Starting an online business begins with filling a need and building credibility, but the factors that go into making your online business a smashing success don’t stop there. While the barriers for setting up a company are low, the majority of people starting an online business fail largely due to mistakes that seem obvious in hindsight — such as overestimating profits or trying to be too many things to customers from the onset. But there are many more mishaps business owners experience.
To enhance your shot at success, look to avoid these 10 common mistakes when starting an online business.
1. Not having a plan of attack.
You don’t need to have a formal business plan — but you still need a plan. Most entrepreneurs regard the business plan as homework they don’t want to do. While it is true that the big-format 20-page business plan is growing obsolete, you do need to know who and where your core customers are, what you are selling and what people are willing to pay for your product or service.
In addition, work out how much cash you’ve got and how long it will last. See, that didn’t hurt too much.
2. Focusing too much on the little stuff.
At the start, you need to get your business off the ground and see if it’s actually going to work. You would be surprised on how many companies started as one thing and ended up being another. The popular business chatting platform Slack for example started off as a video game company and then pivoted over to software after their in-house corroborative messaging platform developed it’s own identity.
While this may seem obvious, new business owners can get really bogged down by the smallest details. Don’t do this. Getting sidetracked focusing on things like how your business cards look or the design of your logo at the early stages is a waste of an incredible amount of valuable time and mental bandwidth in the beginning. Instead, concentrate on the larger tasks that will help propel your business to the next level. You can always come back and tweak your business cards later.
3. Not worrying about money.
Be optimistic–and realistic. There is more then a good chance that your business will run out of money before it makes any. Everyone runs out of money, so do not get discouraged. Know how much cash you’ve got to start and run your business, what your burn rate is and make sure that you have a plan to try to get more before you run out.
Too often new business owners scramble to raise funds, ask friends and family for money, or apply for loans when it’s already too late. Instead, from the get-go create a financial plan, detailing milestones and how much money it will take to reach these goals.
4. Undervaluing what you’re selling.
If you’re selling a product, set the price at what it needs to be to make a worthwhile profit not at what your competition is charging. Make sure to consider all of the manufacturing, labor, time, and material costs for your product. What is your gross margin on sales? Your net margin? How many sales do you need to break even each day or week? What is the worst case scenario, and how would you overcome it? Establish the key performance indicators for your business that will let you know how your company is performing. Numbers don’t lie, they’re not emotional and they don’t make excuses.
In the beginning your product price may be higher then you want, but it will be what it needs to be for you to survive. As your business grows and evolves you can then continue to adjust your price points accordingly.
5. Ignoring customer service.
With so many things going on in the beginning of your business, it’s easy to forget that customers are people who are way more likely to return to your website if they have a good experience.
Make sure you have some way of interacting with the people visiting your site. Whatever domain you decide is best — through live chat, survey, email or phone. Also, monitor social-media sites for brand sentiment and see who isn’t happy with his or her experience and reach out. These early stage customers will be the foundation of your brand. Spend time with them, show that you care, gain valuable feedback and they will reward you by becoming advocates of your brand.
7. Spreading yourself too thin on social media.
When you’re starting off with marketing and building your brand, test out two to three social networks where you know your audience is and you can build a customized audience with a small budget. Don’t blow your advertising budget at the start. As a general rule, Facebook, Instagram, and Pinterest tend to be better for product sales. Experiment will all three social networks for several weeks and then decide which one or two show the best promise and upside for your needs. You don’t need to be everywhere.
8. Underestimating the obsession and drive it takes to succeed.
If you’ve read a lot about the importance of work/life balance — forget about it. (At least for the first year or two.) Don’t worry about time. Big ideas do not come when you are trying to manage every minute of your time. They don’t come when you are multitasking. They come when you are focused on one thing. Let everything else fade to black and drive forward.
9. Thinking that everything is one size fits all.
Just because a product or strategy has worked for one company doesn’t mean it will work for you. In general, you need to have a healthy degree of skepticism about what you read and see successful elsewhere. Focus on testing your idea or your product using minimum financial and resource risk.
10. Inaccurately gauging demand for your product or service.
Remember – just because you like jalapeño-flavored hummus, that doesn’t mean everyone likes it. Too many small businesses fail because the owner overestimates demand. Before launching your venture, find out how strong the demand is for your product or service. How many people besides family and friends have purchased your product? Is it a product or service that most people need or want? Does it fit with current trends? It’s easy to gauge demand in today’s market. One effective and cost conscious way to get feedback on your product or idea is to set up a tent at your local farmers market. Listen to what people are saying and watch how they react.