This week my increasingly useful Linkedin news feed brought me an interesting article by Scott Annan in Business Insider about the mistakes young entrepreneurs make that waste time and money. I'd summarise Scott's list as:
- Sell your product quickly rather than spending ages developing it
- Don't worry so much about people stealing your idea
- Find out what your customers want rather than assuming they are like you
- Don't get distracted from selling things by the endless possibilities of new ideas
It's a nice piece and I think Scott's list is very useful for anyone starting out on an entrepreneurial career. It occured to me that it might be worth writing another list for "social entrepreneurs". The normal lessons of business obviously apply to anyone seeking to use it to improve society, but there are a few particular pitfalls that I have noticed social entrepreneurs seem to fall into more often than their commercial brothers and sisters.
So here are my top four mistakes, in my experience, that first-time social entrepreneurs make.
- Looking for funding rather than looking for business. Most social entrepreneurs aren't doing it for the money. Unfortunately that means they often spend far too long trying to win the approval of influential people like funders and journalists when they should be working. If your idea of success is getting investment, no-one should invest in you. If your idea of success is to be self-sufficient so you can put your next plan into action, then you might actually get somewhere.
- Thinking you know better than your customer. If commercial entrepreneurs start by identifying something that people want to buy, social entrepreneurs sometimes start with the opposite: a desire to get people to buy something they currently don't. There are far too many "shoulds" in social sales pitches. Remember that if you want to be a business, you need to sell what the customer wants, not what you'd like them to want. Do business in the world as it is, not how you'd like it to be.
- Overestimating the market. Most social entrepreneurs think they've spotted a niche that no-one has ever seen before, but in many cases the market they have spotted is either hard to profit from or just not ready yet. A lack of competitors can be a sign that you're missing something. If you are years ahead of your time, be realistic about how much time and money you'll need to reach profitability, and how many new competitors you'll have when the time finally comes.
- Taking too long to issue the first invoice. Business is about selling things to people for money. If you aren't doing that, you are just preparing to do business. The quicker someone pays you money for something you've done, the quicker you know what line of business you're really in. Questions of organisational structure, financial planning, marketing and scalability only matter once you have figured out how to make money.
None of this is rocket science. And let's face it, most of us have made these at one time or another. But as a wise man once said, the trick of life isn't to learn from your own mistakes: any idiot can do that. The trick is to learn from other people's.