CCS Blog

Starting on the Wrong Foot in the Wrong Direction

by Jim Martin

At the latest startup conference the person on stage pitched his method which agreed with the last book you read. He swore that you can ride your idea to fame and wealth by starting your own business. Don’t drink the Kool-Aid, particularly if he says you can’t do it without his book. What he says sounds wonderful, but it’s really poppycock (or whatever stronger word you’d prefer).

2% of those who buy his book will reach his promised level of success. The other 98% aren’t stupid; they simply have false views of business realities. They think intuition and excitement can substitute for good business sense and focus. Starting a company is easy. The challenge is becoming successful. Here are six traps many fall into, six techniques for killing a new Business.

The Idea Is Everything. The idea is worth maybe 1% if it causes you to act. Execution is 99%. If you can’t execute, your start-up will become a shut-down. If your business plan says you’re going to put in more time, energy than the guy with the idea, you need to read the next point.

Worry About a Partnership Agreement Later. You have to cover the legal questions. You can form a C-Corp, S-Corp, LLC, but without a partnership agreement, there is no accountability for anything. To protect yourself, you need a legally binding partnership agreement. You need it before you invest time or money. Formally defining responsibilities and authority before you get started will save you many headaches. The next point will make that clear.

Partners Don’t Need Vetting. What do you really know about your partner? Is he a great father, great husband, outstanding citizen? What you do in your personal life means absolutely nothing when you run a business. Starting a company is a major sacrifice for all involved. An employer will reference check potential workers; why wouldn’t you do a reference check on someone far more important to the business than the shipping clerk? The guy with whom you talk sports around the barbecue is a lot different than the guy in the boardroom. The latter needs proven business acumen and great decision making. You also need a credit reference. If he can’t manage his own finances, you can’t expect him to manage (or even worry about) the company’s.

Worry About a Business Plan Later. This is the mistake that kills. Money will be your most important asset, right? A good business model from day one will tell you where the money should come from and where it will go. Without financial foresight, you will eventually have to sell your company (usually at a loss) or plead for investor funding (which won’t happen without an established business plan). If your business plan correctly identifies the needs for and sources of money, your ability to pursue your dream will flourish. The marketing portion of the business plan will show you how to get your product into the hands of customers. Without a realistic plan, you’ll pay legal, marketing and overhead fees from your personal pocket. That makes turmoil within the partnership more likely.

Build In Every Feature Imaginable. That’s the best way to lose focus. If you think you must offer everything you can think of to lure potential customers, do so in phases. Doing too much at once will leave everyone overworked and frustrated. That often leads to a bad marketing message and nervous (read reluctant) customers. To build a business, do what you do well, keep that simple, then expand it as the time to do so becomes available. There are no perfect businesses. Those that try to start out perfect often fail more quickly.

Never Seek Advice. You know everything there is to know about your product, so why would you need advice? You don’t know everything about marketing, bookkeeping, taxes, labor laws, payroll, and the list goes on and on. Your entire process will go more smoothly if you budget for and hire experts for those support functions where you lack any expertise. SCORE was founded on the premise that experienced business people could provide wisdom and guidance to those starting out (or encountering problems later). SCORE mentoring is free. You simply have to call us or go to our website and ask for it. Among our twenty-five volunteers we have broad experience.

There are quite a few pitfalls scattered across the fields of the business world. If you’d like to hear more, come to SBDC’s free Brown Bag Luncheon marketing talk at noon on July 12 upstairs at the downtown Santa Cruz Library. SCORE mentors will be discussing the nine most dangerous pitfalls small businesses face.