Growing up I was surrounded by entrepreneurs. All of my uncles on my mom’s side of the family ran successful businesses, and I learned that working for yourself was a great way to improve your lifestyle.
No surprise then that I now own a few businesses of my own. But I made lots of mistakes getting started, mistakes I could’ve avoided if I’d known a few things.
Here are seventeen mistakes that you should avoid:
Sell Something Legal
Selling something legal may sound obvious to anyone in business, but trust me, when it comes to wanting to make money you will likely consider a lot of ideas… some legal, some illegal and some in between.
While still in high school I sold CDs and black boxes. I was only making a few dollars off of each CD, so I turned to the black boxes, which made me a little more money. Unfortunately at that time I wasn’t clear on exactly what was legal or not so I decided to get out of it.
You don’t want to make a lot of money and then lose it all because you are on the wrong side of the law.
Sell Something People Can Afford
I once took a job selling high-end vacuums. I enjoyed the challenge of trying to convince people that they needed the vacuums, and it helped that I would shampoo and clean their carpets during my sales presentation for free.
But these were $1,600 vacuums and most people couldn’t afford them. I did happen to sell one to an Indian couple, who are known to be frugal, but they returned it a week later!
Find out what people can pay for a product before you design it, and while you won’t get rich quick this way you’ll definitely find it easier to sell your product.
You Must Market Your Product to Succeed
I enjoyed working and finding new jobs because each time I was making a little bit more money. I liked making more money because I wanted to change my lifestyle and eventually help other people do the same.
But I realized it was going to take me forever unless I figured out how to create a $100 million dollar company.
Monster.com’s business model and the amount of money they made fascinated me, so I decided to build a competing model. I called it Advice Monkey.
I spent five grand building the product and watched Advice Monkey go nowhere. I needed to market it or it was going to sink.
I ended up hiring a total of three companies to help me market this business, but all three wasted my money without any kind of return! That’s why I decided to learn Internet marketing.
In time I grew the site to be pretty popular and even created some buzz in the media, but I ended up having another problem: it couldn’t do credit card transactions.
If people don’t know about your great product, then they can’t buy your great product. It’s that simple.
Make Payments Easy
The lesson I learned from Advice Monkey was that if you wanted to make money you needed to make it simple for people to pay you.
Of course you have to provide a valuable product, something people want or need, but if you don’t make it easy for them to pay you, you’re business will suffer and eventually fail.
I’ve learned that whether you are providing a service like consulting or a product like software, you should provide the simplest, most common and fastest way for people to pay.
If you make it hard then you are simply giving people an excuse to delay paying you or even giving them an excuse to go to your competitor who does make it easy. Don’t do that because it could be a million dollar mistake.
Solve Problems Customers Are Facing
My really first successful company was Crazy Egg. It was successful because my business partner and I realized that the best way to build a business was to find some problem people or companies have and try to solve that problem.
Besides, it makes it really easy to close sales when you can show a potential client what their problem is and how your product solves that problem. The best businesses are the ones that solve problems.
Do It in a Simple Way
Have you ever noticed how simple the best products are? You don’t need a degree in rocket science to understand how to use a bicycle, drill or personal computer, nor do you need one to understand how they can help you.
I’ve seen lots of products and ideas fail because they were too hard to understand. They might’ve solved your problem but it cost too much to do it or they took too many steps to do it.
Remember that people want their problems solved in the easiest way possible, so keep it simple.
My business partner and I thought we had struck it rich when we started Crazy Egg. Here was a product that was simple and solved people’s problem. The money should roll in, right?
We watched the popularity and interest in the company grow, and knew it was just a matter of time before somebody offered us $10 million dollars for it.
It never happened and we eventually had to bootstrap it to keep it going. We didn’t understand why this was happening, but we loved Crazy Egg and so kept with it.
I’m glad we did because about three years after we started Crazy Egg it became profitable. The lesson I learned is you must be patient when it comes to software companies because it takes a few years for them to take off.
I think the tendency when it comes to running a business is to keep your fees low so you attract a wider audience. The only problem with that is you will also attract more people who will complain.
Charging premium prices, especially when you are consulting, does a few things for you:
• You appear as someone who knows what he is talking about.
• You will hear fewer complaints. People and companies who have the money to afford you won’t usually make snarky comments about how much they are charging you.
• You can work harder for one person rather than work mediocre for a lot more people.
• Your reputation will grow as your provide excellent customer service.
Know what your competitors are charging so you can price yourself right. You may be surprised at what people are willing to pay.
Go After the Big Guys
One thing I like to tell people is to offer to do the work for a small paying client for free if they can make an introduction for you to a large paying company.
Does doing work for free scare you? Think about it this way, if that small company is paying you $5,000 a month, but that large company can pay you $100,000, you will make $95,000 more.
That’s a huge increase in income, so think big and go after the big guys!
I understand I am young, but I have experienced a lot of bad times in the business world, and the number one thing that I learned is cash is king.
If you don’t have cash coming in, you will not survive. And if cash is coming in, especially a lot of it, you need to learn how to save, both for the business and for yourself.
Because the economy is like a rollercoaster you could enjoy a few years of making a lot of money. But trust me when I say there will come a time when you will not make very much money.
Resist the urge to pay yourself handsomely and buy expensive office furniture. Your business will weather any financial storm and your employees will thank you!
Never Stop Closing
One of the most important things to remember when you are building a business is that you must always be looking for clients and ways to get them to work with you.
Never get comfortable because you have a handful of clients locked down or you have momentum with your software product.
It’s so important to constantly network, look for business and sell people on working with you. And if you get in a situation where you can’t handle the extra workload, hire temporary help to handle it until you can justify bringing in more people.
Boy, was I all over the place during the time I was learning all of these lessons about business. And I think that hurt me because I was spreading myself too thin.
One of the reasons Steve Jobs and Apple were so successful was they focused. They didn’t have a bunch of products, even though you might think they did. They had only a handful.
That allowed them to do several things very well:
• They could listen closely to what their customers were saying.
• They could create the products to meet the needs and desires of those customers.
• They could make those products the best in their category.
If you are not focused you will not be able to do a good job on your business. Find the things in your business that make you the most money and focus on them. Eliminate everything else!
Always Find Your Passion
When I was doing Internet marketing for companies I was making a lot of money. I was very grateful for that and I was very grateful to the people who helped me build that company.
But it wasn’t very much fun. It felt like a job, and I knew that if I was going to be successful long-term I needed to find what I really enjoyed doing.
Why is this important?
I work 70 hours a week on my businesses, and I’m sure most entrepreneurs work that hard. Some may put in more hours, some may put in a few less.
But I don’t really think of it as work because I enjoy what I do. I really have a passion for it. If you’re not passionate about what you do, stop right now and think about what you really want to do.
Learn, Learn and Learn Some More
Even when I was in high school and working on my own business, I was taking classes at the community college. My uncles had taught me that entrepreneurs never stopped learning.
I loved learning so I kept doing it.
Learning is hard work and I can’t say that I’ve always enjoyed working so hard to learn. And sometimes I even felt like I knew everything about a certain business or topic, so didn’t need to learn anything.
How wrong I was!
I encourage you to keep the mindset that you can learn from anybody no matter who they are, and that in the end you don’t know everything. If you do this I’m certain you will grow wise in the ways of business.
Good Help Costs Money
When I was starting out I didn’t pay much attention to who I hired. Sometimes I’d hire people I knew or I’d hire someone based upon a recommendation from a friend.
I learned that was not the right approach to hiring people. Some times people are just looking for a job and need a paycheck, and soon they take you for granted they don’t work as hard as when they first joined.
Spend time finding good help and don’t be afraid to pay them good money. Think of it as an investment, where you need to figure out your ROI on that person. And then measure their success.
Do this and I’m pretty sure they’ll turn out to be a great benefit to you.
It would’ve been really great to know that people buy things based upon emotion when starting out. What I mean by that is the purpose most people buy a product is because of a feeling they have, like fear or pride.
For example, people buy car insurance because they are afraid of losing all their money if they get in a wreck. Parents send their children to Ivy League schools because they want to brag to their friends.
What you have to do is figure out what emotions will resonate with your customers when it comes to your product.
And don’t let people who say they don’t make emotional decisions about money fool you. Even the most analytical accountants or engineers make decisions with emotions.
Listen to Your Friends and Family
Starting a business can suck up all of your time and energy. It becomes your life and that will not end well if you don’t listen to advice.
I have the best family and friends not because they are fun to be around, but because they also care about me and want to help me when I’m making a mistake.
Unfortunately because I was so busy I would ignore them, only to have my problems come back around and bite me. If I would’ve listened to them in the first place I would’ve never had that problem to begin with!
If you don’t like what they have to say, that’s fine. But at least give them the benefit of the doubt and hear them out.
I hope that by sharing these experiences with you that you’ll be able to avoid some of the mistakes that I made. I can’t promise you that you won’t make some of your own mistakes, but if you do, I encourage you to learn from them.
What lessons do you wish you would’ve learned before you started your first company?
More from Neil Patel on GeekWire: Seven signs that you might just be an entrepreneur… Eleven things every entrepreneur should know about innovation