5 Biggest Mistakes to Avoid When Starting a New Internet Business

So you’ve got the next billion dollar Internet business idea? That might be true, but without a solid plan you are greatly reducing your chance of success and could easily fall victim to common pitfalls.

These tips will help you navigate the treacherous waters of starting a business and just might be the difference between a spectacular launch and the unpleasant alternative.

1. You Can’t Succeed If You Never Launch

This may be the most obvious mistake, but it’s also the most common. From our vantage point it’s almost a syndrome among entrepreneurs, especially those with more complex business ideas.

The original business plan is laid out and it often makes a lot of sense and may have a good chance for success. The reality, however is the entrepreneur becomes the business’s worst enemy. The closer the technology becomes to completion the more features and roadblocks the entrepreneur injects. “We can’t possibly launch without this feature,” and “What kind of reaction will we get if we don’t do this?”

The entrepreneur has poured so much of their life and money into the business they become so afraid of failure they prolong the moment of judgment. We’ve never met an entrepreneur yet that will admit this is their mindset. While the business may never fail in the marketplace because it never gets there, the result is the same.

2. Good Research Can Save you Money

We have two types of businesses who approach us for help with their Internet ideas. The first group, group A, already knows exactly what they want and don’t ask for any help or advice. They just want their site built as fast as possible to their requirements. The second group, group B, has an idea but is open to advice and suggestions to make their idea better and thus give it more chance for success. To both groups a small amount of preliminary research helps provide a foundation for determining the viability and probability for success. This research is commonly less than 5% of ultimate project costs, but group A very rarely chooses to do the research. They prefer instead to trust their instincts. Group B is far more open to research and suggestions and as a result has a much higher chance of success.

Often the research doesn’t support their assumptions and sometimes the group B entrepreneur decides to drastically alter or abandon the idea. While this is disappointing, it is far better to learn the realities of the market in the research stage than in post-launch when you have a lot more time and money invested. At the research stage, entrepreneurs often adjust their original model to account for the market realities and go on to succeed at a much higher rate.

3. Don’t Forget to Prime the Pump

The most common type of idea we encounter is to recreate an existing successful Internet business. The more successful the business the more common it is for entrepreneurs to want to copy the idea and make it better. One issue that can be extremely difficult to overcome with limited startup funds is “priming the pump.” To explain the point, eBay’s business model is the easiest to understand. By anyone’s account, eBay is tremendously successful. But what would be your chances of success if you had an exact copy of eBay’s site and backend but lacked the capital to market on a large scale? For example, Joe comes to the site and immediately understands the concept and says “this is a great idea, I’ll list my product.” But what happens next? Because the site isn’t highly promoted nobody buys his product so Joe gets discouraged and goes away never to return. Shortly thereafter Sally finds the site and is looking for the same product Joe was selling but instead she sees an empty site with nothing for sale so she also gets discouraged and goes away.

Even though you have a marketplace with tremendous possibility and the concept has been proven 100% successful, if you never prime the pump by getting adequate numbers of buyers and sellers online at the same time you may not succeed. Even worse, the timeframe for success may be extended beyond your ability to bootstrap the business and someone else may succeed with the very same idea.

4. Someone Has to Drive the Business

Many entrepreneurs have other fulltime occupations, which is generally recommended in the planning and pre-launch phase to conserve capital or build financial reserves. However, many entrepreneurs think that the Internet provides a good opportunity to get rich without being personally involved in the business. This is almost never the case, and the idea that a web developer can nurture and grow an entire business on your behalf is not realistic. If you plan to succeed online with greater chances for success than a lightning strike or winning the lottery, you should plan to be involved and be the driver of the business at every level. If that isn’t realistic you need to find someone who has significant equity involvement that can be involved at that level. Without a driver, even the best race car can’t leave the starting line by itself.

5. Building The Technology is Often the Easiest Part

There are two parts to any technology business, the technology and the business. Many entrepreneurs spend 90% of their effort and budget building technology but never consider how they are going to market and sell it. Without sales by definition there is no business.

While some ideas are self energizing or viral in nature, meaning that one customer may easily multiply into many, most will require a solid marketing strategy, dedication, and execution to promote sales. Even viral ideas need a good bit of initial promotion to get enough users involved to help spread the word.