Avoiding the following six common mistakes can save a lot of "tuition money" for your start-up business.

Two brothers founders of Woolly Pocket

Text | Lorie A. Parch

Like all start-ups, Rodney Nelson also needs to provide support for his company Woolly Pocket Build a great website. He founded the company with his brother Miguel Nelson to sell exquisite, environmentally friendly plants online. But they encountered some problems.

“Our first website was designed without following the standard rules of a website,” Nelson recalls. He lives in Phoenix and works as a business management consultant. "The navigation function was difficult to use, and customers had to scroll to the bottom of the homepage and then scroll to the next page to find the 'Buy Now' button."

The brothers began looking for another. a programmer, but their second e-commerce site was also not working very well, and they found it difficult for the technical team to respond quickly to it. "The first design of the website cost almost US$7,000, and it needed to be revised six months later." Nelson said, "The second time we spent US$15,000, and we felt satisfied at the time, but it did not bring any benefits to people. It was refreshing. Then we started looking for help from a company a year later. So we designed three websites in one year and ended up redesigning the website four times in a year and a half. This is when it really works.”

For your business, it may not only cost you so much to build a website, but also everything else may require you to pay “tuition fees.” ——This is Murphy’s Theorem for startups. Running a start-up seems to cost money everywhere, and it’s hard to be smart enough to get value for money at first. But some common mistakes can doom a bootstrapped startup. Here are six pitfalls to be wary of and professional advice on how to avoid them.

Expensive price one: weak team

Bill Aulet is the managing director of the Martin Trust Center, a subsidiary of MIT Entrepreneurship. He is also the author of the book "Disciplined Entrepreneurship". He believes that picking the wrong team is one of the most expensive mistakes entrepreneurs make, not only causing a huge loss of revenue, but also easily destroying morale.

He explained: "Recruiting for a job in a startup looks like playing basketball on the court. You can pick your friends to play with, but if you want your team to always have opportunity to compete, then you have to choose your teammates carefully.”

Recruiting people with a variety of special skills is critical. But Aulet advises: “Just like a great team, they must hold the same values ??and have the ability to still trust each other in difficult times. Based on this, be able to work with your co-founders and early employees under heavy pressure. Supporting each other is often more important than friendship."

Expensive price two: biased pricing

Sarah Shaw, CEO of Entreprenette, a consulting firm in Durango, Colorado, said: "The first company I founded. One company was a handbag company, and the biggest mistake I made was pricing. ”

“I didn’t expect that for clothing and accessories, you have to allocate the required fabrics, including the wasted fabric area. It’s taken into account,” Shaw explained. Because she lacked an accurate understanding of costs, she failed to price her products accurately.

“I think people generally think that pricing is twice the cost, but that’s not true.

"She said, "After accounting for marketing, showroom fees and other expenses, the pricing should be 2.5 times the cost. ”

In the first two years of joining the business world, Shaw invested US$100,000. Thanks to her own persistence and word-of-mouth media spread (many celebrities like her handbags), the company finally achieved annual revenue 1 million US dollars, and successfully attracted investors, but after the "9·11" incident, the company fell into a downturn and eventually died in 2002.

Blue Oak Energy CEO Tobin Booth. Like Shaw, it also paid a heavy price for its wrong pricing strategy. In 2010, the California solar photovoltaic system builder signed a contract with a retail company to install solar equipment for the latter in eight states across the United States.

“We have zero experience dealing with this type of complex order in such a competitive market. "We didn't know in advance the tax liability that we would have to bear across so many states, and we didn't know the labor costs in different states," he said. Moreover, due to weather and transportation reasons, delivery delays were also caused. ”

The company’s failure to plan a specific time for installation resulted in delays, which resulted in additional warehousing costs. In 2011, our losses reached $500,000. Booth revealed that he was responsible for the incorrect valuation It is the worst experience as an entrepreneur, but he also said that it is not without its benefits: "As the old saying goes, 'Eat a bite and gain wisdom. ’ The most painful experiences are also the classes where you learn the most. ”

Expensive price three: missed opportunities

When you have a killer idea, you naturally want to package it well and promote it to the world. But even people without CPA qualifications know that the longer you take before publishing an idea, the more money you’ll spend

“This is a common mistake people make. Wrong, especially for those in the tech world. Drew Williams, co-author of the book Feed the Startup Beast, analyzed, “Many skilled people want to make it perfect before launching an App, but this often means that it takes a very long time and costs a lot. . "This mistake is likely to put you in a desperate situation - before gaining consumer recognition, you need funds to maintain normal operations and make progress in product development.

"You need to combine the most original , after the basic product vision is perfected, let more people know about your product and find buyers for it. "Find one or two customers who are interested in your product and willing to provide experimental support for you to build, test, and modify the product," Williams advises. There is always a certain gap between the product and your vision, and you need to explore slowly. If you have a real customer behind you, you can create a better product in a very cost-effective way. ”

Expensive price four: Technical illiteracy

When founding Traklight, a software company focused on helping individuals and businesses identify and protect intellectual property rights, although Mary Juetten did not have to A Luddite (a person who opposed capitalist oppression in Britain from 1811 to 1816 by destroying machines and other methods) who hindered technological progress, but she did not know anything about technology, Juetten said: "I know how to show what our software can do. What... But I don't know much about software coding or website development or anything like that. ” Juetten is a certified public accountant with a CPA qualification in Canada.

Previously she relied on the experience of the company’s other co-founder in the technology field, but when their partnership ended, she fell into It was a mess. “This was the biggest mistake I made: I was always looking for the best opportunities to collaborate, but I didn’t let myself learn more programming languages ??and didn’t bring in talent in this area.

”

The team she recruited to create the Traklight software division told her that there was “no way” to use one programming language and that one “had to” use another programming language to build the website. “If you design a website for me Employees would come up to me and say, 'You'd better use this color instead of that color,' and I would raise all kinds of questions. But I have never expressed any opinions on the matter of programming languages, because it is a technical issue. "

The four-month period reserved for software development was extended to eight months, and later extended to nine months or even longer. "If I have professional technical knowledge, I can definitely win more. With more time, products can be brought to market earlier. "She said, "So those entrepreneurs who are 'technologically illiterate' like me need to be self-taught. ”

In the end, Juetten took the “Essential Technical Knowledge for Entrepreneurs” course. She recommended that other business founders who need relevant professional knowledge visit Codecademy, a fun programming website, or through the entrepreneurial education company General Assembly. Training courses to obtain corresponding solutions.

Expensive price five: distressed legal fees

Booth of Blue Oak Energy is very eager to get the order that spans eight states in the United States. Redraw a quotation, but he also deeply regrets being too frugal with legal fees and other legal expenses when the company was still in its infancy. “If I could reorganize the early employees, it would cost a few thousand dollars to hire from the beginning. How nice it would be to have a lawyer draw up a proper contract!" he recalled. "My mistake was not finding a lawyer who really understood the company's business. "

Many of the company's early customers did not repay the cost of solar equipment as scheduled, and Booth found a debt collection company to cooperate. He said that he also suffered some losses in the process: "I found that in our contract, There are some clauses in which the other party does not bear attorney's fees. "Today, Blue Oak Energy's annual revenue has reached 20 million U.S. dollars.

Shaw also had a similar experience because when she signed the contract, she did not know that the company's trademark rights named after her should belong to her. , so when investors negotiated to purchase the company, her name was also purchased. “I can no longer use my own name to start any company. ” She was very remorseful, “I wish I had hired a lawyer to remind me. ”

Expensive Price 6: Saving on Promotional Fees

Williams, the writer mentioned above, said: “Many entrepreneurs will think that others need to spend money to promote their products or services. But my company doesn't need it, because my products are good enough and the aroma of the wine is not afraid of the depth of the alley. "Another myth is that you can build a brand and attract consumers for free through social media. "Social media doesn't provide a free lunch. ” He said, “Being just right on social media often requires an incredible amount of effort, and it usually takes you six months to a year before you make even a small amount of progress—in a word, it’s not a Promotional tools that enable quick response. "

If you are not sure how much budget you should invest in marketing, Williams' suggestion is to invest 10 to 20% of the company's estimated gross revenue. "As your company gradually stabilizes, this proportion can be appropriate. Reduce it to 5-10. If the company becomes the leader in the market, it only needs to invest 5 or even lower. "

After the Traklight website was launched, Juetten found that the company's ranking on search engines was not ideal. She recalled: "No one found us through search. "So, she decided to invest a certain amount of marketing expenses. "For a small company, the first promotion expenses are staggering, but we did not adopt the method of modifying the website, but launched email marketing and CRM (customer relationship management). )". Now this initiative has begun to bear fruit: in April 2013, the Traklight website had only 100 monthly visitors; by the end of that year, the number of monthly unique visitors had climbed to 2,800.

How much loss has Juetten suffered from the lag in software development and marketing? She estimated that “tens of thousands of dollars were wasted on meaningless programming language updates, but by This may cause hundreds of thousands of dollars in losses due to the time and cost of delaying the launch of the product.” If not, "we should be much better off than we are now."