand and website on a shoestring. This point makes a lot of people sweat. But think if it this way. Has having a very nice logo ever made anybody a millionaire? No, it hasn’t. So be careful about this. Be careful about what it is that you’re spending your money on.

But make sure that you do spend money on the real tools that you need. Never skimp on your business tools. But don’t overspend on your business tools either. Because if you do, you’re going to run out of cash very, very quickly.

Now the next thing that we see which is really part of the underestimation of cost is that people do not have a marketing budget when starting their business. They think that they can just do a few organic posts on Facebook or something like that, and that’s going to work for them. Unfortunately, it’s not. Just because you open the doors of your business does not mean that people are going to flow in. There’s a lot of competition out there, there’s a lot of noise out there. There’s a lot of people posting on a regular basis out there. Therefore, you need to make sure that your business can stand out from all of the others. So what we say is that you need to make sure that you have a defined marketing budget. And that should be about a third of all of your costs. So whatever your costs then add on another third for marketing because that is key to success. You must have really good marketing and you must have marketing consistency. So put that inside your starting budget and it will make all the difference.

Most startup businesses fail because they don’t have enough customers, and they don’t have enough customers because they’re not spending enough money on their marketing. So make sure that you don’t make that mistake. So again, mistake number two. Make sure that you completely understand your budgets and that you have a cushion for when things go wrong.

Mistake number three. People have not identified their target audience.

Startups commonly think that everybody will want to buy for them. One of the most common answers I get when I ask about who will buy from a starting business is: “Oh, this is open to everybody. Everybody’s going to want to buy this.” Sorry no, that is actually not the case. You might think it’s true, but it actually isn’t. Only a very small number of people will actually want to buy from you right now. Therefore, you need to know who those people are and you need to understand the problems that you’re solving for them. And very importantly, you need to understand where those people are going for their information. So that essentially means that you need to be able to create a niche market for your startup business. 

Target Audience

You need to understand your target market and you need to understand them like they’re your best friend. You need to know them pretty much on that basis, exactly like you would know your best friend. Because if you can’t step inside their mind and you don’t know what’s going on inside of their brain; then you don’t know what they’re thinking and you don’t know what their problems are. You also don’t know what their pain is. Without that knowledge you cannot realistically expect to sell to them.

Plus, if you know them that well, you also know where they are going to get their information. If you don’t understand that then how can they even hear your message in the first place? You’ll end up putting your marketing message in the wrong channels. So, you need to make sure that you know them inside out. You know everything about them. So, mistake number three people make when starting a business is not having identified a target audience. You must identify it.

By the way, please don’t be afraid. You might think that there’s not enough people in your niche. The thing is, you only need a few thousand people who are interested in what you’re buying at a particular moment in time because as time goes on, more people will fall into that category. So don’t make your audience too broad. Define it and create a niche that’s small; because that’s where you’re actually going to find your sales.

Mistake number four people do not have the skills to start a business.

startup business owner

People starting a business rarely, in my experience, know what it takes to run a business. Therefore, they’re literally doing what we call “trial by fire”. That is obviously learn as you go along. Now, it can work, but you are honestly picking the longest and the hardest way to do it. People think that starting a business is really, really easy. And it can be if you know what you’re doing. But if you don’t, you’re going to make a lot of mistakes. You’re going to forget a lot of things. It’s going to take you quite a long time to build up those skills. In some cases, we see people who are literally three, four years down the line, they still don’t have the basic business skills. They still don’t understand why their business is not working. Well we can tell you why. It’s because they don’t understand how to run the business.

People starting a business rarely, in my experience, know what it takes to run a business. Therefore, they’re literally doing what we call “trial by fire”. That is obviously learn as you go along. Now, it can work, but you are honestly picking the longest and the hardest way to do it. People think that starting a business is really, really easy. And it can be if you know what you’re doing. But if you don’t, you’re going to make a lot of mistakes. You’re going to forget a lot of things. It’s going to take you quite a long time to build up those skills. In some cases, we see people who are literally three, four years down the line, they still don’t have the basic business skills. They still don’t understand why their business is not working. Well we can tell you why. It’s because they don’t understand how to run the business.

You must invest in yourself and learn how to actually run a startup business. I’m talking about learning how to do the marketing. I’m talking about learning how to understand finances. And no, you don’t have to be accountant. It is simple addition and subtraction. That’s all you need to be able to do your finances effectively.

Equally important skills are customer services and the customer journey. This means, what the experience like for the customer when they are working with you. All of these things need to be figured out.

On top of that, you need to have systems and processes in place that make your life easy. Most startup owners have forgotten this. Again, we can see why. At the beginning, business owners try to do everything themselves. Obviously at the beginning they’re trying to minimise the costs that they have. But if you’re not a whizz at maths, or somebody who’s really good at finance, it’s going to take you a while to figure out how to do that. Or, if you’re not a marketer, it’s going to take you a long time to understand how to do the marketing. And so the trial by fire method actually really slows down your progress. It means that your competitors and people with more experience are going to be able to stride ahead of you.

Now, the good news is it’s actually quite easy to get these skills. There’s nothing more than just determination and ability to learn and an ability to get back up that you need in order to be able to be a successful business owner. More good news, there are courses out there, of which we have one, that will teach you everything that you need to know to start your business. And within 30 days, you’re ready to go.

So, make sure that you invest in yourself. Or at the very least, make sure you have a mentor or somebody with actual business experienced who you can talk to and can show you the way through. Don’t leave yourself guessing the right way forward. Remember, 90% of businesses fail. And most of those within the first year or two. And most of that is down to the fact that people don’t know how to run a business. Business owners can be overwhelmed by what they have to do on a day to day basis. So, if you know what you’re doing, you can cut out a lot of messing around and you can make your life a lot easier.

Business Skillset

Now, the good news is it’s actually quite easy to get these skills. There’s nothing more than just determination and ability to learn and an ability to get back up that you need in order to be able to be a successful business owner. More good news, there are courses out there, of which we have one, that will teach you everything that you need to know to start your business. And within 30 days, you’re ready to go.

So, make sure that you invest in yourself. Or at the very least, make sure you have a mentor or somebody with actual business experienced who you can talk to and can show you the way through. Don’t leave yourself guessing the right way forward. Remember, 90% of businesses fail. And most of those within the first year or two. And most of that is down to the fact that people don’t know how to run a business. Business owners can be overwhelmed by what they have to do on a day to day basis. So, if you know what you’re doing, you can cut out a lot of messing around and you can make your life a lot easier.

I already mentioned that as a startup you’re going to try and do everything yourself. As soon as you can, bring in other people who can do it for you. Time is your most valuable resource. It’s not money, it is actually time because there’s only 24 hours of the day. Whereas money you can always replace. Spending your time wisely means making sure that you have people around you who know what they’re doing. Especially if you have never run a business before.

Step 1: Invest in yourself.

Step 2: Invest in people to do it for you.

This way you will be more successful more quickly. Further, the success you get will be far greater by knowing what it is that you’re doing. So invest in yourself and learn the skills to start a business.

Mistake number 5: People have not set any sales targets and don’t have a defined simple business plan they can use.

starting a business planning mistakes

Remember earlier I was saying that people just assume that because they have launched their product that it will automatically sell. Not so. In order to create sales you have to focus your attention on selling. And really on lead generation. This comes from creating a simple marketing plan. It needs to be defined enough to be actionable. Very often we see people’s marketing plan in their busines plan and it is generic. They say things (literally) like “Oh, well, I’ll do Facebook posts.” Or “I’ll post on Instagram.” Or whatever the case may be. But that is not enough. That is not defined. It does not give you a target, it does not give you a direction to strive for.

We appreciate that it’s difficult to know what to do because there are so many different experts pointing you in a different directions and it is easy to get confused or overwhelmed. So, all you need to do is make this simple. You need to get specific to what you’re doing. You need to define your message and you need to define your marketing channels. Then just continue to do that; consistently. You don’t need to get complicated.  In fact, the shortest route is often the best route. And it’s just a question of figuring that out and then repeating that model.

Another area we see people weak on, is that people don’t understand how many leads they actually need to generate in order to achieve the sale target. They assume just because somebody is interested that they’re going to buy. But unfortunately, this is not the case. In some cases, you need 10 leads in order to get one sale. And other products you may need as many as 100 leads just to get one sale. So if you don’t understand what leads you need to generate through your marketing, then how will you be able to actually reach your sales target? I can guarantee you that you’re not going to be able to get your sales targets if you are not generating enough leads. I cannot stress enough how important it is that you understand that.

Another startup mistake is that that people either don’t write a business plan or, very common, don’t follow the business plan. Now those diligent startup owners are writing business plans tend to create very long and very complicated plan. These are the traditional business plan that the bank might ask you to do when you’re applying for funding. That type of a plan might be fine for a bank, but it is not realistic and not usable on a day to day basis for a startup. You need to have everything on a one page business plan. 

Everything has to be there. It has to be something simple that literally a five year old child could follow. That type of a business plan is what makes your life a lot easier. (I wrote an article on this subject a few months ago. You can see it here. Why a traditional business plan template won’t help you when you’re starting your business )

Business Plan

And the thing is, is that most people haven’t figured out how to write a simple business plan. And because they don’t have that plan, they end up just doing all kinds of stuff that is not important in their business. They end up wasting a lot of time. They’re not working on what is critical in their startup which will generate those sales, which will make that business a success. That leads to entrepreneurs being very, very busy, but not having any cash to show for it. This is absolutely awful for them of course; and my heart goes out to them. But we see this all the time. You need to have that defined plan. You need to break it into simple steps and you need to follow it. You need to action that plan every single day and ignore anything that is not critical in your business. If it’s not critical and it’s not going to make a difference to your sales, leave it for now. Do the critical things first.

So make sure that you have your defined goals, make sure that you understand your targets, make sure that you understand how many leads you need to generate. And once you’ve done that, then your startup life will be a lot easier. So, like I said, mistake number five, not having defined sales targets, and not having a defined plan that you can actually follow.

So there you are, those are the five biggest mistakes that people make when starting a business. Make sure you pay attention and action these points in your own business. It will help you enormously.

If you enjoyed this article and want to learn more, we have a special webinar that we are doing called

The 3 Secrets That Every StartUp Needs To Know To Build A Successful Business. 

So if you want to know more then click on this link and I’ll see you there.

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About The Author

how to start a business - ray lavery

Ray Lavery

Having started her first business at 16 and now with over 20 years experience in senior leadership and director positions. Ray has also started and grown several businesses to multiple 6 and 7 figure heights. Through multiple government back business support programmes and through her own consultancy work Ray has helped over fifteen thousand businesses scale to the heights they wanted.