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02.19.2016

26 Tips for Startup Entrepreneurs from an Experienced Businessman

26 tips for beginner entrepreneurs in startups from an experienced businessman

For the past 10 years I have been doing internet business and during that time I managed to create and bring to profitability 5 own startups. Moreover, one of my main business is made-to-order web-development. Here I often receive orders from clients who want to develop their own internet startup. I have faced with different projects every day during 10 years. Many of these projects are startups in the full sense of the word. One of my first skills even in LinkedIn is Start-ups. Somehow all this startup romance attracts me. I like to build new companies or individual independent branches of business in existing companies.

While I have been creating my own startups and startups of my clients, I came to the conclusion that 95% of all startups have fundamentally wrong approach of making new companies and therefore is a failure. In this article I want to talk about my rather extensive experience in this difficult case and save beginners from fatal mistakes.

First of all let's look what I mean by "startup"? Primarily for me it is a business. It is a new project with untested idea, which we want to turn into a profitable business. Therefore, I always consider any startup as an entrepreneur-manager and I advise everyone to have such a position against startups. So my thoughts will be built by the point of view entrepreneur-manager.

Top 5 mistakes of the beginning entrepreneurs

The main thing - it's an idea. Basic problem of many beginning entrepreneurs is that they incorrectly start even to think about startups. Most people think that the main thing in startup is an idea, but they are wrong. The idea - it's not a business and even don't a startup. This is an intangible thought in your head, which may be erroneous. Till then, while this idea does not start to bring you money - from an economic point of view, it does not cost anything. Certainly, you will be very upset if you tell your idea to someone and this idea will be stolen. What if it can bring a billion? What if I am behind half a step to the great success? All these thoughts often appear in the minds of beginning entrepreneurs, but the idea - this is still very small.

Investments. Quite large percent of beginner entrepreneurs think that the most important thing - it's an investment. This is also wrong. Most internet startups could be started without any investments even with a pocket money that you have. If you don't have even some pocket money it is early to make your own startup. You need to learn at least how to earn something as a hired employee. If you have a work and earn something, this will be enough for the beginning. In any case, the investment - it is actually other people's money, which you get underneath commitment. If you previously was not as the director of the company and did not earn / spend money on business, then you will spend useless any amount of investment. Investments can only harm and de-motivate you on this stage of your personal growth.

Syndrome of teenager. You can observe that many beginner entrepreneurs have a "syndrome of teenager". It is when beginner entrepreneurs think that they know everything about the business and accurately see how to be successful. Even if the idea of a startup is right, the way to success will be changed 1000 times during of its achievements and as planned at the beginning - definitely won't be.

The main thing is the product. Almost all people begin their startup with development of product (often website can be as the product). On the website is focused all the resources, including financial. There are 2 mistakes. Firstly, probably, you will have a product created in isolation from the buyers and they may not want to buy it. Secondly, there may not be enough money for marketing and sales and this is more important than the product.

The Soviet type of management. This mistake generally permit managers,which are older than 40 years. People with established approaches to business, who studied "doing business" in 90-s, try to apply the same approach to IT projects. This can be expressed in project management methodology, when they try to use in the best case Waterfall, but more often they do not use any methodologies. Also it can be expressed in hard budget constraints on development and in blocking the actions of employees, when they are not perceived as the partners, but as the slaves. And there could be other interesting things.

In my opinion, it is the most serious mistakes, but not a complete list. Any of the mentioned mistakes probably will destroy your startup, but if there is more than one mistake – failure is 100%.

How to achieve a success?

I have briefly told about mistakes. Now I want to highlight a number of rules that will help you to achieve success and get into those 5% of successful projects.

  1. Test the niche.

    You should test the niche before a serious launching of the product. This can be done through verbal agreement and the first test of sales. We can use single-site that usually containing only basic information of commercial or non-profit organizations or a serious landing with the main information and check the reaction of the users. In some cases, you can even make a prototype or take standard site. In any case, you should not be based on guesses, but on real people's reactions to your product.

  2. Start with the sales.

    Sales managers have a saying: "Good sales manager can sell even the air!" Indeed it is: sales must be before the release of your product. Startup should be begin with an understanding of how you will sell your product. When you will understand how to sell, ideally you need to check this: find potential clients, tell them about your product and take payment in advance. Maybe you will not have a product, but you must be required to establish contact with a client and get at least a preliminary agreement. The most ideal case is to sell a lot at once. The received money give you an opportunity to create a product and you would not feel the necessary in the investments. Moreover, one of the first departments that you will need to build in startup is sales department.

  3. Team.

    The most important thing in IT is people. They will be the engine of your product. Find top-notch team that will be able to create, promote and manage your project. It is necessary to highlight the skills that are primarily needed for your project, part of the duties take on yourself (only that what you can do really well), take part of assistants for yourself, and the majority give to outsource for professionals. It is particularly important to give on outsource single or small permanent work, so you will not pay to specialist who will work 2 hours instead 8 working hours per day. Start with people who will be able to sell or help you in this by a variety of another ways. Don't forget that complete the project on pure enthusiasm is unlikely to succeed, and good experts are expensive.

  4. Methodology.

    It should be a project management methodology. I advise you Agile for a development large sites internet startups. This is only a part of management, but it touches one of the most important parts of the internet business - website. The bottom line is that you can flexibly manage the requirements and progress of the project. Internet project - it is always very unpredictable thing. Even the most experienced specialist will never say exactly how it should be done and how much time it will take. Due to the specific of our branch it will be better to choose a flexible management methodology of the project. Still, there are other parts of the company's management, but about them I will tell you later.

  5. Start with small.

    Very often beginners in startups try to build a "spaceship" and therefore they are bankrupt. Divide the project into beta version and other parts. Beta version should contains the most basic functions with which you can come into the market. After that it will be possible to update this product monthly. The task of startup - quickly and inexpensively bring a product to a market. Herewith the first cut-down by functions version must still be with a high quality. However it is not worth to do a greatly cut. The beta should carry a value and be able to compete on the market. And in general: simplicity - it's good!

  6. Marketing.

    Think about marketing from the outset. It must be taken into consideration when you create a product, website and in the future. Marketing should provide a good flow of customers and must be fully considered and monitored. The budget for marketing should be in several times larger than the budget for the creation a product. Don't think that a good product will sell by itself - it is a myth.

  7. External consultants.

    For some reasons it was decided do not to apply to external consultants on the expanse of runet. This is a huge mistake. Any startup has a plenty important tasks and for this solutions are needed top-notch professionals. It is not necessary to hire on bet the best expert in the market. It is possible to attract him on 2 hours, for example, using the consultation. During this 2 hours he decides or says how to solve some important issue and will take payment even 1000 $ for this 2 hours, but it will be better than you will try by yourself to solve the same issue without having the necessary experience and as a result it will causes much more damage to your project. If you have the budget you can hire even entire companies in the same format. This is foreign approach: to engage consultants or give something to outsourcing, which really works.

  8. Investments.

    Just start without investments. You don't need them on the beginning. Investor is a commitment and extra weight. If you can’t do pre-sales - this means that your idea is probably not as good as you think and if you take on board the investor, you can stay without panties at the end. The investor can be engaged when the idea have been already tested and you need money to accelerate growth, but not before.

  9. Start young.

    You can start to do your business at any age in spite of you are 20 or 60 years old. One day I stumbled upon research which showed interesting results: up to 30 years only 3% of entrepreneurs started the business. It was an American research. I think that this figure will be a little bit more in post-soviet countries. I began my own startup at earlier age and I advise to try your first business in 20-25 years, while you still have time, have parents who provide you and you haven't your own family. Startup will take a lot of time and most likely will bring a little money or even generate a loss during first 3 years. If you start young, next perfect time, when you can start is 30-40 years old. It is time, when you will get a lot of experience and accumulate a starting capital. In any case, in length of time business chances will begin to fall for various reasons.

  10. Do not give up.

    Probably, I would say 99%, will come the moment, when there will be so hard and you will feel that it is the end of your startup. If you look at the history of well-known entrepreneurs, you'll find that many of them were on the brink of bankruptcy or even bankrupt. For example, PepsiCo was 2 times bankrupt and this is a multibillion business! Honestly, my business for 9 years was 3 times on the verge of bankruptcy, but, thank God, I didn't become bankrupt.

  11. The paradox of growth.

    Faster growth drags more money to sustain it. In other words: successful project - the less of money. As long as your startup is just a growing small business, it is highly likely to be unprofitable. Try to prepare yourself to this truth.

  12. Personal income is scanty.

    Many people leave the job and begin their own startup in search of a better life, but everyone doesn't understand that personal income of startups will be scanty the next few years after the start. It is not necessary to believe in beautiful stories of good life. It will be better to prepare yourself that your personal income will fall in several times and more often to the loss until your startup doesn't turn into a stable business.

  13. All must be documented.

    Do you want it or not, but all agreements with partners, investors and customers are needed to be documented and you should treat to this very seriously. This is a business and it's best to be ready that sooner or later someone will try to throw you. Immediately divide share with the partners and secure it in the agreements. At once prescribe all conditions with investors even before receiving the money. In b2b sector make contracts with clients, and if you have any site service, like a SaaS, - make a contract-offer.

  14. Strategy and tactics.

    You must have a development plan for the next 3 years, which includes strategic and tactical ideas. Don't be confused with the business plan. There is an elementary, but very useful thing – tree of goals. The meaning of this method is that there is one big goal (the trunk) and a lot of small, which you need to reach before main goal is reached (branches). In other words, you can want to build a billion company, but on the way from the desire to one billion you will need to reach many small goals.

  15. Strategy of lean startup.

    You are lucky and you have the money? It's great, but no matter how much money you have, it won’t be enough. Begin to spend money carefully from the beginning and don't waste your money down the drain. Think ten times before you will buy something and is this thing really necessary. Remember the principle of "Occam's Razor", it can be used in everything.

  16. The site - it's still important.

    We're talking about internet startups, so website is very important. It will be the basis for big sales. It is important to achieve a good conversion, but before you need actually understand what the goals should be set in front of the site and what we mean by this "conversion." In order to create an effective website, you must begin with its professional design. Think about marketing, make professional selling texts, adaptive layout, etc. In many ways, the site for startup is also a tool of PR. A good website is expensive, but this is a website and in internet startup is worth to invest there money. Make a cool website and you will be taken seriously. Margaret Thatcher said: "The first impression can be made only once."

  17. Trust your team.

    If you began to do a startup and attracted to its creation professional performers, you should trust them within their competencies. It is very common to observe, when the founder of a startup tries to think for all and starts to horn in those spheres about which he doesn't know anything. The most frequent problem is when the founder says to the designer how to do design. If you have already attracted specialists, it will be better listen their opinions and sometimes even blindly trust.

  18. Delegate.

    It can be a problem for beginner entrepreneurs. You must be able to delegate your duties to subordinates with responsibility, otherwise you will be overloaded and performers will sit idle. You need to charge maximum work to performers, but constantly control it. Otherwise it won't be done or will be done by the way that you don't need at all.

  19. KPI.

    Before you are going to begin a startup, think about key performance indicators (KPI). You need to measure literally everything, especially at the start of the project that in case to correct its development. Think about what thing and at what stage is the most important for a startup? Often attendance could be the most important thing during the first year. Second year could bring you a good turnover and third year - net profit. Or maybe vice versa. It depends on the goals. You need to accumulate statistics and analysis, periodically do retrospectives and as a whole consider the experience of the industry. Ask yourself a question: «What can be considered as a success and what as a failure?»

  20. Legal person, offshores, etc.

    At the beginning of a startup legal person is not required. First of all try to make a major deal verbally and under this deal make a legal person. It is very quick operation, if you have a desire. Fortiori you don't need to go into offshores - it's for big business. When you are going to attract investors it is the only time it should be done. Don't make a legal person too late. During the product development, as well as after its completion, will be the ideal option to do registration of domain, copyright and trademark on a legal person.

  21. Lack of time.

    Almost immediately after the start you will have problems with lack of time. This is an eternal problem that can't be solved completely, but you can improve the situation. Firstly, you need to plan your work: for day, week, month, year, for 3 and 5 years. Secondly, divide all your work into groups according to the urgency and importance. Thirdly, try to delegate.

  22. Keep your word.

    Trivially, but not everyone can fulfill these obligations. Make promises very gently and carefully at the beginning. They can be given to customers, partners or employees and it does not matter. The most important thing always do this promises.

  23. Don’t work with your friends and family.

    If you break this rule, it is very likely to destroy your relationships with people whom you love. It happens almost always.

  24. You will be changed.

    Business changes people and you will be changed too. First of all, it will be changed your perception of the world. You will better understand it. The changes will take place in several stages: immediately after the start, after hiring the first employees and after conversion startup into a successful business. You should not be afraid. These changes are good.

  25. Do not allow "burnout of manager".

    If work a lot for wear, you may encounter with "burnout of manager", when work becomes uninteresting and motivation drops almost to zero. It's more psychological burnout, so this can be combated. Find a balance between work and rest, try to travel, try to increase positive emotions in your life and reduce the negative.

  26. Start right now!

    Most of the projects still remain in creator’s minds. Absolutely anything don't prevents you to start right now after the reading this article! For the beginning find one hour and start, further it will be easier.

About the Author

Nikita Semenov
Nikita Semenov
CEO, SECL Group Corporation
+1 (929) 237–12–11 info@seclgroup.com seclskype
Nikita Semenov is CEO of SECL Group Corporation, which structure includes the same name digital-agency «SECL Group», Catamba Web Studio, chain of «Kupini Commerce» web stores, «Digitov» Business School, «Taxov» legal company. Since 2002 has been working in IT, since 2005 has been CEO of SECL, which in 2008 has evolved into the group of companies SECL Group. Author of numerous studies and articles, lecturer of specialized conferences, independent consultant for the dozen of companies. Specialization – social networks and eCommerce.

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