9 Things Not to Do When Starting a Business
Interested in launching a business and looking to avoid mistakes along the way? Moving too quickly can lead to hiring the wrong people, spending too much time or too many resources in the wrong areas or being too rigid about your roadmap, among other rookie missteps. Bentley consulted some expert professors and successful alumni entrepreneurs and uncovered some surprising tips.
For starters, understanding the current business landscape is paramount. Don’t mistake your expertise in your company’s product or service as mastery of starting and running a business. Research the industry your company will be part of and learn what customers and investors expect from good businesses — for example, by reading the Bentley-Gallup Force for Good survey, which polled thousands of Americans nationwide on their opinions of the role of business in society today.
Here’s some advice from entrepreneurs and experts on what NOT to do when starting a business.
DON’T WASTE TOO MUCH TIME ON YOUR BUSINESS PLAN
Of course, when you start a company, it’s good to have structure for your ideas and a vision that is tangible and presentable, but a formal, meticulous and micro-detailed business plan at your seed stage could be a waste of your time and resources, since you will likely toss it out or rework it completely after your first meeting.
Bentley alum, entrepreneur and investor Cort Johnson ’06, vice president for business development at AtScale, cautions that you shouldn't waste months and months honing your business plan. Instead, he suggests using a simple 10-page slide deck that covers all the important bases, including your market, team, advisers, competition, existing problem, solution to the problem, product or brand development strategy, projected traction, early financials and needs.
Bentley Professor of Management Tatiana Manolova agrees. “Having the perfect pitch presentation with visuals can be more important than having the perfect business plan. This is particularly true as we are facing so many audiences on social media crowdfunding growth and financing. Entrepreneurs must have the perfect pitch for every occasion.”
DON’T BE AFRAID TO PIVOT
There is always the risk that even the best-laid plans will face disruption, from revenue streams to regulatory or other limitations. But don’t let the fear of changing your ideas hold you back. Be flexible and embrace pivoting early on.
“The severity of the COVID-19 pandemic’s impact caused both a supply and a demand shock to the global economic system,” says Manolova, referencing a coauthored study on women entrepreneurs.
The research — presented at the World Trade Organization — found that although the pandemic disproportionately affected women entrepreneurs, as their firms are more likely to be younger and smaller, they were able to pivot their business and incorporate digital strategy. A few ideas to lower risk: cost-cutting, changing the pricing model and moving into a new line of business.
DON’T RUSH TO BE FIRST TO MARKET
Especially in the “speed wins” era of consumer startups, there’s culture of panic that can take over and make even veteran entrepreneurs anxious about the need to be the first company or product to market, or the first to “disrupt” a particular industry in order to secure market dominance.
But being the first to market doesn’t mean that you will always be the consistent market leader. Instead, create a bona fide example of market need and traction that you can use to execute your business plan even more successfully — maybe even grease your wheels on the road to recruit investors.
If you’re a software company or mobile app, this could mean learning from the design, functionality, marketing, funding or adoption mistakes of your early competition. If you’re launching a traditional brick-and-mortar business, this could mean simply creating a bigger market for the type of product you're selling and then exploring ways to innovate.
DON’T IGNORE PAPERWORK
Even at the earliest hypothetical stages of your business, take the documentation of your ownership stake and your partnerships seriously. Look around for resources near you or online that can help create your legal framework for free or pro bono. Don't overlook the importance of dotting your I’s and crossing your T’s from the beginning.
“We all think working on paperwork, budgeting and keeping up to date with insurance is miscellaneous work, but it’s important and necessary,” says Gerly Adrien ’11, co-owner of Tipping Cow gourmet ice cream. She shares important points she learned when starting her business: Know your budget and review it often; figure out what your expenses will be and how much revenue you need to make it balance. Do not get behind on figuring out what taxes you need to pay; make it a priority and work with an accountant on setting it up the right way from the beginning. Get general liability insurance and any other types of insurance you may need; look at the options to keep your business safe.
DON’T ASK EVERYONE YOU KNOW FOR FUNDING
Yes, if you’re working on a small project and only need $50K, asking friends and relatives for money is fine. But involving people you know for larger projects can be tricky.
You also shouldn’t reach out to every possible investor out there. Some venture capitalists want to be the first ones in the door, and shopping your opportunity around may make you used goods. You could hurt your chances by going to the wrong investors or too many of them.
“There are so many funding opportunities, but you have to be aware of timing — who comes when — because they are different stages of financing,” Manolova says. “Coordinate and calibrate your message accordingly.”
DON’T HURRY THE HIRING PROCESS
Finding the right people to join your team is always tough. Sometimes you want to rush to get people on board. But taking your time can be a major value-add in the long run. Spend the time and energy up front vetting candidates.
“You cannot do everything,” says Adrien, who is teaching a Global Business Strategy course at Bentley. “You need to find people who will be able to execute your vision, your strategy, your operations, finances and other areas that are crucial to your business. When hiring, do not hire fast and under duress. Think about if you are not there, who is going to be able to do it for you the right way.”
Bring in people who can not only do the job, but also think a little deeper. Look for colleagues who offer distinct skills and unique resources and networks, or even just distinctly culture-creating personalities.
“When you think about the role you are hiring for, think about not only what the person will do for you on a day-today basis, but think about what they can do for you that will provide value, who will be part of the vision and who will be there even when times are tough,” Adrien says. “Also remember ethics when hiring. Don’t try to hire people who want to nix the full process and find quick fixes.”
Top of mind for Adrien: “I try to think of the areas I am not the best in and hire that person to teach me. I love being able to tell my vision, and for someone to respond by telling me their ideas for how we will do it. I continue to learn every day and even take the time to be in each person’s role so that I can see how I can be a better business owner.”
DON’T FORGET THE BIG PICTURE
Modern entrepreneurship culture loves to harp on the statistic that nine out of every 10 businesses fail. But those numbers can be misleading as to the definition of failure.
If you define failure as the inability to IPO, that’s one thing. But you can also think of a successful company as one that gets a high valuation and decent payout, especially when weighing the option of how much equity to give up in exchange for investment.
DON’T FOREGO YOUR SALARY
Entrepreneurs have a tendency to put all of their available funding and liquidity back into their businesses, sometimes without thought for their own personal finances. But paying yourself a salary — even if it’s a small wage, even if you’re bootstrapping — will be crucial to your longevity and your future success.
“You’re not creating a side hustle,” Adrien says. “Think about how your business is a true business with a long-term strategy and vision. What problem are you solving? What legacy are you trying to build? Are you wanting to build generational wealth?”
She shares five guiding principles to create a long-term strategy for your business: What are your goals, in terms of revenue, expenses, salaries and emergency savings for the first 5 years — and how will you meet that? What are the monthly goals that you must achieve and complete to meet the yearly goals you want to create from your business? What is your salary each year? Who do you need on your team internally and externally to build this business? What impact are you creating from your business?
DON’T DISMISS COLLEGE OR GRAD SCHOOL
Yes, you want to get going on your amazing idea. So much so that you think going to college or getting a graduate degree is a waste of time. But be open to the opportunities that an education will offer. In business classes, you can learn about how to create a business plan, market your product or structure your company.
And there are benefits outside the classroom as well — including meeting potential business partners. You have the chance to both work and socialize with your fellow students, bouncing ideas around and seeing what resonates. Who knows? Your next great idea could come up during an all-nighter studying together.
*Updated from an article originally published on October 15, 2021