What Not to Do

A seasoned entrepreneur reveals the 17 most common mistakes startups make and how to avoid them -- plus, the 5 things you must do to ensure success.

John Osher has developed hundreds of consumer products, including an electric toothbrush that became America's best-selling toothbrush in just 15 months. He also started several successful companies, including Cap Toys. He built sales to $125 million per year and then sold the company to Hasbro Inc. in 1997. But his most lasting contribution to the business world just may be a list of screw-ups he jotted on the back of a piece of paper.

"After I sold my business to Hasbro, I decided I'd make a list of everything I'd done wrong and [had] seen other entrepreneurs do wrong," explains the 57-year-old Jupiter, Florida, serial entrepreneur. "I wanted to make a company that didn't make any of these mistakes. I wanted to see if I could come up with the perfect company."

He came up with an informal list of "16 Mistakes Start-Ups Make"-since expanded to 17-that has been used in a Harvard Business School case study, has been cited in many publications, and has become a part of what he teaches budding entrepreneurs in his frequent university lectures. He also used the list in 1999 when he started Dr. John's SpinBrush to sell a $5 electric toothbrush that quickly became America's best-selling toothbrush. In 2001, Procter & Gamble purchased the company from him for $475 million.

"I didn't expect it to actually work like that, but it did," Osher says. "It'll probably never happen again. But we made a perfect business, from the beginning to selling it to another company." Since then, however, Osher has created another product, an electric dish scrubber that he also sold to Procter & Gamble. And he has yet another health-and-beauty product-development effort underway-although he's keeping the details close to the vest-in which he'll try again to create the perfect business.

To home in on what lies behind the 17 mistakes, Osher told Entrepreneur what they are and how you can learn from them to achieve your own level of perfection.

  • Mistake 1: Failing to spend enough time researching the business idea to see if it's viable. "This is really the most important mistake of all. They say 9 [out] of 10 entrepreneurs fail because they're undercapitalized or have the wrong people. I say 9 [out] of 10 people fail because their original concept is not viable. They want to be in business so much that they often don't do the work they need to do ahead of time, so everything they do is doomed. They can be very talented, do everything else right, and fail because they have ideas that are flawed."
  • Mistake 2: Miscalculating market size, timing, ease of entry and potential market share. "Most new entrepreneurs get very excited over an idea and don't look for the truth about how many people will want to buy it. They put together financial projections as part of a presentation to pump up their investors. They say, 'The market size is 50 million people that could use this product, and if I could only sell to 2 percent of them, I'd be selling a million pieces.' But 2 percent of a market is a lot. Most products sell way less than 1 percent."
  • Mistake 3: Underestimating financial requirements and timing. "They set their financial requirements based on Mistake 1, and they go ahead and make a commitment to this much office space and this many computers, and hire a vice president of sales, and so on. Before they know it, based on sales projections that were wrong to start with, they have created costs that require those projections to be met. So they run out of money."
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This article was originally published in the February 2004 print edition of Entrepreneur with the headline: What Not to Do.

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