I thought I'd start a tread where people can share their biggest business mistakes. This way we can stear follow MC's business owners away from known pitfalls.

Anyone have anything they'd like to share?

Buying way to many of one product.

I still them. Anyone want to buy some?

I have a lot of money tied up in slow moving inventory.

-Charles

We did the same thing - we bought way too many of single items rather than buying 1-4 of each and increasing the product line.

Some clients have shared with me that they underestimated the timeframe to get listed in search engines... or they over estimated the volume of orders they would receieve soon after launch.

How about not fully investigating key business solutions? Had I called Yahoo support before signing up with them - I never would have done business with them... File under not doing your homework....

Capt, What are YOUR biggest lessons learned? After all, you have on of the biggest companys on the forum....

YAHOO was definitely our biggest mistake, this move has cost us thousands, we didn't count on a cancellation fee from our merchant account either, it isn't anywhere in anything we signed but, it does state they can take fees anytime they see fit for losses they think they have incurred.

Everyone has their hand in your pocket..

Having a Business Plan

A lot of people that I talk to do not have a business plan, do not know when to enter and exit, and are not realistic as to what their busines can do for them.


A lot of people are quick to jump into a business in hope to make money quick without knowing what it actually takes. First, if you do not have a business plan, that is like drive from New York To California without a map (your are just following the street signs.


Know when to enter and exit. Is your market profitable? Are their a lot of competitors? Exiting in short run - Is your business making enought to cover your Variable costs. Exiting in short run - if you are continuing to level out or suffer losses you can never expand and thus you are going to lose a lot of things down the road.

Being Realistic - Is it relistic that you are going to be a millionaire? -No Is it releastic to go bankrupt? - yes. Why is it so easy to be one but not the other...lol.. I can go on and on, but these are just some things to think about.

Luckily My site has done well and I also invest very well. Just be smart in what you are doing and have a plan.

Proper Planning Prevents Piss Poor Performance

Remember the 6 P's!

This has been a great thread... thanks for starting it Saxon.

1. Funding and Burn Rate >> As Krazy stated above, create a business plan and define the expenses you expect to incur. Then multiply this figure by 4. Regardless of how well you plan... it ALWAYS costs more than you predict. Make sure you have enough funds to sustain your business and do not skimp on marketing. IT TAKES MONEY TO MAKE MONEY.

2. Create Reasonable Timelines >> When I first started my online store (there was no such thing as pay per click... and I thought I could build a web site and begin processing orders the next day. Building a business regardless of whether it is online or offline it takes time and resources. Predict a break even timeline then multiply it by 2.

3. Market and Competition Analysis >> I performed an extensive market analysis of the when I started my online store... but I did not learn enough about how I was going to market it. MC didn't have forums back then and I didn't understand SEO. It took me 6 months to make my first sale... armed with the proper marketing and SEO knowledge, I could have sped up this process.

4. The Customer is ALWAYS RIGHT! >> Treat the people that feed you with respect. Any success a business derives stems from the customer.

I could go on for days... I will add more as time permits.

Thanks Saxon!

I used to run a Modeling Company before getting into the family business. The biggest mistake I made was not fully understanding the costs to run the company (what I had to buy) and how I could make that money back. And if you have employees make sure they fully understand what they get paid/benefits/bonuses BEFORE they do anything for you, and its best to get that in contract.

One other mistake that companies make - You need to set guidelines!. We have found with our current company that sometimes certain jobs/sales can turn out to cost you money in the long run if you don't follow certain guidelines/rules set for the company. We used to accept a product back that was custom cut for the customer, this made us lose a lot of money because we couldn't resell it, now we just have a policy that we don't take product back if its been custom cut/sewn. Make Rules/Regulations and FOLLOW THEM!

Always look at what your competitors are doing, if they have been around for more than 2 years than they are obviously doing something right.

I agree with what chammer1 said, don't buy a ton of one product and hope it will sell (we also still have a ton of red/white/blue webbing we bought 2 years ago, thinking it would sell in just a few months after 9/11). Variety is the spice of life and also makes your store look like a one-stop-shop that customers will come back to. But, also try to underestimate how the product will sell, if you are constantly out of stock than it can hurt business also. Its a delicate balancing act, but if you do research and look at competitors than you should be able to figure out a happy medium.

One other mistake - Don't Follow, LEAD! Don't follow what everyone else is doing if you think they are making a mint. Come up with your own unique idea, businesses with a niche are the businesses that last.

My two cents

Thanks everyone for adding to this tread - this stuff is gold!

One last blunter - I had to learn the 80/20 rule the hardway. I've found it works just a well with time managment as web retail.

http://management.about.com/library/weekly/aa081202.htm

Another thing people do not factor in is oppurtunity costs. What you have to give up in order to get what you have. AND THIS DOES NOT HAVE TO BE MONEY. Very important. This is one thing that accountants do not calculate when calculating site profit, in which it is a big portion.

Krazy... that's is great point.

It is difficult (if not impossible) to build a successful business without taking opportunity cost into consideration during any decision making process.

I also think if your talking about what people don't factor in. Before you ever start a business, ask yourself, if you have the stamina health, attitude, and funds to support you for a year at least.

You know there are "growing pains" things that happen beyond your control, you have to be able to solve problems as soon as they come up. You cant have a defeatist personality.

There is no time to wine about whats happened just accept it and get around it, or make it better.

Is your family able to help where you used to do things? I know we personally devote about 16 hrs a day to our business right now.

I NEVER could have done that when my children were little. But look at any successful person, nobody gets there working 2 hrs a day. Theres no magic pill.

I just cant wait for the day in a year or so when I can get away with working an 8 hr day and everything else run pretty smoothly.

Like the Dropshipping wharehouses in this software, that alone will save me 4hrs of work a day once I have it set up and were getting the orders Im expecting in a year.

Our biggest error was also buying too much of one type of thing -- we brought in a whole container of beautiful hand-painted glass. It's great stuff, and people like it. We just have too much of it!

We're selling it off quickly in a 70% off Early Bird Christmas sale (in our store, not online).

We will get our capital back, but won't make much money on it.

On the flip side of buying too much of one product, when I was building up inventory to start, my product line was too diverse. I had too many different products and not enough of each. I solved that problem by dumping the yarn end of the business temporarily, concentrating on the patterns and leaflets. I have since started to add yarn back into my product line, but am concentrating on specialty yarns, not the stuff you can buy at Walmart really cheap. Oh, I guess that would have been mistake #2!

Just thought of another thing since we had been talking about shipping supplies. Anyone that ships priority mail MUST use the post office's free supplies. When I first started, I just packaged everything up, took it to the post office and found that some of my packages were too heavy to go first class and had to be sent priority. Waste of money to use my own purchased supplies. If you're going to ship USPS, check out what the post office has to offer for free and use it! Do this before purchasing mountains of boxes. (Mistake #3)

My biggest mistakes have usually involved trusting someone who turned out not to be too trustworthy....

Case in point: a former site I owned is where I cut my 'e-business teeth'

I hired a designer to design my 3.0 cart a year and a half ago- and the girl effectively made the software UNUSABLE by anyone but HER. AND she almost destroyed my relationship with ! Thank goodness was proactive and gave me a heads-up. They truly saved my butt, because I just didn't know any better at the time. So the bottom line is that you ALWAYS have to get some background knowlege before you hire a pro - so you're not TOO in the dark about how things work

Mistakes are just doors to enlightenment. Don't get bogged down in them...learn and keep it movin'

Terri

Terri... that's really good advice. You can have the best business model in the world yet still fail if you don't have a solid and trusting relationship with your partners etc.