Most entrepreneurs are familiar with the ridiculously high percentage of small businesses that will fail in the first couple years. The business owners who survived the odds will tell you that they didn’t achieve success on sheer passion alone. It took hard work, and in most situations, it didn’t happen over night.
After spending the last decade running my own business consulting for companies and corporations, I have witnessed it all. Here’s seven of the most common mistakes I’ve seen newbie entrepreneurs make with alarming consistency.
1. Not setting aside enough cash reserves to support yourself. I believe that one of the reasons why so many small businesses fail within the first few years is NOT because the business model isn’t viable or the entrepreneur isn’t “good enough” to make the business work, but it’s the fact the financial ramp up time is a firm reality. Most entrepreneurs simply run out of money to support the business and/or themselves before the business is profitable enough to sustain itself.
2. Using assumptions that are overly optimistic during planning. I see so many newbie entrepreneurs fall into this trap. They have a great idea and convinced their friends and family that it’s a no brainer. They jump into the fray only to realize there were a few not-so-little details that they failed to consider or a few areas where their assumptions were overly optimistic and before they know it, that “no-brainer” business is hanging by a thread.
Be honest with yourself. Are you underestimating the time required to get the first client? Are you overestimating the demand for the product? Are you assuming zero risk by not allowing for what could go wrong?
3. Not properly evaluating your business model. Not everyone incorporates a business model into their planning. It’s so easy to get really lathered up around the concept of your business, but it’s quite another thing to put pen to paper to help you objectively evaluate your overall business model and its profit potential. The simple truth is that having a great idea is just a start – it doesn’t necessarily translate into a profitable model.
4. Trying to do everything yourself to save money. If you try to do EVERYTHING yourself, you’ll not only run yourself into the ground, your business will suffer, because you don’t bring sufficient expertise in every area. Your time is money. Think about where you must personally invest your energies. Should you be developing and refining your content, products and services, cultivating relationships with key clients and stakeholders, developing credibility within your industry? No one can do this for you.
That said, others can develop your website, handle your public relations, develop templates for your newsletters, make trips to printers and copiers and perform random administrative functions. Utilize them.
5. Not being willing to work like a dog during the early days. I’m amazed how often I run into people who’ve recently launched their businesses, but they seem shocked that they’re not making six figures while working a 25-hour work week. They seem to have this glamorous view of entrepreneurship where they get to start at the top and skip all the hard work. The simple truth is if you want to make it, most startup businesses have to hustle early on. This might mean working another job while you’re starting your business, volunteering or doing some work for free to gain experience and exposure. It also may mean working nights and weekends.
6. Pricing your product or services too low or high. In my business I often respond to request for proposals. Years ago, I’d been submitting proposal responses annually to a large governmental agency. After about four years of consistent rejections, I got a tip from a colleague that my pricing was too low to be considered seriously. That year I doubled my pricing on the same classes and was selected for the first time.
7. Not having a growth strategy. We all know of a restaurant that was great when it first opened but after expanding the food or service went downhill. They then developed a bad reputation and eventually closed. Don’t be that business.
While most small businesses think the goal is to win as much business as they can, this isn't necessarily true. Sometimes, you can attract too much business and then have a completely different challenge that could threaten the longer term viability of the business completely.
