The 4 Warnings for a New Startup
1. Don’t under price yourself.
When you’re just starting out, you may be tempted to offer rock-bottom prices for your goods or services. After all, you don’t want to alienate potential customers by charging too much…and isn’t underselling the competition a reliable strategy? Well, maybe—but that’s not the way to make a profit. Especially when you’re just starting out, you can’t be in the business of offering mega-discounts. If you recoup only enough money to pay labor and operating costs, you may be helping to feed your employee(s)’ family, but not your own.
“Under pricing is without a doubt the biggest mistake new business owners make,” Often, the urge to undercut the competition is just too great, but doing so can quickly hurt your business. What you need to do first is figure out ALL your costs and what YOU want to make, AND THEN A LITTLE MARGIN FOR RESERVES (this will soon be a blog post) and then use that information to determine the price. After determining what you need to charge to make what you set out to make, you may find the business you chose does not work. Yes this has happened to me more then once. There are also many ways to add value to your services that will allow you to charge more if you have done your homework identifying what your competition fails to offer.
2. Make room for a marketing budget.
One of the biggest mistakes new business owners make is not including a marketing/ advertising budget in their operating costs. In a nutshell, this is the money you invest every week or month to tell your community why they need your product or service and why your company is the one they should choose.
If you do not reach new prospects and retain existing customers, you won’t be in business—you’ll be bankrupt. Quick tips- First, figure out what makes your business unique: what it offers, why people need your product or service, and why consumers should choose your company over any other. This is called your ‘unique selling proposition.’ Use all or part of it to create taglines, logos, marketing messages, etc. that will enable you to advertise through websites, social media, newspapers, fliers, etc. Then do a little research to estimate how much these types of advertising might cost so that you can budget for them.
3. Hire smart.
The idea is to prevent your side business from eating up a lot of time. That’s why the goal is for you to NEVER EVER be the one actually performing the service you provide. And that means hiring smart is a must. If your business will need one or more employees other than yourself (this is especially likely if you’re starting a service or retail business), be aware that how and whom you hire will affect how successful your business is. Before you even think about placing your first employment ads, spend a few minutes get familiar with federal, state, and local labor laws (these cover areas like hiring discrimination, child labor, independent contractors, immigration law, and more).
Once you’re familiar with all applicable hiring laws, it’s time to get the ball rolling, I recommend making sure that you can get the labor you need before you officially open your doors by running test ads. If you don’t get five applicants within three days, you might want to rethink which field you’re going into, because you want a business that is effortless to hire for.
When you begin interviewing be sure to look for talented, smart, experienced, and competent people with integrity. Don’t automatically hire friends and family members because it’s convenient! Remember, experience, competence, and reliability are invaluable assets
4. Don’t let the other guy outperform you.
After your business opens its doors, it will develop a reputation and faster then you think. Whether it’s a good or bad one is largely up to you. To make sure that customers hold your company in high esteem, focus on providing great service to each and every customer from day one. Word of mouth is important for the growth of any new business and providing those little extra touches will get people talking about you in a positive way.
Let’s use a lawn mowing company as an example. To show that you do the little things that big companies won’t, you decide your employees (BONUS – will wear a company t-shirt tucked in with khaki shorts – this is extra but it drives me crazy when new business owners skimp on image) will pick weeds out of flowerbeds for no extra charge. This takes 5 minutes but will make a huge impression. In this scenario, I would recommend giving employees a postcard printed with two boxes (labeled ‘lawn mowed’ and ‘flowerbeds weeded’) for each visit. At the end of the job, employees check each box and leave the card with the customer. Not only does this make sure your employee does the work—it also shows the customer how important this ‘extra’ weeding service is to you. And that the company has put quality control measures in place.