Common Mistakes of First-Time Entrepreneurs

The stats don’t lie: half of all businesses close within 5 years of opening and almost 90% of them close in the first year. To put it in perspective, in Russia twice as many companies closed than launched in 2018. There are many reasons for this: an unfavorable business climate, issues with taxes, uninviting loan rates, and declining consumer purchasing power.

Global processes have not been of help either. For example, it’s now self-evident that the plummeting oil prices, the coronavirus, and the resulting quarantine around the world have affected our lives beyond recognition. For many areas, the epidemic is proving to be a great challenge. The hospitality sector, event management, tourism, offline trading, and everything else connected with people being in close contact with one another is now in jeopardy. On the contrary, companies that deliver food and other products, online education, and entertainment are growing. Neither the big companies nor the entire world economy looked after by national governments were ready for these big changes.

In this situation, you should stay calm and flexible in decision-making. We will have to adapt to changes. If you’ve always wanted to start your own business, now is the time to consider this opportunity, master the missing skills, and understand how to manage work in this new reality. 

1. Deal with your motivation

I have already written about how it is important, first of all, to answer the question "I want to do it, so then what?" at the start of any project. This question is particularly relevant for entrepreneurs. The answer does not necessarily fall into the "I want to become rich / pay the mortgage loans faster / buy a fancy house" category. Material goods are not always the true reason for our actions. Perhaps, you simply want more freedom, or you want to be able to choose with whom to work and build the whole process from the bottom up. Perhaps, your dream is to realize a longstanding idea and bring an innovative product to the market… You want to be creative and not just be an executor of someone else's ideas. Anything can push you to organize your own business: the main thing is to be honest with yourself.

I myself was wrong in believing that I wanted more money. Moreover, every time I set myself such a goal, a dubious project came along. It promised a bright future--a bit later naturally. And I had to start working at a rock-bottom price. As a result, I did business with the owners who said that they themselves knew how to do it: they needed only the hands. In fact, it turned out that they knew very little, and every step of their employees were kept under their control, that is, there was no talk about any improvement or development, ever.

When I realized that it’s not the money that really motivates me but the desire to help people achieve great goals, I began to succeed. I started to see myself as a business, and I started to do business with those who wanted to grow together, who understood that eating a horse, a bite at a time, requires a step-by-step approach. 

There is a good anecdote on this subject. 

A millionaire is being interviewed: 

- What is the secret of your success?  - It is patience, my friend, patience.  - But I can name a thousand things where no patience can help!  - Such as?  - Carrying water in a sieve...  - You are wrong, my friend: you just need to take the sieve and wait for the winter.

Determining why you are doing all this and moving forward methodically will push you closer to achieving your goals, faster. 

2. Start a business within a familiar field...

It is one thing when you change the area of your activities. In this case, you will have some time to get used to it and understand the sphere: you will have your executive sponsorship and supposedly the support of your colleagues. It’s another thing to start your own business in a new area. Here, as Alice from Wonderland used to say, "You have to run as fast as your legs can carry you to just stay where you are".

Therefore, if you decide to become an entrepreneur, first look around you, understand what you are an expert in and how you can implement your knowledge and experience in a new way. Fall back onto these, "What principle do I follow in life?", "Get out and do it", or "Time will tell."

I have a friend who was staying at home with her kids. She took an online course on how to create and develop an Instagram community, then chose a topic she knew, wrote pieces from her heart, and started to develop her own blog. Literally, 3 months later, she received her first paid advertising offer. She combined her knowledge and new market opportunities, learnt the tools, and soon rose in demand among advertisers. 

3. Think about your financial cushion  

When starting your business, you must face the fact that it will require all the time, efforts, and resources from you initially. Perhaps, you’ll have to work on your idea for  some time and test many hypotheses until you find the one that best fits your goals.

During this period, it is important to have either a financial cushion, which will cover your daily costs for the first few months at least (or better half a year), or additional earnings through an already established source of income.

When you are considering a new project, try to combine it with your usual work first. Move forward, step-by-step, turning your ideas into a profit. 

Two of my friends started a software distribution company. In the afternoon, they worked for major IT companies, and in the evenings, they dealt with the tasks of their business. It was in the Middle East, where the small wholesale market comes alive after 6 pm when the heat goes down. Both left the main job after no sooner than 2 years when they managed to bring the business to a comfortable position, secure stable revenues, and build a solid team. 

4. Test your product with real users

In this matter, you should avoid extremes. On the one hand, you can continue perfecting your product till doomsday (and many mistakenly do). Then, there is a major risk that you’ll enter the market with a functioning but unsuitable product, and you’ll need to redo everything from scratch. On the other hand, if you rush things and give the clients a poor prototype, you’re likely to get a lot of fair criticism in response. The best way to move forward is to make an MVP (Minimum Viable Product), test it internally, release it, collect feedback (the more feedback the better), and then improve the product post-launch.  

I know an entrepreneur who deliberately brings his ideas into some of the most "toxic" communities. There, his ideas are scolded or praised. He analyzes all of the comments and as a result learns what needs to be reworked, polished, or left as is in order to make his product/s better. 

Now we at the Kick Ecosystem are preparing to launch a new crypto exchange, and the Referral Program developed for it. It was released on a pilot basis at the end of last year. The product was in great demand. Now almost 900,000 users have registered for the program. Furthermore, a large community has already been formed around the exchange waiting for its launch. We are making improvements to this day. Perfection knows no boundaries.  

5. Learn to sell 

The business is tied to intimate producer-consumer relationships. Even if you are planning to open a laboratory, a gallery, or a library rather than a shop, you should understand that in addition to creating a product or service, it absolutely has to be sold. And it may be you who will have to do it at first. You must sell it to customers, partners, investors, and even your future employees. You must learn to present your idea in a way that makes them want to work with you.   

Mark your own areas of expertise, how you are different from your competitors, what advantages you possess, and what is the uniqueness you bring to the table. 

Identify your target audience and understand their needs. What kind of problem do these people want to solve when buying this product?

Tell them about the product in a clear and up-to-date format. Show the benefits that the customers will get while using your product. Demonstrate the value, be open with people. The price can only seem unjustified when you have not addressed these points, and the customer cannot see what they’re paying for. 

Do not disregard advertising and marketing. Word-of-mouth advertising and the first clients from friends and acquaintances is good, but it will not be possible to scale up your business this way. Marketing is not always about a huge budget; nowadays you can find advertising for the wallet of any size.

Also, it’s OK to make mistakes. The main thing is to be able to see them in the right light and assess them accordingly in terms of your newly gained experience. And not repeat these same mistakes of course! Whatever your business preparation in theory, in practice life will surely deliver a couple of unexpected "surprises" for you. Be prepared.

Alexander Gnatusin, CEO of Kick Ecosystem, International Sales Development Expert