When it comes to starting a new business, it can be hard to be mindful of the many pitfalls and challenges when there are so many new and exciting things that need doing. But underestimating the impact of seemingly small decisions can come back to haunt you in the long run. Start-up mistakes can hit you hard.
It’s therefore no wonder that new businesses can sometimes have a rocky beginning. I’ve launched start-ups all over the world – including London – and I’ve learned a lot from the start-up mistakes, which I’m now putting to good use at finder.com/uk.
Here are some of the common mistakes I’ve experienced personally or observed in others over the years:
Lack of research
Before even launching, you have to know the market inside and out. Who are your biggest competitors? What do they do well? What are they not so good at? And, probably most importantly, who is your target audience? Assuming that ‘someone’ will want what you’re offering isn’t good enough. Aim for specifics. It helps if you’re part of that target audience but nine times out of 10 you are not and so your personal perspective can be quite misleading. Talk to your target audience and build personas based on the characteristics of your most common users. These personas will help you objectively evaluate if a development or innovation is likely to succeed.
At finder, we spend a lot of time researching new markets from every conceivable angle and talking to people who are in the know or who offer a unique perspective. We also invest a lot of time in understanding the problems our target audiences are trying to solve so we can develop a product that meets real needs.
So, in whatever niche you’re launching in, you need to be the all-knowing guru with access to all the relevant data, analysis and expertise. If you don’t fully understand whatever problem it is that you’re trying to solve, you’ve already failed.
All eggs in one basket
Imagine this. You have a great idea which you are sure everyone will love and buy in droves, so you spend months, even years, building a ‘perfect’ product. Yet when you launch, nothing happens. You’ve invested so much in the product so you persist, then slowly it dawns on you that you got it wrong. Although you now have a better idea of what people want, you’ve exhausted your funds, wasted a lot of time and it’s frankly too late!
A much better approach is to develop an agile business that can ‘go live’ quickly and often with new ideas. You then simply measure what’s working and reinvest in these areas, while closing the ideas that missed the mark. One of the mantras of finder’s co-founder Fred Schebesta is if you’re not making mistakes, you’re not trying hard enough. Launching a business is a risky venture – mistakes are bound to happen. Just make them quickly and learn from them.
Everyday I’m surprised at finder at the things that work and the things that don’t. Some key business opportunities have been identified in areas I had placed a low priority on, but by getting out there and testing more and more things, the cream ultimately rises to the top. One good example of this is retail fashion, which is performing well in terms of organic traffic and conversions.
Underestimating required investment
Starting a successful business with true growth potential can be an expensive undertaking and you’re not doing yourself any favours with optimistic forecasts and budgets. In a startup, many of your assumptions will have huge margins of error, so while hoping for the best, prepare for the worst. Trying to make a profit in the short term will stifle your growth and all too often, this leads to small businesses staying small and never realising their full potential and valuation. But never let anyone use ‘investing’ as an excuse for poor spending. Always spend frugally. This doesn’t mean not spending at all, but rather getting the best deals and most cost-effective solutions.
We spend thousands of hours researching how to get the best deals, and this not only helps consumers, but also business owners and managers. I’ve learnt so much about international money transfers for businesses as we outsource talent all over the world. We were losing money from using the wrong money transfer service and by switching providers, we managed to save thousands of pounds.
Underestimating the value of brand
I learned very early on the power of establishing a brand for a start-up. It helps attract staff, close deals and gain media coverage. Brand covers much more than just a sharp logo and marketing collateral, it should be defined by the very essence of your business. It should reflect your culture, values and mission, and should permeate every aspect of how you present your business and position yourself in the market. Developing a brand identity can be time-consuming and requires consultation with your team, customers and investors to ensure it’s authentic. Investing in good design is essential and well worth the investment, as in business more than anywhere else, first impressions count.
finder is an unknown brand in the UK and entering a very competitive market. I’ve needed to spend quite a bit of time on our positioning to communicate to key prospects and influencers the fresh ideas and approach finder is taking to the UK comparison market.
Lack of focus
I, like many entrepreneurs, can easily get distracted by new ideas or opportunities. Although this inquisitive mindset is very important, it can lead to a lack of focus on the core business imperatives. At finder, we use OKRs (Objectives and Key Results) to keep everyone on track and working towards common goals. OKRs are a framework for writing down specific goals and tracking outcomes. I’m a massive convert and it’s definitely a tool that would have helped some of my early start-ups back in the day.
Choosing the wrong location can make or break a start-up. If you’re based somewhere that doesn’t attract the best talent then you’re setting yourself up to fail. Likewise, starting up in an area with sky-high rents and inflexible long leases can make growth painful, which I quickly learnt after setting a business up in Victoria, London.
When we launched finder.com in the UK, I had the luxury of working from home until I found the right location. After considering a number of London locations we selected Croydon Tech City, dubbed the ‘Silicon Valley of South London’ for its close-knit and rapidly growing tech startup population and £5.25 billion redevelopment plans. Although Croydon does not instantly spring to mind as a desirable location to attract staff, we have found flexible office space at a reasonable rate. It’s also right next to the hyper connected train station and BOXPARK (based on the Shoreditch original) with cool cafes and great places for lunch and drinks. The location has been very popular with staff looking to escape the costs and unpleasantness of a central London commute.
So it’s worth thinking outside the box when looking at locations. Put yourself in the shoes of your prospective employees. Consider: where have the experts congregated? Where are similar startups located? You can even look at the long-term success of other start-ups in the area. Last year, Cambridge was the city with the highest start-up survival rates at 49.5 per cent, yet London has the highest number of them plus receives the most funding.
As a start-up, especially one just launching, you have to be flexible. You may have had early success, but the market is moving rapidly and the idea you’ve been capitalising on has a shelf life – don’t let that get you down. Just adapt, pivot and overcome, trusting in your startup culture and expertise.
Jon Ostler is CEO at personal finance comparison website finder.com/uk.