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Eureka: Mistakes startups do
by Jay Gutman
2017-01-04 12:03:46
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So you want to set up that startup. You have an idea for a small business, and you daydream about becoming the next Apple, Microsoft or Facebook. The sky’s the limit. You got that loan, or that angel investor believed your idea was feasible. Before you rush into things, here are some of the mistakes I’ve seen when dealing with startups around the world. The mistakes are in no particular order.

start01_400Mistake number one: not chatting excessively with lawyers

The first expense you will want to make involves talking to several good lawyers. I say several because you will want a multi-dimensional side of what the laws and regulations are and what kind of legal trouble you could get yourself into.

You will want to have hour-long multiple chats with lawyers, either from consulting firms or from law firms, or those involved in private practice. I like to joke that you will need an overweight lawyer, a thin lawyer, a female lawyer and a lawyer with an unconventional name. I like to joke that the overweight lawyer will tend to paint a rosy picture of what could happen, the thin lawyer a detailed view of the dark pitfalls you could fall into, the female lawyer a more careful and strict interpretation of what could happen and the lawyer with a strange name could perhaps come up with strange cases that have happened to people in your business. Not always true but you get the idea.

Laws change all the time, sometimes for the better, sometimes for the worse. Strange things can happen in the business, and there are always laws that you were not aware of that are there to protect you. Stay away from lawyers who offer written reports of the legal framework for people in the business, you will want to pay those lawyers who like to share lots of funny and not so funny anecdotes of what has happened to people in your business. You will also want a lawyer who cites his or her sources, rather than those who talk exclusively in terms of “I know someone who.”

Mistake number 2: Not talking to the people who are in the business

I know too many people who tell me “I don’t want to talk to people who are in the business because I don’t want them to think that I am stealing their idea and want to compete with them.” But let’s face it, once you are out there they will know that you are out there, so why waste a chance to talk to them beforehand.

People in the business will sometimes offer misleading advice, or perhaps offer pessimistic perspectives (which are sometimes a warning sign to stay out and perhaps choose a different path) but if the business is thriving they will offer sound, useful advice. If they say it’s tough out there, it probably means it’s tough out there.

Mistake number 3: Hiring (way) more people than you need

Depending where you live, each person you hire will cost you about 20,000 dollars a year or more. Oh but I could start my business in India and China and pay my staff a few cents an hour. Good luck finding qualified people with those wages, the qualified ones probably found better paying jobs or are trying to network their way to better paying jobs. Can you bet on 20,000 dollars of profits a year? 40,000 a year? 60,000 a year? Whatever the profits you’re looking at, divide that by the number of staff you’re hiring.

Mistake number 4: Using corporate culture advice from your business school textbooks

Torturing, blackmailing or throwing things at staff is illegal in many places and that includes denying toilet breaks. There’s no weird or unconventional way to motivate your staff. Some large companies get away with the crazy stuff, but you’ll want to treat your staff with utmost respect or courtesy, or be prepared to invest large sums in legal fees. Ask your lawyers what the laws and jurisprudence is around handling staff.

Mistake number 5: Using sales advice from your business school textbooks

The best way to sell a useful product is to have a useful product. You’ll naturally find good arguments to sell your useful product.

Mistake number 6: Using a “foreign language” when selling your product

If your company teaches French to people who don’t speak French, it’s probably best not to advertise the school in French, because people won’t understand the advertisement. If your company sells a specialized product or a product to specialists, it’s probably a great idea to get in touch directly with those specialists, without going through generalists.

 Mistake number 7: Relying on interns to get anything done

Interns are either fulfilling a school requirement or want to wait before they have a shot at getting hired before getting anything done. If they sense they’re not going to get that contract, don’t expect top-quality work.

Mistake number 8: Not having many friends who you agree with

What’s the best way to sell a product? Flyers? Advertising? The more friends you have, the better. That’s because your friends will be your first clients or will recommend your first clients. That is if you get along with those friends and don’t have too much of a bad reputation.

Mistake number 9: Not convincingly explaining what your product consists of

What’s the best way to explain your product? A powerpoint presentation? Public speaking? A PR video? A script? An allegory of the current political climate? If your friends or potential clients don’t understand your product, you can’t go too far.

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