The ‘Big 3’ Mistakes (And Their Fixes) For First-Time Entrepreneurs
This post originally appeared on Forbes.com
For entrepreneurs who missed the MBA steamboat, I’ve talked in the past about the advantages of MOOCs (Massively Open Online Courses).
But here’s another option for online coursework to train new and existing entrepreneurs. This week I met Matt Clark, the CEO and co-founder of Amazing Academy, an award-winning young entrepreneur who built three successful companies before he reached 25. Together with co-founder Jason Katzenback, he’s now providing education for other entrepreneurs with a student base of 14,000 graduates so far, who’ve been prepared for entrepreneurship or to grow their companies further through a combination of online classes, training calls and live events. Students report combined results of more than $100 million in revenue over the past two years, particularly in the creation of online companies and the highly popular Amazon-oriented “Amazing Selling Machine”.
Clark’s specialty is online businesses and e-commerce, which is one of the fastest and most efficient ways for many prospective business owners to become an entrepreneur, as there is little (or much less) capital investment involved in running an Internet company, as compared to their traditional counterparts. But ease of the Internet aside, first time business owners are prone to rooky mistakes.
From his somewhat unique vantage point I asked Clark to share the beginning business errors he sees most. Here’s what he said:
- Don’t expect to be perfect. The mistakes people make when building new businesses are similar to what someone experiences trying to run a marathon for the first time. Your first business is not likely the one that makes you wealthy, Clark said. If you observe any uber-successful entrepreneur you’ll likely see many prior ventures that provided necessary learning experience. Like a first-time marathon runner, the time you spend on finding the perfect running shoes, running style, foot strike and training plan will make little difference when you’re huffing and puffing one hour in to what’s likely to be a four-to-five hour battle of willpower.
- Don’t get paralyzed by your fears. “We see new people get paralyzed by their worries about what’s coming,” Clark says. “What happens if a supplier doesn’t send my product? What if somebody sues me? What happens if I grow too big and need to change company structure?” These and a thousand other questions won’t matter if you never get a business off the ground, Clark says, but worries often stop prospective entrepreneurs from building any business at all. If you’re just stepping out of the starting gate, don’t squander your mental energy calculating how many thousands of steps you’ll take in the 24th and 25th miles of the race. Worrying prematurely will sap the valuable motivation you’ll need to pull you through the long road to success, Clark suggests.
- Don’t get derailed by your first setback. “We see far too many new business owners fired up with ambition that fades away with the first inevitable obstacle,” Clark says. When building a new business, understand that you will experience issues on a day-to-day basis. There will be customer service issues, product and inventory problems, employee issues. At one time or another, every area of the business will feel like it’s falling apart. This is the strain that comes from building something that’s never existed before by someone who’s never done it before (that’s you). “Like a marathon runner, expect to feel pain along the way,” Clark says. “But also know that after you work through the pain and the bumps in the road, the freedom you gain from knowing you will never have to depend on someone else for your financial freedom is well worth it,” he says.
Next, Clark shared with me his top three points of advice for dealing with new business cash flow, which for most new business owners is the biggest issue of all. Cash flow management for a new small business is interesting, Clark observes. You’re often in a Catch-22 situation in which you know you could make more money if you just had more employees and resources, but to get those additional employees and resources, you need more money. Clark is an advocate of building businesses through bootstrapping, using only your own resources and those produced by the business, to you’re your growth. On that basis, he suggests these three strategies that apply to investment funded organizations as well:
- Grow “lean”. Unless you do this, revenue generated in your business is simply going to go in one door and out the other, with nothing left over for you, Clark maintains. Especially at the beginning, focus on building your business with the minimum resources necessary. If you can build your business out of your house with a virtual team, do so. Don’t waste money on an office while you’re still figuring out your business model. If you can, do without the fancy website, the custom-built shopping cart, or anything that may make sense later on that only adds incremental value to your business for now. Make your business as low-cost and efficient in your early stages as possible.
- Use performance-based marketing. When cash is tight you can’t afford “branding” marketing campaigns (the term for the marketing efforts you have no clue how to measure, Clark maintains). Instead, focus on the forms of advertising you can measure. In the case of his own business, Clark attributes much of his success to a partner program that allows other businesses and students the opportunity to refer others to his products and earn a commission for doing so. “If they don’t refer anybody, it doesn’t cost us anything,” he notes. “But if they refer lots of people, great—they make money and so do we—but we maintain zero risk.” Affiliate and referral programs are a form of performance-based marketing that allows you to grow your new business without risk. But advertising vehicles such as Google AdWords, Facebook Ads or any platform that allows you to measure results to a penny are a way to grow efficiently, too. But don’t spend on what you can’t measure, or you’ll likely see your cash dwindling down a black hole (and Clark assures me he has been there as well).
- Use low-cost online resources. Now is the best time to build a business, Clark says, in that you can hire expert staff cheaper than ever from around the world without having to pay the fixed overhead of a traditional, brick-and-mortar venture. While there are also some down sides to hiring overseas staff, such as potential communication issues and lack of control, for a new business owner, outsourcing is a great way to build your business cost-efficiently in order to keep your cash flow as high as possible. Websites such as Elance.com, Odesk.com, and 99Designs.com offer access to graphic designers, programmers, writers, and hundreds of other specialist services you can access anytime you want. “I built my first business with a designer from Bulgaria, a programmer from India, and a team of customer support representatives from the Philippines,” Clark said. “It’s incredible what you can build when you have access to talent from all over the world, 24/7.”
Clark offered his personal advice on business and time management as well:
“I feel you have to be a bit of a time management nerd,” he said. “I’ve read tons of time management books, listened to time management audiobooks, and tried out at least twenty different time management methods to help me become a more effective business owner.”
As an employee, someone else dictates much of your schedule and priorities. But as a small business owner, your business’s future depends on effectively managing your time and spending sufficient time on the specific activities that drive your business forward every single day.
When starting out, you likely will be doing everything yourself, Clark notes. Customer support, order processing, marketing, and operations will all fall on your shoulders. But as cash flow increases in the business, you should delegate the most mundane and routine elements first. Usually, this includes customer service and order processing. Next, as your business grows, you’ll likely hire marketing staff and operations staff, and will continually chip away at your personal responsibilities to keep the business running. Eventually you’ll be able to spend 100% of your time and focus on the overall business strategy and vision instead of day-to-day management.
“One way I ensure I’m able to spend more time focusing on my business is by scheduling appointments and calls only between 2:00 and 4:00 in the afternoon, Monday through Friday,” Clark says. “This way I know that I’m able to spend the morning hours on my most important job, which is figuring out the vision and big picture strategies for the company to go forward.”
Another tip from Clark is to never go into a day without a plan and a list of items you want to do that day to grow your business. “I recommend building a list for the entire week before the week starts, then each day, pull from that list what you think you can get done that day,” he suggests. Ideally, the entire week’s list is completed by the end of the week. Then, you start the process over again with the next week. This keeps you proactive in growing your business, instead of reactive and emergency driven.