Search:
Recent Posts
Categories
Archives
YoungEntrepreneur: The Top 10 Mistakes People Make When Starting A Business
YoungEntrepreneur.com pulled together a list of the top 10 mistakes people make when starting a business. Some I agree with and some I don’t but overall its a good read. My comments are below in italics:
What are the common mistakes that new entrepreneurs make and how can you avoid making them yourself? Here is our top 10 list of mistakes people make when starting a business:
1) Not enough money.
The most common reason why new businesses shut down is that the owner runs out of money. Cash flow is critical to a startup business. You could be profitable and still have to close your doors because your customers are taking too long to pay you. Cash is king in a startup venture and you need to prepare for it.
One option is to make sure you have enough startup capital from your own investments or outsiders (bank loan, private investors, etc). A second option is to ease into the business so that you start doing it on a part-time basis until you know that it will make enough money to support you.
I would call this “not enough runway” rather than “not enough money”. Or you could call this “not enough sales”, which should be #1 on this list. Sales fixes all kinds of money problems.
2) Not thinking survival.
Starting a business is all about survival. How do you stay around one more day so that you can learn more about your market and close new customers?
At the beginning stages of a business this may mean doing work that might not be completely what you want to do but it helps pay the bills. You need to do whatever it takes to survive and get through until the business can fully support yourself.
I hate thinking in terms of “survival”. People in “survival mode” burn out quick. Think execution, cash management, and sales instead of “survival”.
3) Losing momentum.
Many new entrepreneurs have ambitions to start a business so they create a website, try to make a few sales, go all out for a few months and then stop completely. Building a business is all about momentum. If you had 24 hours to spend on a business they would be put to far better use by spending one hour a day than for 24 hours straight.
It takes time to develop a new company and for people to react to what you have to offer. Never lose the momentum and even if your business is only a part time initiative for you at the moment, make sure that every day you are making progress of some sort to move your company forward.
So true!
4) Doing it all alone.
Nobody is perfect or has the skills to do everything themselves. You need to understand what it is that you bring to the table and what you need to surround yourself with. If, for example, you are very strong at inventing but don’t want to sell then you need to find a salesperson to help you.
You won’t succeed by forcing yourself to do things that you truly don’t enjoy and will never be good at. Know where you stand and what value you can offer. By getting people around you who complement your skills, you will be able to achieve your goals and have a lot more fun along the way!
I would call this “thinking you can do it all alone”. New businesses should look to outsource non-critical functions (like book keeping)Â and focus on executing on the things that will bring revenue in the door (like sales).
5) Not hiring right away.
You should begin looking at who can be brought on board to help you from the first day of starting your company. There will be tasks in any business that you, as the owner, should not be focusing on if you hope to build any sort of sizable organization. Why are you doing admin work when you should be out closing customers, talking to the media, and landing new partnerships?
But I’m broke! How can I hire someone? Even if you have a $0 budget you can find people to work for you through high school and foreign student internship programs. Once you have a budget, you can bring people on board for as little as one hour a day (what I first did) and then increase their hours when you can afford it. You need to be spending your time working on the business and not in the business.
This is a huge debate in the world of startups. I fall on the “wait to hire” side. Also, hiring non-skilled labor, as suggested above, can be a huge burden as you try to keep interns, etc from screwing up. Look to outsource first. Look for consultants willing to work with you for minimal hours per week. Look for people who will work for stock. Make sure they are all skilled. Focus on the most important activities.
6. Doing it just for the money.
If you don’t truly love your business then you won’t be successful. If you read the stories of famous entrepreneurs and how they built their organizations you will find that it all comes down to the root of loving what you are doing.
Money is definitely important, as most companies are for-profit enterprises, but it will often take a long time to come and if you don’t truly enjoy your work then you won’t be able to convince yourself to keep going. You can only do something that you don’t really love for so long before you give up.
The author states “If you don’t truly love your business then you won’t be successful.”, which I no longer believe. Money can be huge motivator. I firmly believe that Silicon Valley runs on the prospect of riches more than the desire to innovate. That said, its hard to get rich starting a new business. Go work in sales if you want to make real money without the stress of owning your own company. Â
7. Getting to year 1, past year 2.
Many entrepreneurs have a hard time getting to the end of year one. Typically it’s because they started the business on a whim and got excited about an opportunity but didn’t do the proper research. These entrepreneurs usually run out of money and close down after a few months.
A second challenge is getting through year two. It usually takes three years of hard work to make a business. Year one is all about the excitement of getting started. You’re high on energy and ready to take on the world. In year two entrepreneurs often find themselves still not making much money and the startup excitement has faded. You’ll need to work your way through the downturn and know that the money is coming if you keep at it.
Agreed but this isn’t a “mistake” people make.
8. Don’t build around a customer.
The best way to make a lot of money quickly is to find a customer who has a problem and is willing to pay you to solve it - and then you go out and build the solution. Most entrepreneurs take the opposite mentality of “if I build it, then will come†only to realize that they’ve built it and nobody is coming. Instead of talking to customers as to why they’re not coming they decided to continue building and building. Soon they find out that they’ve invested years of work and nobody is interested in buying from them.
The companies with the highest failure rates are restaurants because they are usually built around an owner’s personal tastes. Meanwhile, the entrepreneurs with the lowest failure rates are lawyers and accountants because they are based around a service that we all need (whether we like it or not!) Talk to potential customers, see what they are interested in, identify who has money and what their pains are and then create your product / service around them.
AGREED! The first paragraph perfectly defines what I see in a lot of “tech” entrepreneurs in Utah. They think its cool so everybody else will…right? Wrong. In Utah we lack vision and basic market research skills (among other things).
9. Don’t seek mentors.
A great way to get a business going is to find out what other people have done to achieve success and implement those strategies into your own company. Find mentors who have knowledge of your industry and will give you time out of their day to help you.
You could set up a formal board of advisers and compensate people for their time but if you’re a startup you can play on the fact that most entrepreneurs are willing to help out a fellow business owner as a way to give back. If you show genuine appreciation and approach the right people, the advice you get will help make or break your company.
This is right on. Create a great board of advisers and find mentors who can help you. It will make all the difference in the world!
10. Don’t get involved in the community.
Tied in with not seeking mentors is not getting involved in the small business community. Countless opportunities are generated by connecting with other young entrepreneurs and finding out what they are up to and how you can help. You will get new business opportunities, partners, investment, media attention, ideas for productive tools to use, advice for your company, and many other resources that otherwise would take you years of trial and error to figure out (if you ever do at all).
I would call this “not networking” but what he says is so true.
A great community to be involved in, needless to say, is the Young Entrepreneur Forums, where there are over 32,500 entrepreneurs waiting to meet you and help you grow your business!
Evan Carmichael
YoungEntrepreneur.com Blog Manager
Evan, overall good advice. Thanks.
[...] unknown wrote an interesting post today onHere’s a quick excerptIn year two entrepreneurs often find themselves still not making much money and the startup excitement has faded. You’ll need to work your way through the downturn and know that the money is coming if you keep at it. … [...]
Left by YoungEntrepreneur: The Top 10 Mistakes People Make When Starting A … on 02/15/2008[...] Knudsen. Chris posts on life, business, and politics. I really like his list of 10 common mistakes that new entrepreneurs make and how can you avoid making them [...]
Left by MountainWest Capital Network Blog » Blog Archive » New MWCN Blogmaster on 02/15/2008