5 Mistakes I Made When I Started My Business & How to Avoid Them

Today we have Rieva Lesonsky, CEO of GrowBiz Media, candidly sharing the top 5 mistakes she made when starting a business, and how you can avoid the same errors.

Every startup entrepreneur makes mistakes. That’s how we learn, right?

In the interests of helping you learn, I’m going to share 5 mistakes my partners and I made when we started our business—and how you can avoid making them.

Mistake #1: Pricing our services too low

Pricing for a product-based business can be simple because there are clear-cut costs involved, but pricing for a service business is a little hazier.

When we bid on our first job, we had no idea how to price our services. Even after we figured out an hourly cost (taking into account our overhead), it was hard to calculate how many hours the project would take. And we were in such a rush to put in our bid, we forgot to take into account all the costs we’d incur—such as the services of a Web designer.

After having to pay some unexpected expenses and barely breaking even, we learned the hard way that you need to build a little wiggle room into your pricing. That way, even if a job takes longer or costs more than you expect, you won’t lose money on the deal.

Mistake #2: Not asking for the sale

I’ve spent most of my life around salespeople, but I’m not a salesperson myself. That’s why when I first went out on my own to make sales, I often fell short.

At the last minute, I’d get cold feet and not ask for the sale. Deep down I’m shy and closing just didn’t feel natural to me. If you feel the same way, you’ve got to get comfortable with selling or your business will never succeed. Either build your own sales skills, or find someone to sell for you.

Mistake #3: Working without a contract

When you’re a startup hungry for the sale, this is an easy mistake to make. You go back and forth with a prospect for weeks or even months.

Finally, he likes your proposal, and says “Go ahead!” You eagerly get started on the project or the order. It feels like the deal is done – you’ve spent so much time hammering out the details! Only one problem: There’s no signed contract in place.

No matter how quickly the deadline is coming or how urgent the client says the order is, you need to let them know that you’re ready to start work as soon as you have their signature – but not before. This advice applies no matter how well you know the client or what type of prior relationship you have.

Mistake #4: Spending too much time and money on payroll

Even though we are a small company, we wanted to buy systems that would grow with us – not ones that we would quickly outgrow. So we got talked into subscribing to a payroll software system that was much bigger and more complex than we really needed.

After one of our partners spent literally months in training to learn the system, we finally faced the facts: This was a waste of her time. When our subscription ran out, we researched other options and found a great deal: Bank of America’s Easy Online Payroll®.Easy Online Payroll was perfect for us as a small business with fewer than 50 employees.

We can access everything online, with no software to buy or install – and the service calculates tax withholding, does direct deposit and tax filings and payments, tracks vacation and sick days and more.

Mistake #5: Sticking with an outdated business plan

OK, we didn’t really make this last mistake – but we easily could have. Fortunately, the recession, which hit as we were launching our company, forced us to reassess our business model.

Although we had spent lots of time and brainpower creating our business plan, we realized that this plan wasn’t going to work in the new economic reality. We had to revamp everything, targeting an entirely new market. It worked for us, and also reminded us how important it is to frequently ask yourself, “Is what I’m doing working?” If it’s not, you need to come up with a new strategy.

Rieva Lesonsky is CEO of GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses. She recently conducted an expert forum on Bank of America’s Small Business Online Community, where she answered questions about navigating a small business through the current economy. You can also ask her questions at www.askRieva.com or follow her on Twitter at www.twitter.com/Rieva.

 

Photo Credit: daniel spils

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