Don’t Let Your Side Business Fail
6 things I learned working at a startup, where no one quit their day job
As a rule of thumb, I have always believed the phrase “If it were easy, everyone would be doing it.” And although starting a business is not easy at all, it seems to be everyone’s ambition. Your friend from high school has an escargot delivery service, your neighbor is trying to monetize her inspiration boards, and some guy you follow on Instagram has developed an app that nobody asked for. They make it seem easy, and it sure feels like everyone is doing it.
“Millenials and GenZers are 188% more likely to have the aim of creating a side business, compared to babyboomers.” — Sales Force 2019
However, it’s a well-documented fact that 90% of startups fail. Yet, the idea of being your own boss and making money from your creativity and skill is to good not to take a risk on. Much like the couples that decide to get married knowing most of them will end in divorce, you think it won’t happen to you. Your idea is good, you have the knowledge, skill, and work ethic necessary. Above all, you have passion. You will make it! Plus, if you don’t, you’ll still have your day job.
“In comparison to Baby Boomers, Millennials and Gen Zers are also 48 percent more likely to say that they started a business because they had an idea that they were passionate to bring to the marketplace” — Oberlo
Failure rate varies according to industry, and so do the main reasons for failure. But no matter what the industry is, here are six common mistakes people make when they’re starting a side business, and how to avoid them:
1. Nobody needs your product
We all have good ideas. Especially in the shower. But not all good ideas are practical, and not all practical ideas are profitable. You need to be very honest with yourself and ask the right questions when you pitch your idea to other people. If you don’t, they’ll mostly tell you that your idea is good and congratulate you on it. That’s not information you can leverage into anything. That’s barely even information.
Market studies are a must for starting a business, yet I’m continually impressed by how many startup owners either don’t do them or don’t do them right. Asking your friends and family is a start, but it’s about 1% of the work. In fact, if they aren’t in your target audience, their insight is not even that relevant. You need to be asking your potential customers if they would buy what you’re selling, for how much, and under what circumstances. If they say “yeah, that’s a good idea! I’d buy that”, it’s a great start, but don’t forget to follow up.
“That would be nice to have” is very different from “That would be a game-changer”. How many products do you think would be nice to have, but never bought because you don’t need them that much? I bet a lot. You should be very aware of where your product or services fall on that scale.
What we do now, at my side job, is not exactly what we had initially set out to do. It turned out people liked it but didn’t need it that much. That’s not a bad thing! Through the process of finding out they won’t buy your initial product, you can, and should, find out what they’ll buy instead.
2. It's too fluid of an idea
This is where passion might not work in your favor. In simpler times, a baker would open up a bakery, not because he was passionate about bread, but because the village had a need for it and, by providing that product, he would make a profit.
When you’re passionate about something, it’s easy to start dreaming, adding “nice to have” features and fantasizing about how you’ll change an entire industry with your services. You will make bread, the best bread. And croissants. And you’ll have a delivery service. You’ll sell to the general public, but also be a supplier for schools. While you’re at it, to elderly homes. And give some to charity. Actually you should also supply orange juice to all of those. You should have an orchard, and grow the oranges yourself! Maybe you won’t use them all, so you can sell some to supermarkets.
You started out wanting to open a bakery, and find yourself trying to start an agricultural firm. That is also a bakery. That is also a charity.
The bottom line is that you can’t heavy lift if your core is not strong. In my year of working at a startup (that I don’t own), I learned that when you tell people what you do, they tend to get excited and make all sorts of suggestions: “you do x? why don’t you also do y and z?” Some of those will be useful, but most of them will not. More features mean more financial investment, more of your time spent developing and marketing them, and, if you want to do them right, more people working on it. This is all the more dangerous when you and your team are not working on your new company full time.
Yes, you should have a plan to scale up. But focus on your core business, especially in the earlier phases. What are your audience’s needs, and how can you meet them in the simplest, fastest way? That will make you money. You can then reinvest and, possibly, change things up in the future.
Don’t try to cram all your ideas into a single company, or you’ll spread it too thin and end up failing.
3. You’re married to your idea and you’re not listening
Everyone told you you should be “networking”, so you are. That’s great! But are you listening? Instead of focusing on what you can get out of any given conversation — be it the person’s contact, an investment, or to get your name out there — , ask yourself, what can they teach you?
Maybe they have been in the business longer than you, and have some insights to share. Maybe they’re a potential client whose opinion should matter to you. Maybe they are your target audience and might tell you what they look for in a product like yours.
Make sure you listen first, then let them ask you what you do. Nobody likes the startup geek who is eager to pass their business card along. What people love, though, is talking about themselves, and there are infinite benefits in it for you, if you just listen.
Don’t tell them what they should be looking for!
Listen and ask yourself if you can provide them with what they need. If you keep getting the same input and it doesn’t match your product or service, it’s time to reconsider your choices and possibly make adaptations. An idea is only valuable to you if it’s valuable to your customers. If they won’t pay for your service, it’s not valuable, no matter how useful, or good you think it is.
4. You’re not taking any risk
My entrepreneurship professor (Yes, I’m one of those. Gross, I know!) gave us 3 rules of investment that, after being out in the real world, I absolutely stand by:
- You should be making some of the investment yourself
- That investment MUST NOT come from a mortgage on your house
- If you're married, your spouse shouldn’t also be an entrepreneur
The last two are pretty self-explanatory, and since we’re talking about side businesses, where you’d still have a “day job”, maybe the last one wouldn’t hurt that much. But I want to talk about the first rule.
If you’re not making some of the investment, therefore not taking some of the risks, how can you expect others to invest and risk their time and money on you? It’s okay if you don’t have a lot to invest, and maybe you don’t even need that much to start, depending on what your company is and what you do.
Investing, even if only to buy the tools you need to produce a professional output and look like you know what you’re doing, will not only make potential investors and customers trust you more, it will give you another motive to hold yourself accountable. It’s a layer of commitment to your business I don’t think anyone should skip.
5. Your team has no stake in it
You don’t want your business to start off as “favor-based”. Do you have a friend who is a designer and will be happy to make you a logo, or even a website at a discounted rate, or even for free? Do you know someone who wants in on it and will work alongside you day by day? Awesome. Kind of. What are they getting out of it? Yes, they believe you and your product. Yes, they want to be involved from the start and see great benefit in it for their careers in the future. But remember: this is not their day job either.
A favor-based business is simply not a business, it’s someone doing you a favor. That means it’s not a priority to them, and that will hurt the results for both.
You also need to remember that if someone is working on your project, you have an added responsibility to make it work, or you’re just wasting their time.
If you’re not paying your team members’ bills and putting food on their table by employing them, you need to give them something else, other than a project and a dream. That can look like anything that feels right for both of you, either it’s equity, a payment that you’ll make down the line or any solution you work out with them. But give them something.
6. You treat it as a hobby
If the security of keeping your job while working on a side project is something you can’t or won’t give up, I am not here to discourage you. If anything, I think it’s that more respectable. It doesn’t have to mean you’re afraid or don’t believe in your idea. It means you are responsible and a hard worker!
However, the level of commitment you put into your side business should be the same as what you would put into a second job. This is your project, your baby. Yet, because it is yours, there will be a temptation to treat it with a lower level of commitment.
Don’t think of it as monetizing a hobby, and if it doesn’t work, it doesn’t. That is a recipe to fail.
Have designated hours to work on it and don’t let “life get in the way”. This means sacrifices you have to be ready for. It’s also where making an investment and having a team will be decisive factors. They add to the responsibility in a good way, as they hold you accountable.
All in all, your passion should be the driving force of your side business, not what brings it down. Take it seriously and be honest with yourself. Treat it like a job and like there are very high stakes for you and everyone involved. If you do this, and your product and services are valuable, it will all work out.
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