Fatal Startup Pitfalls: Do's And Don'ts To Avoid Them

Published in Forbes | September 23, 2019 | Author: Thomas Minieri -- Many people start their first business starry-eyed and with high hopes of success, only to be rattled when things get tough or don't go as expected. My experiences as a successful small-business-owner-turned-franchisor have allowed me the opportunity to not only learn from my own business experiences but also to learn from our franchisees' experiences.

Business, especially new business, can be tricky. One major advantage of purchasing a franchise is that franchise systems are typically set up to help new franchisees avoid as many problems as possible. If you are starting a new business without the benefit of a franchise system, you are going to need to spend a good bit of time planning and seeking guidance from others in your industry who have experienced and overcome challenges. Doing so before you launch will help you avoid unnecessary issues later.

Franchise or not, these common pitfalls plague many new business owners. Below are my top five dangerous startup pitfalls that, with some insight and planning, can be avoided.

DON'T UNDER-FUND STARTUP MARKETING

In my experience, many franchisors require their franchisees to spend a certain amount of money on initial grand opening marketing and advertising because they know how crucial proper marketing can be early in the life of a new business. Many small business owners who are not part of a franchise system dramatically under-fund initial marketing efforts.

If handled properly, marketing should produce a positive return on investment (ROI) in a short amount of time. A well-designed and managed marketing campaign and sales system is like a well-oiled machine: You put $500 of marketing in one end and $750 in sales comes out the other end. With that knowledge, why wouldn’t a new business owner spend everything they could on marketing and sales?

The answer is all too often based in fear. Most small business owners don’t believe marketing will produce ROI or they don’t know how to build a marketing system that will produce ROI. They are fearful of losing money so they take no action, which can have devastating consequences. Don’t let this fear hold you back. Before you go into business, make sure your marketing, advertising and sales processes are well-thought-out and that you have a proper plan and budget in place.

DON'T UNDER-FUND ONGOING MARKETING

Franchisors often mandate ongoing marketing spend requirements for their franchisees because they know how important it is to keep leads and prospective customers coming into the business‘s pipeline. Funding a properly built marketing system is akin to keeping your car filled with fuel. Cutting the marketing budget for even one month can negatively affect revenue and cause a shortfall in the proceeding month‘s budget due to lower sales. This, in turn, leads to that month’s marketing getting cut and continued lower sales. Thus, a downward spiral begins.

It can be challenging or impossible to recover from a downward spiral caused by marketing cuts. So, avoid cutting marketing in the first place. Instead, find other ways to lower expenses in a startup environment or if you find yourself in a slow sales season.

DON'T BE ABOVE THE RULES

When you’re just getting started, it’s crucial to set and adhere to policies and procedures. Business hours should be maintained without deviation, even on slow days or weekends. Customer service processes and sales scripts should be followed without alteration or shortcuts. If you’re the only employee in your new organization, it is even more important to resist breaking the rules — you’ll find that trends and habits form quickly. Remember, the easiest time to set a company‘s policies and procedures is when the team is small.

So, take time in your organization’s early months to figure out your processes and then stick to them without fail. As the owner, you should be the living representation of your company’s culture  business systems, not the person who is above the rules. If you show you’re willing to break procedure, employees will follow your lead as the business grows.

DO PROPERLY EVALUATE SYSTEMS

Problems are going to happen -- it's inevitable. I’ve seen that it’s common for newer business owners to misdiagnosis problems in their organizations. If business is slow, for example, it‘s a common diagnosis to blame the company’s marketing systems. However, the answer is rarely that simple. Even small mom-and-pop businesses are complex and comprised of multiple systems that work together.

Every owner should understand and track their company’s process chain: the system of systems that leads to a sale. If business is slow, evaluate the entire process chain to flesh out the problem. Is the marketing strategy producing leads? If so, is the telephone being answered properly? What about the sales team? If they are burning through leads, then the organization may need to restructure its sales systems or provide better sales training.

In this scenario, salespeople may be tempted to blame the marketing team by saying they are getting bad leads. Maybe that’s true, maybe it’s just an excuse. Either way, if sales are low, the key to getting things back on track is a proper evaluation of your entire business, its people and its systems with the goal of pinpointing the exact problem or problems.

DO PREPARE IN TIMES OF PLENTY

It’s human nature to think that the good times will last forever. In my experience, people work harder when things are going poorly and tend to coast when things are going well. However, circumstances that are outside of your control can alter your world in an instant. The economy can change, your industry can change, a new competitor can move into your territory, or technology can advance quickly, leaving you falling behind.

If business is good, then push to gain more market share and work to set your company on firmer footing. Invest in better marketing systems, technology, more qualified staff or improved benefits for customers. When hard times come (and they always do), you’ll be better prepared to see it through.