TSN #6 - Business Traps I Wish More First Time Entrepreneurs Avoided, Myself Included

Okay, so you made the decision to jump into a cold water pool. You want to give entrepreneurship a try, either as a side gig or a 24/7 commitment.

You open X, LinkedIn, Instagram, and you see how much money people have raised or how a few people managed to sell their businesses for hundreds of millions of dollars.

Should a unicorn exit be your primary goal? Go big or go home?

It should not.

Read on.

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What is the “job to be done” here?

First-time entrepreneurs often overcomplicate things and are too optimistic about outcomes. I was the same and had to learn the hard way.

I wanted to have a billion-dollar startup when I was at university. The probability of achieving it? 0.0001%. The probability of losing all invested time? 99.9999%. Odds? You be the judge of that.

You want small wins, cash flow, some predictability, and a higher probability of succeeding. This is especially important if you are doing it for the first time. You want to play at the “easy” level, not expert.

Ideally, build one, two, or three of these businesses to get good at it and have diversified baseline income before hitting those high-risk big swings.

By the way, this is what “multipreneurs” strive for. We can look into this topic in the future.

So, if I were starting with a clean slate, what would I avoid?

My list of “First Time Entrepreneur” traps:

1. Going for the sexy stuff (AI, Crypto, Web3)

Jumping into trendy tech fields like AI, crypto, or Web3 can be tempting, but it also attracts the best and brightest. Do you want to compete with them on your first try? These markets are oversaturated with specialized knowledge. The majority of wealthy individuals run unsexy, profitable businesses that don’t attract harsh competition.

Advice: Not the best way to start your entrepreneurial career.

2. Playing a game with long sales cycles & with tough purchasing mechanics

Need an example? B2G business models. Founders pitching me another 58th idea for a city parking app, acknowledging it’s a B2G, but claiming that once they get there, customer value is going to be amazing. The magic word “once”. Got enough cash for a 12-24 month sales cycle to be rejected as a newcomer?

Advice: Forget it, please.

3. Playing roulette to raise VC money

Let me give it to you straight, the probability of raising money from a VC or an Angel is 3%. 3 out of a 100. Let’s get that baseline income home first and then we can gamble and bet on big ideas.

Advice: Go for this as a first time founder only if you have enough “money cushion”, have some unfair advantage in terms of domain expertise/cofounders etc. & willing to probably lose all time invested into the idea. If your aim is freedom or baseline income, avoid.

4. Ignoring brand and trademark situation:

This is a baseline thing, your business takes off and you get a lovely letter from a large corporation asking you to change your name or they will sue you. Happened to me, twice. Note to self: some people learn at slower pace.

Advice: just google it and invest an hour, before you buy that domain.

5. Avoiding the topic of distribution:

Everyone talks about ideas but not distribution. You don’t know how people will find out about your offering or product? Well, then maybe you should not do it. Also often forgotten is the cost of those distribution channels. Running social media ads are not a universal solution.

Advice: Who has the best distribution, wins. Not the best idea.

6. Not having an early path to revenue

Let me return to the idea of a parking app. From the outset, it is unclear who will pay and if they will. Sure, you might consider municipalities, users, or commercial real estate operators, but you have to build the app, navigate the procurement process, and, if successful, will it eventually generate enough revenue? Will this take 6 months? 12 months? Contrast this with a window cleaning business or, my favourite, bouncy castle rentals. The time from idea to revenue is as simple as picking up the phone and cold-calling 25 potential customers.

Advice: don’t make your life difficult from day 1, the best ideas are ones you can start selling today, generating “negative working capital” & then you deliver in the upcoming days/weeks.

7. Starting with a “new to market” idea.

Taking part in a market creation effort, or even better, revolutionising an existing established market is tough. More so if you are a first time founder/entrepreneur. Time is your precious resource early on, here the risk of losing it is extremely high.

Advice: Look for an existing market, ideally underserved and deliver what clients asked for. You can hit those “market revolution” crusades later.

To close off, if you are new to entrepreneurship, you should make strategic moves to ensure a stable monthly cash flow. Yes, in the future you can take more risky bets. However, to win the game, you have to stay in the game, and this is achieved through maintaining cash flow.

That's all for this week. Let me know which one resonated with you the most!

- Slavo

P.S.: If you’re looking for some more inspiration, click the link below: