4 Costly Business Blunders Entrepreneurs Make While starting a new venture can be exciting, you may fall victim to certain mistakes that could end up costing you a great deal in the long run.
By Aaron Goodin Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
When you're just starting out it's easy to get caught up in the excitement of a new venture. After all, you're finally realizing a dream, you've found people willing to invest and you're ready to do whatever it takes to succeed. But when you're leading with eagerness rather than rationality, you're likely to fall victim to certain mistakes that could end up costing you a great deal in the long run.
In my four years of startup life, I've had the opportunity to experience a few hard-learned lessons that many entrepreneurs would do well to avoid. From not reading the fine print to unintentionally overbuilding a product, these small oversights could mean time and money most startups simply can't afford to lose. So heed my advice and watch out for these costly errors.
Related: 4 Key Lessons From a Startup's Spectacular Failure
1. Not reading the fine print.
Starting a business is fast-paced and exciting. Each day brings something new, and as the CEO you're constantly switching directions, making sure everything is running smoothly. With tons of projects on your plate, it can be easy to overlook minor details.
In the early days we were using consultants as a resource to help grow the business. Assuming that people were genuinely transparent, we made the costly mistake of not reviewing the contract with a fine-tooth comb. As a result this agency was charging us a percent equity in our company in addition to their rather hefty monthly retainer. The equity was never verbalized, and because it was hidden in the fine print of the contract, we didn't realize it right away. Now we know to look through everything…twice.
2. Hiring the wrong people.
I can't express this one enough. The team you bring on is not only there to help with the work, but they are also your best tool for achieving success. As a startup founder you want to move fast to get your vision up and running but not taking the time to hire correctly from the start could leave you with the wrong people for the job at hand. If a friend says they have the experience you are looking for, don't jump the gun and say, "you're hired." Rather, look to the advisors and mentors you have built up and ask their expert advice. Also, keep in mind the culture you want to build and hire people who match it -- it's going to make a difference when things get rough.
Advice: Ignore the impulse to hire quickly simply to get things going. Do your due diligence (even if that means paying for a recruiter to help in the early stages) to make sure you find the perfect people for the job.
3. Overbuilding a product.
When launching a new tech product there's always a chance of getting caught up in the development process, where exciting technology and innovation can trump sound planning. If you don't slow down you'll run the risk of overbuilding.
Related: 9 Blind Spots That Sabotage Businesses, and How to Beat Them
I heard a startup founder once say "sell before you build" which really resonated with me at the time, as my company had very recently done the exact opposite. When you're building new products and features you need to make sure your customers will buy them, because if not, you're likely back to square one. Start small, get market validation (multiple times) and then build incrementally to ensure you are bringing a successful product to market.
Advice: Check in frequently to make sure your product plan is mapping to your vision. If it's not, then you need to figure out why and adjust accordingly.
4. Not seeing the value in hard earned money.
This one is a little bit harder to avoid, but very important none the less. Financing a new venture is a long road, and for many entrepreneurs, the few go-rounds can be stressful. Sure it's easy to be chummy when you have revenue or a new round of funding, but what happens when those funds start to run out and uncertainty is lingering in the air? Ultimately this goes back to the team you spent all that time hiring. The people you surround yourself with, the ones that can go through a particularly difficult bootstrapping round and still come out the other side, those are the people who are with you for the long haul. They believe so fully in your vision and product that no matter how tough it gets they are there with you win, lose or draw.
Advice: Recognize the value in hard earned money, and surround yourself with a team that sticks around no matter the balance in the bank.
Related: 3 Stories on Bouncing Back From Failure
