There are untold mistakes that the budding entrepreneur can make when blinded by the excitement of starting a new business. The good news is that mistakes are all part of the learning experience. What separates the businesses that survive from those that fail lies in not repeating those mistakes.
Fortunately, many entrepreneurs are happy to share their knowledge so that you don’t have to go through that first round of mistakes if you learn from their experiences.
Business coach David Holland shares the following practical tips in this post on common mistakes made by startup companies.
Double your estimates Many projections and decisions when starting out are based on assumptions - assumptions that are not necessarily based on a track record or fact. For this reason, rather assume it will take twice as long to reach your targets and cost twice as much as you anticipate.
Growth can be bad This sounds counter-intuitive, but only if you don’t factor in the impact on your cash flow if you grow too fast. David suggests that some of the biggest culprits that drain your cash resources in a rapid growth phase include discounting to win the bigger contract, unchecked growth in your fixed costs, longer payment periods, and holding larger stock reserves.
Stay hungry, be cash cautious David recalls a case of an entrepreneur with a considerable pile of cash to start his business who wanted to know whether to invest it all in his business. David suggested investing a portion and putting the bulk away in a savings account. This would have the effect of forcing the entrepreneur to chase sales in order to build his business rather than relying on his pile of cash. Naturally, the entrepreneur ignored this advice and only go serious about sales once his savings had dried up. The lesson is that staying hungry for a sale focuses your efforts.
Hope is not a strategy No matter how much you believe in your product and its natural appeal to the market, hoping that the market will respond to your passion is a misguided assumption. Only by developing clear and effective marketing and sales strategies can you expect to make an impact. People don’t buy what you’re selling; they buy the benefits that will impact their lives or business.
It’s not a get-rich-quick scheme Money is the consequence of operating a business that serves a purpose and meets customer demand. Without a clear, long-term vision, mission and purpose your business is unlikely to produce that financial end-result.
Hire right Employing people is one the most important decisions you will make when growing your small business, and it is easy to hire the wrong people. Finding the right fit - people with a passion for your business rather than people with the best qualifications - is the first step to building your team.
The will to keep fighting Running a small business is not easy. It demands all of your energy and most of your time. David suggests two ways to avoid burnout is to keep learning - through books, seminars, events, and so on - and don’t be afraid to reach out for help. Finding a mentor or advisor is not a sign of weakness, but rather one of maturity and good judgment.
Key takeaway: Running your own business is a constant learning process. You can learn by stubbing your toes on common hurdles, or you can learn from others’ mistakes. The latter is always a less painful route.