Entrepreneur and business angel – Dmitry Kostomarov told us about the most popular and typical mistakes of entrepreneurs. Dmitry worked for 7 years in a large international FMCG company, 8 years in marketing services, 8 years in retail support, and currently focuses on projects in the field of EdTech, HRtech, work force management, health management. His current projects are actum.pro, e-queo.com, mr.wolf. We recommend listening to it for all beginners and comers..
Before starting any business, you need to answer two of the most important questions: “Why do you need this?” “What is the result?” In general, with these questions you will have to start every morning and end with them every day. Let’s look at the development of a new business and determine what mistakes entrepreneurs can make (and successfully do) at each of the main stages.
The first and biggest mistake of beginning businessmen is that they invent goals other than money. And even if they talk about profit, they do not indicate the order of numbers. We give an example. To me, as an investor, guys came who decided to make an instant messenger with many social functions and chips for networking. And reasoning that it is enough to change the world, and money thanks to this will flow like a river. To a simple question about how much they are going to earn, the founders talked for a long time about the advertising model, partnership with aggregators, and more. If I started a mobile application, I would hardly have done it for less than a million dollars. Given the margin in the mobile, if you pay for it, you need to earn five million for this. Which means in practice a million users for $ 5 or 5 million – one at a time. Hence the final question: what in this product suggests a paid interest of 1-5 million people?
You always need to start with the product. Old and reliable forms of planning are still not outdated, so you can just go along the 8P matrix, adopted to describe the product or service business. The matrix will allow you to understand and see the most common mistakes entrepreneurs make on the way..
First P. Error: Waste Product
Product It’s not so important what you came up with – a cross-scoring platform for obtaining loans, bars for a healthy diet or just decided to repeat a successful model from another market – you should make a normal product. Now a typical mistake of projects at the start is that MVP (minimally viable product) is, oddly enough, at an excessively minimal level. They expect to start up faster and test hypotheses, and so on. Forgetting that we are living in a digital age in which good experience spreads as fast as bad. And by making an unsuccessful product, you get a negative user experience.
Your project must be really needed. And here we can observe another typical fallacy of aspiring entrepreneurs – “no one did this.” They consider this sufficient reason to make stupidity first, and you? At the same time, you can define the features of a good product in several phrases: it improves consumer experience, solves an unsolved problem at an adequate price, or just looks like another good product, but costs less or more is available.
Second P. Mistake: Neglecting Price
Price, price. The favorite neurosis of some entrepreneurs is shame for making money. These businessmen are immediately visible in the culture of their teams, which only do that they give out discounts and reduce costs, reducing the value of their product.
You don’t need to go far for an example: for example, my partner on the e-queo.com project constantly gives fantastic discounts, although the product really has no analogues and is magnificent from all points of view. Typically, such entrepreneurs say: “we earn on the other.” Well, what can I say? You need to earn in business on every breath. All that you haven’t earned now, you will NEVER earn.
Third P. Error: Incorrect calculation of customer value
Place, place. Where you sell. Recently came a project with snacks of healthy eating with an ideal calculation error. Their model had a beautiful margin and network sales. I had to explain that there is always a distribution price and it never happens that you deliver a product and there is a line immediately after it, and the distribution price is zero. Attracting any client costs money. For example, SkyEng, according to rumors, spends 7,000 rubles to attract one client. If so, then the project simply cannot be profitable, because there is a gap between the numbers. The conversion to a full-fledged lesson cycle, taking into account the margin, is simply lower than you can afford on such numbers.
Fourth P. Mistake: Premature Advertising
Promotion. The rating about the mistakes of entrepreneurs can not do without this. One of the top misconceptions in the marketing field, of course, is promotion before starting a business or project in the expectation that interest will be warmed up and people will look forward to the official launch. This happens in one case out of a hundred. And in 99 others, the client disappointedly writes off the product as unsuccessful, and competitors make a successful release. A classic example from this area is the birth of the Lily selfie drone. While the founders were engaged in the promotion of a non-existent product, DJI released the third generation..
Fifth P. Error: Business with friends and relatives
People The people who work with you and represent the company. The worst thing a project can do is hire friends and relatives. Mountains of literature have been written about this and this can only be done when you have not found another way to part with friends, family or business. Another curious phenomenon in this area is associates. Many founders are so grateful to those who started with them that they forget about the need to keep their distance. And often over time, they are faced with the question of who did what for the project, and is the founder important in principle? It is sad, but it is better to part with people from the time the business started, if you are not ready to make them partners. Such mistakes of entrepreneurs probably exist as many as entrepreneurship itself..
Sixth P. Error: Excessive process complexity
Processes The processes are different, but it is necessary that they are convenient and reasonable. Most start-up entrepreneurs make a mistake and start thinking of the project as a future corporation, creating excessive regulation of the simplest things. Or letting your employees spin processes. As a result, without revenue, we get bureaucracy. At the initial stage, the process can be only one – endlessly try to do better and cheaper. And for any attempt to invent a bureaucratic procedure – “execution”. Even if you don’t understand anything in bookkeeping, but you allow accountants to build a wall for employees, this will kill the business faster than you can realize what happened. Back office is the first business killer in nature. If you do not immediately explain to these bureaucrats that they are nothing more than a service bureau for those who make money, they will drown you.
Seventh P. Error: An aimless partnership
Partnership, partnership. Entrepreneurs make the most mistakes right here. Firstly, it’s impossible without partners. But you can and should do without those whom you call in the project only because you are scared. Partners must give the business what you yourself cannot. And for psychological comfort it is better to turn to professional psychoanalysts. Partnership from the point of view of b2b is also an important aspect, and 90% of entrepreneurs and 99% of corporations sooner or later fall into the trap of the phenomenon “I am crying, I am right.” Partners, suppliers, participants in the supply chain – all work in one bundle, for the same purpose – your money in your pocket and increase it.
Eighth P. Error: Relation to Production
Production, production. 8P has many interpretations. If you have production, then this is productivity and quality, if you are a service, then physical evidence is intangible, but real evidence for the consumer of your existence. There is an endless clearing for stuffing cones, which are better talked about in a separate material.
And we will end this text with one important truth: business is the projection of relationships on money. Normal human relations, respect for yourself and partners, employees, contractors are more likely to lead you to a result than something else. An entrepreneur is a genetic predisposition to risk and the ability to work in a state of extreme uncertainty. Such a psychotype rarely gives rise to absolute adequacy and friendliness, but you need to try. So things will go easier and easier, and the typical mistakes of entrepreneurs that are inherent in others can bypass you.
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