Most customers are happy to pay a premium for a product they perceive as better or more convenient. For example, let’s say you’re looking for a real estate agent. One charges a hefty commission, and one offers to do it for a quarter of the cost. Some potential clients might be suspicious of the cheaper agent’s expertise. People often assume that cheap things are cheap for a reason. Although cheaper products aren’t necessarily worse, some customers will see a higher price as de facto proof of a product’s superiority. Pricing is more complicated than “low equals good.” There’s another problem with cutting prices. If you cut prices to the bone, you might have to cut salaries and staff to the bone too. It’s tough to cultivate loyalty and enthusiasm among your staff when you’re paying subpar salaries.
customers. After all, everything they do—from building and refining the actual product to staffing up and networking—is essentially for customers. But it’s very possible to be too focused on the business and the product, when you should be talking to customers instead. Interacting with potential customers is one of the most valuable things you can do. It can take your business out of the realm of the abstract and place it in the real world, so to speak, where its value (and its shortcomings) will be so much more obvious. You might learn more in an hour with a customer than in a week of meetings. NOT PROTECTING IP In the whirlwind of excitement that often accompanies the birth of a new small business, it’s easy to overlook little details like filing for patents and trademarks, registering your business, and other tasks. And if you experience some early success, you may never have the time or inclination to look back and tie up those loose ends. But this kind of oversight can be extremely expensive if one of your rivals ends up filing a patent over your head and you have to hire lawyers to iron things out. All success grows from a solid foundation. You will face a multitude of challenges throughout your career as a business owner, but you can improve your odds by starting your endeavor on solid ground. •
that you could do? What openings or vulnerabilities do they have? What mistakes have they made? And don’t forget that some of your biggest competition is, well, nothing. The customer you’re chasing could always simply do or buy nothing. And if you don’t convince them they need your products or services, they may may not engage with you. Customer inaction is a competitor just as much as your actual business rivals. NOT HAVING A PURPOSE A small business needs a well‑defined mission or purpose. Why? First, if you want to convince talented recruits with job security to leave jobs and roll the dice with your business, you’re going to have to offer them more than just money. People do their best work when they’re part of something larger than themselves. The second reason you need a purpose is to get through the tough and uncertain times that are sure to come. If you’re just in business for the money, any serious adversity is going to make you doubt what you’re doing—and maybe even quit. But if have a purpose—whether that’s as lofty as improving society or as personal as proving your doubters wrong—you’ll be motivated to push through the rough patches.
LACK OF A DETAILED BUSINESS PLAN
Starting a business without a busi- ness plan is like starting a long hike in the woods without a map—you’re probably going to end up lost and in trouble. Even if it’s only a single page, a good business plan is a road map for your business. It lays out where you’re going, why, how you’re going to get there, and how much it’s going to cost you. Your early plans aren’t going to be totally accurate, but they can provide you with much-needed clarity and a sense of direction in uncertain times.
THINKING CHEAPER IS BETTER Some entrepreneurs think
their path to riches and market dominance will be paved with cut- rate prices. They make the mistake of assuming customers are purely rational beings and, given a choice between competing products of roughly equal quality, they’ll simply choose the one that’s cheapest. That’s not usually the case though.
Luke Babich is the co-founder of Clever Real Estate, a real estate education platform committed to helping home buyers, sellers, and investors make smarter financial decisions.
Babich is a licensed real estate agent in Missouri, and his research and insights have been featured on BiggerPockets, Inman, the LA Times, and more. He has a bachelor’s degree in political science from Stanford University, where he graduated with honors.
OVERLOOKING YOUR CUSTOMERS
It may sound unlikely that any business would overlook their
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