I compare the way I felt as a new business owner to getting behind the wheel for the first time, freshly minted with my driver’s license. It was pure excitement and exhilaration. I couldn’t wait to cruise with the windows rolled down, and feel the wind blowing through my hair.
Having the guts to start your dream business is a huge reason to celebrate! However, the novelty quickly wears off once you start hitting a few potholes and roadblocks.
As a startup entrepreneur, you’ve probably spent so much time psyching yourself up to prepare for the launch, that you’ve neglected to plan for the aftermath that comes after everything is actually running.
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Here are 4 potholes I hit on my first joy-ride, and how you can avoid them as you start your own journey:
Mistake #1 Execution Without a Plan
When I first started running a custom paper design studio, I had an oversimplified idea of how a business made money — As long as I provided a solid product and customer experience, and spent a few dollars on advertising online or in magazines, people would come flocking, right? Silly newbie me.
By the time I had taken on multiple clients, I was already deep in the weeds of both a service and product-based business. I got so caught up in the grind of managing my clients and doing the work that I didn’t have a chance to plan out my long-term strategy and profitability goals. Plus, I was still working at my full-time job.
Because I didn’t establish any metrics or profitability goals from the get-go, there was no roadmap to where I was headed, and I became very reactive to the day-to-day issues. My energy and profitability took some major hits.
SOLUTION: Establish Business Goals and Metrics
Before you drive too deep into the woods, take a weekend to sit down and brain-dump all your thoughts and ideas on paper, essentially creating a simple business plan. Keep in mind there is no “one-size-fits-all” template, because each industry and business model are different — The point of this exercise is to create simple and actionable goals to hold yourself accountable to.
Then, you need to establish metrics as a gage to measure your progress towards reaching your goals. Often this is putting a number or ratio next to your goal in order to make it quantifiable.
Goal-setting helps you chart out your path to reach your desired result, and measuring the progress helps keep you motivated.
Your strategies will likely get tweaked along the way, but it is your roadmap to stay on track. As you gain more business experience and begin to understand what works (or doesn’t work), you will certainly go on detours, and that’s ok!
Mistake #2 Not Staying Organized
For someone like me who is OCD about being organized at home, it’s funny how much I let things slide at my studio! Organization became one of those things that I would “deal with later”, because it never felt like a priority.
Then, when I needed to find that one piece of important paper, I had to spend a whole day turning the office upside down only to find it in the middle of a random paper pile. Tax time was a nightmare! I scrambled to find all the bills, invoices, and receipts to catch up on my bookkeeping and attach backups to my government correspondence.
Would you spend a few hours a month to stay organized, so you could save days of frustration later in the year?
Hell yeah, count me in.
SOLUTION: Invest in Time and Tools to Combat the Clutter
- Use a cloud-based solution for bookkeeping — I use Freshbooks to go virtually paperless with my bookkeeping! I love that:
- Invoices can be sent to clients via e-mail, which gives my business a polished and professional look.
- Expenses can be automatically downloaded from my online bank accounts, saving me hours from not having to type the number in myself
- You can even attach pictures of your receipts to expenses to avoid having to dig through a shoebox to find them later on
- Best of all, I can even view reports and client correspondence on the mobile app so that I can check my books from anywhere.
- Use my link to get a free 30-day trial so you can test this out for yourself! You’ll be thankful later when your accountant needs to see backup, especially for tax time!
- Keep PDF copies on the cloud Use a PDF scanner app like Genius Scan to take a picture of paper correspondence with your phone, so you can keep them on a cloud solution like Dropbox or Google Drive for easy reference, no matter where you are. Keeping digital copies also allows me to search for them on the computer if I am too lazy to dig through all my file folders.
- Stash paper away in one place (that’s not your desk) — Invest in a filing cabinet to keep important documents like manuals, paper statements, checks, or official corporate documents in one secure place. This makes a pretty and functional addition to your office.
- Schedule a MONTHLY desk clean-up session and file all those straggling documents away. Shred or dispose of documents that you no longer need so that your desk doesn’t become a paper fortress.
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Mistake #3 Working With Everyone and their Mommas
The tendency as a newbie biz owner is to take on anyone and everyone who is willing to pay you real money for what you have to offer!
Today, I would give Newbie Me this piece of advice: Be picky about who you serve!
I know this sounds counterintuitive, but stick with me for a moment.
In my design business, I experienced two distinct types of customers:
Type 1: The Time-Suckers
These people needed multiple consultations before deciding to proceed (or worse, not proceed), after haggling to the penny. They were difficult to work with because they didn’t have a clear idea of what they would be happy with, so I had to spend hours justifying design decisions, and educating them about quality. They had high demands and yet were hard to please.
Type 2: The Ideal Customers
These folks came with their own ideas and trusted my creative process to turn their inspiration into reality. They saw the value in my service, and appreciated the quality of the final product. When they were thrilled with the end results, they promoted on social media, and sent referrals my way. They were a complete JOY to work with, and I loved making them happy.
SOLUTION: Hold Out to Work With Your Ideal Customers
Obviously, working with the latter type of customer is a win-win for everyone.You'll naturally do your best work for customers you genuinely enjoy working with. In return, they'll be your biggest fans.Click To Tweet
Simply put, you can’t afford to have your most precious resource — TIME — drained by customers who will never be happy and will never be true ambassadors of your business.
Remember, you can choose NOT to take on business if you don’t think it’ll be a good fit. While you can’t avoid them entirely, chances are, you may see some red flags in some early interactions, and can choose to steer clear (gracefully) of a potential transaction-from-hell.
Your ideal customers appreciate the value you bring, and will be happy to pay you fairly for said value – What a beautiful thing.
Mistake #4 Undervaluing Yourself
It took months before I gained confidence in the value of my advice, and the quality of the product and service I provided. Even as an accountant with a knack for numbers, I felt uncomfortable discussing pricing because I didn’t want to feel aggressive and “salesy”.
Customers shopped around, so they would compare my pricing to that of my competitors. I felt pressure to match my competitors’ pricing, even though I knew I provided a superior product and service.
This often ended up with me pricing myself lower than I should have because I didn’t want people to feel like I was ripping them off. Instead, I ended up ripping myself off because I wasn’t making enough profits to justify the time that had to be spent completing their project. It made me reluctant to go above and beyond to do something I knew was worth more.
SOLUTION: Price Yourself What You’re Worth
Time is your #1 resource as a business owner. There are only 24 hours in a day, and only a portion of that is devoted to serving your customers (assuming that you sleep occasionally). You must ensure you are compensated fairly for the hours you put into directly serving your customers.
Pricing is a multi-faceted issue which I will expand upon in a future blog post. But as a simple rule of thumb, you should at the very least determine an hourly rate for your own time + cost of materials, and ensure the price you charge covers this cost.
- Make sure your direct labor costs take into account all of the time required at different stages.
- Time spent on activities such as: consultation, research, testing, customer service and troubleshooting should be tracked and quantified. This ensures the product is priced high enough to cover all the true costs of sales, production, and after-service.
- Ensure you are compensated by the hour for projects of an uncertain length.
- For defined projects, you can set a package price. Make sure the customer understands that the package includes a fixed number of hours allocated for you to provide the service(based on your best estimate). Add in controls to regulate the time you spend such as: a fixed number of revisions to a project, or a maximum number of design proofs. This way, any additional work that is required above the original scope can be quantified and billed separately.
These tips are just the tip of the iceberg…
What are some things you wish you could have done differently before you took on something huge?
To hitting the road confidently!
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