All new business ideas at most of the times come from people who are working full time, possibly raising a family and have limited resources and skills to get started. More often than not, the would-be entrepreneur simply has no experience with starting a business. And it is at such times that they look out for mentoring or investment, in order to build their venture.
The resources and opportunities were limited earlier, but with the changing times this scenario has changed too. This rise in available resources, however, has brought along the inevitable business opportunists waiting to take advantage (and the money) of inexperienced entrepreneurs.
Hence, it is very important for the budding entrepreneurs to stay cautious and avoid the below mentioned 7 traps while starting a business.
If you are among the entrepreneurs who believe in partnering with like inded people to set up a business, then you must keep this in mind. Many businesses are founded by more than one person, often to fill needed skills, resources and responsibilities. If you are seeking co-founders for your business, keep in mind that anyone you find should have the same expectations as you about getting started. You should put as much effort into finding and vetting a co-founder as you would a spouse. You will be just as financially and emotionally tied to this person or persons, so allow the process the proper energy and time to sort out.
2. Technical team
One of the segments that is growing at an unprecedented fashion is the software related companies. Everyone has an idea for an app, website or other new technology. Entrepreneurs often set out to find tech talent with the hope of attracting someone to do the work for deferred payment or equity in the company. The problem is that too many developers have gotten burned in these deals, and most tech talent understands the chances of success for most startups are extremely slim, so finding someone under these circumstances is increasingly difficult. If you need good tech talent, be prepared to pay for it, at least in the initial stage. Keep in mind, however, that you do not need to (nor should you) develop a full-fledged working model of your product or service. Instead, develop a minimal viable product (MVP), which provides the most fundamental benefit of your idea.
3. Service Providers
Service providers, such as accountants, attorneys, distributors, printers, etc., would all love an opportunity to work with the next multi-million dollar company, but nobody wants to start for free. More important, if you have service providers willing to lower their costs for your startup, then the level of service you receive is often indicative of what you are willing to pay.
4. Reviewers and bloggers
If you are compensating someone to review and discuss your product with their audience, it is no longer a review — it’s an advertisement. That is not to say that you should not leverage these resources as part of your marketing strategy. Sometimes, bloggers have huge and influential audiences and can help raise visibility for your product quickly.
5. Product and industry awards
Entrepreneurs need to understand that there are usually fees to be considered for an award and to use copyrighted logos or images to promote the award, which can sometimes run into the thousands of dollars. Again, knowing which awards carry the most influence and positive impact requires careful and thoughtful research.
Some require upfront fees or have deferred compensation scales as the business develops, while others require a share of your business’s equity.
If you are considering a business incubator, thoroughly research your target organizations online and in person. Reach out to administration to clarify terms and conditions of participation. Review the list of mentors and make certain that they offer the expertise and network you need for your startup.
Investment firms (venture capital and private equity) and individual (angel) investors do not require you to pay a fee to be considered for investment. If they do, stay far away. The best (and arguably only) way to find good investors is to put the time and effort in yourself. Attend networking events and take an active role in local and regional business organizations.