The 17 Mistakes That Startups Make According To John Osher

Posted on March 22, 2017 by Kim Clark

The 17 Mistakes That Startups Make According To John Osher - Lioness MagazineSerial entrepreneur John Osher seems to have ambition in his vital organs. During the seven years he spent as a college undergraduate, Osher started and sold a vintage clothing store and an earring outlet. On the way to launching ConServ, his first major business venture, Osher worked as a cab driver, plumber and a carpenter. His second venture was Cap Toys, where sales volume reached $125 million. The company was sold to Hasbro, Inc. in 1997.

Osher has developed numerous consumer products, including an electric toothbrush that in just 15 months became America’s best-seller in that category. As it turns out, his most valuable contribution to American business may not be the companies he’s launched and profited handsomely from, but rather the startup advice that he’s detailed and shared. When developing the plan for his third business, Dr. John’s Products, Ltd., Osher sought to create and launch the perfect company and so he decided to make a list of everything he had done wrong as he built his previous two ventures. 

In 1999, he used the list as a guide when he brought out Dr. John’s SpinBrush, that previously mentioned electric toothbrush that retailed for $5.00. Maybe you bought one? The SpinBrush became wildly popular and in 2001, Proctor & Gamble bought him out for $475 million.

His list “17 Mistakes Start-ups Make” became a Harvard Business School case study in 2002. As you write the business plan that you’ll use to launch and sustain your start-up venture, you will appreciate the practical advice provided by the inimitable John Osher. 

  1. Failing to adequately research the concept to ensure it is viable 

The most important mistake of all. I say nine out of ten businesses fail because the original concept is not viable. You want to be in business so much that you don’t slow down and take the time to do the up-front research, so the business is doomed before the doors open. You can be very talented, but your business will fail because the concept is flawed.”  

Read magazines, journals, blogs and newsletters that cover the industry you plan to enter, so that you will fully understand the market you will enter and how to most advantageously position your product. Attend conferences when your budget allows and find free webinars. Confirm that you are about to enter an industry that is growing, not shrinking. Pay special attention to new developments or technology, the presence of major competitors and regulatory legislation that are on the horizon and poised to impact your ability to grow and sustain the business.

  1. Miscalculating market size, timing, ease of entry and potential market share

Most new entrepreneurs get very excited about their concept and don’t look for the truth about how many people will want to buy what they they’re selling.

Monitor and understand your market demographics, seasonal business cycles, potential barriers to entry and get to know how potential customers are getting their needs met now and what could motivate them to do business with you. Develop a credible business model.

  1. Underestimating financial requirements and timing

“Based on inadequate research noted in Mistakes #1 & #2, fledgling entrepreneurs operate from the premise of over-stated market size and their ability to enter it. They then start spending more money than they should on start-up costs, creating costs that require those inflated sales projections to be met, so they run out of money.”

  1. Over-projecting sales volume and timing

You have already miscalculated the size of the market. Now you over-project your portion of it.”

  1. Under-projecting expenses

Cost projections are often far too low. Part of the problem is that you’ve projected market share and sales volume that are too high. There are always unknown reasons that come up to make expenses higher than planned.”

  1. Over-spending on office space and equipment and employees

Now you’ve got lower sales, higher start-up costs and then you layer on too-high operating costs.

Resist the temptation to rent office space if you can operate effectively from a desk at home. If you can take clients to a restaurant for meetings and you otherwise work alone, then why increase your operating expenses? You can hire a telephone answering service to personally take messages, so it seems like you have an assistant. When you need another pair of hands to take on a big project, outsource tasks to a freelance Solopreneur and spread the wealth.

  1. Failing to have a contingency plan to cover a shortfall in sales

Even if you’ve been realistic about your ability to enter and penetrate your market, sales projections and start-up and operating expenses, there are things that happen when you start a new business. These aren’t a result of poor planning, but they happen. Bank rates could go up. There could be a strike. You need a Plan B to cover yourself should things not work out within the timing that you want.

  1. Bringing in the wrong or unnecessary partners

There are certain partners you need.  If you need money, you’ll need money partners. But too many times the guy with the idea takes on his friends as partners. Many people don’t provide strategic advantages. Before people are made partners, they have to earn it.

  1. Hiring employees for convenience, rather than skill

In my first business or two, I hired relatives but in many cases, they were wrong for the job. It’s hard to fire relatives and friends. Spend time to handpick people based on skill requirements. It bogs you down when you hire people who can’t do the job.”

  1. Neglecting to manage the entire company as a whole

You see this happen all the time. They’ll spend 50% of their time on something that represents 5% of the business. Too often, the business owner doesn’t have a view of the whole company. They get involved in part, but don’t manage the whole. Whether I handle this aspect or another, whether I hire someone to do what I can’t, I consider how it all fits into the long-term and short-term big picture.  Constantly try to see your big picture.”

  1. Accepting that “it’s not possible” too easily, rather than finding a solution

I had an engineer who was very good, but with every product we developed, he would say ‘You can’t do it that way.’ I had to be careful not to accept this too easily. I had to look further. If you’re going to be an entrepreneur, you’re going to break new ground. A good entrepreneur is going to find a way.

  1. Focusing on sales volume, rather than bottom-line profit

Too much of your management is often based on sales volume and market size. There’s too much emphasis on how fast and big you can grow the business, rather than on how much profit you can make.”

  1. Seeking confirmation of your actions, rather than seeking the truth

This often happens: you want to do something, so you talk about it with people who work for you. You talk to family and friends. But you’re only looking for confirmation. You’re not looking for the truth. You’re looking for somebody to tell you you’re right. You have to learn to give more value to the truth than to people saying what you’re doing is right.”

  1. Lacking simplicity in your business vision 

Rather than focusing on doing everything right to sell to your biggest markets, you divide your attention …trying to be too many things at one time. Then your main product isn’t done properly because you’re doing so many different things.”

  1. Lacking clarity in the business purpose and goals

You should have an idea of what your long-term aim is. It doesn’t mean that it won’t change, but when you aim an arrow, you aim it at a target. What are you trying to do? If you want to create a billion dollar company with a certain product, you may not have a chance. But if you’re trying to create a million dollar company, then maybe with that product, you’ll have a chance. Clarity of your business purpose is very important.

Have the confidence to embrace your long-term goals and do what is necessary to achieve them. What matters most is your vision for yourself and what you decide makes sense to pursue.

  1. Lacking focus and identity 

This list was written from the viewpoint of building a company as a valuable entity. Remember that the company itself has an identity, a brand. Do not go after too many things at once and end up with a potpourri of products and services, rather than a focused business entity. When you go into business, it’s important to maintain a focus and an identity. You must be focused on who you are and what you do and you build power and credibility from that.”

This is a business model issue. Refrain from trying to touch as many target markets as possible, ready to use very skill set that you can muster. Being all things to all people results in an unfocused brand story and a diluted perception of your expertise. From your elevator pitch to your website and chosen social media platforms, potential clients must quickly understand how your products and services can help them. Sometimes, less is more.

  1. Lacking an exit strategy

Have an exit plan and create your business to satisfy that plan. You may build a business that you feel will start fast and make a good deal of money and for that reason will attract a lucrative buy-out. Maybe you figure that you can make lots of money for about two years but after that, competitors will enter and you won’t be able to protect yourself from them. So after the first year, you watch the marketplace very carefully and keep a close eye on inventory. Another exit strategy can be to hand the company to your kids someday. The most important thing to do is build a company with value and profits so you have all the options open to you; keep the company, sell the company, go public, raise private money and so on. A business can be a product, too.”

Ask your business attorney or accountant to see to it that your choice of business legal entity aligns with your exit strategy.

About Kim Clark

Kim L. Clark is an external consultant who provides strategy and marketing solutions to for-profit and not-for-profit organizations. Kim is the founder and principal of Polished Professionals Boston and she teaches business plan writing to aspiring entrepreneurs.

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