8 mistakes natural food startups makeand smart ways to avoid them

8 mistakes natural food startups makeand smart ways to avoid them

If you’re going to fail at natural products entrepreneurship, make sure to fail fast. Building a business is all about learning from your mistakes—and there are plenty of mistakes to be made. But go ahead and scratch these eight most common mistakes off your list. Now you’re ready to fail faster than you ever thought possible.

Starting a new company can be an exhilarating and rewarding experience—or a colossal train wreck that leaves you exhausted, broke and limping back to the corporate world. Boost your odds of success by avoiding these common pitfalls:

1. Not solving a problem or filling a need

When Seth Ellis Chocolatier introduced organic, nut-free natural truffles, they filled a significant need. “Until our truffles, there was not another brand of boxed chocolates that was completely nut-free,” says co-founder David Lurie. The company soon followed with nut-free Sun Cups, for people with peanut allergies. Problem solved. 

 Clearly, some products don’t solve a problem or fill a need (think plastic vampire teeth, talking picture frames, fuzzy dice), but the most successful products are must-haves, not nice-to-haves. Take a cold, hard look at your brilliant idea, and clearly state the problem it solves. It may be “making delicious cookies available for people with multiple food sensitivities,” or “offering earth-friendly cosmetics for women who care about the environment and their skin.” Do your research to make sure your idea is viable. Even the most generous funding and talented team won’t make a faulty idea successful in the long run.

2. Skipping the business plan

Formulating and writing out market analysis, strategy and projections will take your idea from the subjective realm of whim and passion, and anchor it firmly in objective reality. Once the cold, hard facts are on a spreadsheet and Power Point, you’ll know how (or if) you should proceed. A well-crafted plan will keep you and your partners on track and accountable, and help you identify priorities, establish goals, measure performance and avoid costly mistakes.

On the other hand, one study from Babson College of 116 startups found no difference in performance between businesses who started with a formal business plan, and those without. “I laugh at my business plan now,” says Adam Grossman, founder of Seaweed Bath Company, a natural skincare line. “I knew absolutely nothing about what I was getting into. I recommend writing up a plan, but don’t spend too much time and definitely don’t spend money on it.”

Sometimes, the weeks (or months) lost to tweaking and polishing the perfect plan may be better spent just going for it. Put your idea out there: Create a prototype, get your product in front of the end user, gather feedback, and make adjustments. Even a prize-winning plan won’t make a bad idea sell.

3. Skimping on your look

You don’t get a second chance to make a first impression. Having a so-so logo is like showing up to a job interview with scruffy shoes or dandruff on your shoulders. Hire a professional to help you with branding—name, logo and design. A good brand will confirm your credibility, communicate your message clearly and connect with consumers emotionally.

But before you go too far down the branding road, do some trademark research. “It’s horrible to have the absolutely most perfect, ideal, beautiful concept, and then find out it’s already taken,” says Adina Grigore, co-founder of S.W. Basics of Brooklyn, makers of an organic skin care line. “Hire a lawyer to file the trademark for you, and hire designers to create your look. They will both save your business (a.k.a. your life) and in the long run it will be less expensive.”

4. Selling the farm

Don't mortgage your house, cash in your retirement fund or close out your kids’ college fund. Most startup owners are already pretty maxed out, financially, mentally and emotionally. Adding the burden of losing your life savings will do nothing to improve your business (or your state of mind).

Be sure to provide for your basic needs, even during the leanest of your company’s times. How much does that mean? There are two general approaches: a fair salary, or just enough to squeak by. The advantages of the just-enough approach are minimizing overhead, and keeping operating requirements slim until the company is established. But that approach doesn’t take into account how much capital you actually need to finance your business. Conversely, the fair-salary approach more accurately portrays your financial needs, and will give you a better idea of what you need to proceed.

5. Flying solo

It’s a rare person who has all the skills—and stamina—needed to run a business alone. “It’s much easier to have a partner,” says Reem Rahim, creative director and co-Founder of Numi Organic Tea. “Having a partner allows you to complement your skill sets and strengths, and split up the tasks at hand.” Plus, you’ll lessen your financial burden, increase your networking opportunities, and have a comrade in arms to share success and setbacks.

On the other hand, choosing the wrong partners can be a nightmare, and sticky to undo. In most cases, breaking up a business partnership is as emotionally and financially draining as dissolving a marriage. Choose partners you know, trust and have worked with before. Surveys show that teams of prior coworkers are significantly more stable than either teams who had a prior social relationship or teams of strangers. And no matter what, craft a clear and comprehensive partnership agreement with the help of an attorney. It’s the best money you’ll ever spend.

6. Undercapitalizing

The bottom line: You’ll need more money than you think. “When we started Seth Ellis, I wish I’d raised more money right off the get go,” Lurie says. “You enter into an ideal world where you think ‘Okay, I need X amount of dollars for year one, and in year two, I’ll make money.’ Really, you should be capitalizing your business for the first three to five years. You’ll spend enormous amounts of time and energy going for subsequent funding.”

Be careful, too, about overhead costs. Don’t commit to office space, manufacturing equipment, computers, salaries or other fixed costs until you absolutely must. It’s nearly impossible to forecast sales, especially in the first year or two, and a sudden dip in sales can leave you with expenses you can’t cover. Outsource as much as possible, arrange short-term or flexible contracts, and hire contract workers, not full-time employees.

7. Not listening to others

You’ll save time, headaches and costly mistakes. “If you’ve run a prior business, you’ll know how to start a new one,” says Rahim. “If you haven't, you have a lot to learn. The voice of reason and caution, even if you decide to counter it, will help you in every move you make.”

Ask advice, from mentors, consultants, experienced employees and co-workers. Seek out the founders of small but thriving companies. Set up a board of advisors—many fellow entrepreneurs are willing to forgo compensation. Subscribe to business magazines, like Forbes, Inc., Fast Company, Entrepreneur and Harvard Business Review. And build a library of books that highlight business successes and failures. Classics include Getting to Plan B by John Mullins and Randy Komisar; Outliers by Malcolm Gladwell; Early Exits by Basil Peters; How the Mighty Fall by Jim Collins; and Crush It! by Gary Vaynerchuk.

8. Doing it only for the money

A successful business requires deep commitment and passion. If you’re just in it for the money, choose a different career. If you don’t love and believe in what you’re doing, your brilliant idea will ultimately feel like just another job (with much longer hours). Plus, you’ll likely make less than you would working for someone else. Surveys show entrepreneurs made 35 percent less over a 10-year period than they could have in a paid job. And, on average, entrepreneurs earn no more by founding startups than they would have earned by investing in public equity. 

Do it because you believe in your product. Do it for the fun, adventure and learning experience. Do it because you’ve always dreamed of owning a company, or to create a legacy for your children. That’s not to say money isn’t a factor. It is. But there are easier ways to fund your retirement.

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