April 15, 2014
Repeating someone else’s mistake can be worse than making a mistake of your own. After all, plenty of entrepreneurs have come before you, so why not learn from both their successes and mistakes?
Over the years, I’ve learned a lot through trial-and-error as an entrepreneur. Take some advice, from one entrepreneur to another: learn from my mistakes so you won’t end up repeating them yourself. Avoid the following four mistakes at all cost:
1. Overlooking a structural method for finding a viable business idea
Most entrepreneurs find their business idea accidentally while neglecting a more structured process of finding a good idea for a new company or product. One such structured process consists of a bottom-up and a top-down method. Do you have a method in place?
2. Not thinking through the main business model drivers
As an entrepreneur, you should optimize the capital allocation and thereby generate a value proposition over competitors. If you don’t focus on the main business model drivers, then you’ll lose market share to the competition. A tool that might help you is the business model canvas which covers the following considerations: customers, key partners, key activities, revenue drivers and cost drivers.
3. Failing to test your business hypothesis
When you start a new company, you can never be sure if it will work out or not. This uncertainty is the basic nature of startups. The problem is that many entrepreneurs just start with their idea, but don’t state what their business hypothesis is and under what conditions they would abort their business idea. A hypothesis could be: “I can offer 10 eggs for $2 each to customers which cost me $0.50 to acquire.” Based on this hypothesis, you can then test and validate your business model under market conditions.
4. Scaling too early
Another problem facing eager entrepreneurs is that they want to scale their business too early. This means they invest in their business (marketing, employees, infrastructure) before they know whether they have a product-market fit. This problem occurs even more often with venture-backed companies. But don’t worry, you can resolve it by following a structured process of: generating an idea, then stating and testing your business hypothesis.
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