What are some of the common mistakes entrepreneurs make when starting out? Here is a list of ten of the most common mistakes new entrepreneurs make when starting their business. Although mistakes made can be our greatest teacher, they can be time-consuming and costly. So here I will like to share with you my hard-earned experiences and the insight I gained from my own lapses in judgment.
1. Starting Without A Business Plan
If you are serious about making your new business a success, you must have a written plan. It can be as simple as one page to get started. Writing it will force yourself to think about how you plan on making your business come to life and also become profitable. Force yourself to honestly answer such questions as "Who will my customers be"; "Why will they buy from me?"; "How much will I charge for my products and services?"; "How will I get the word out about my new business?". Be realistic about the costs of running your business. Your business plan will act as an ever-changing and ever-improving guide for you to follow.
2. Having No Management Experience
As the founder of a small business, you will be directly responsible for all aspects of management - finance, marketing, sales, employee relations, dealing with sub-contractors, and bathroom cleaning, etc. But if you are starting your business because you are great at your particular skill or service, and want to devote all of your time and energy to doing this, maybe a family member or partner can handle most of the management of the company. This person must share your vision and goals for the business.
3. Hiring Help Too Soon
Do not hire employees until it is absolutely necessary. The expense of hiring help can financially drown your small business very quickly. When you do hire someone, make sure that they are hard-working and honest. Only hire people you need, not people you like. In our financial advisory service, we only hire employees that we know and trust. And for some of the work, we rely on old time friends to do some of the smaller jobs.
4. Not Hiring Professional Help
Do not skip on hiring professional advisers like an accountant and attorney. Interview several and find advisers that you are comfortable talking with. Do they understand what you are trying to accomplish? Are they quick to share their experiences and knowledge with you? These professionals can save you many headaches and lots of money.
5. Not Using the Cash-Method Of Accounting
Under the "cash method", you record business income when it's received into your bank account. And you record an expense when it is paid out of your bank account. Most of us use this cash method for our personal finances because it is much simpler and less time-consuming. This is also the ideal method for the small and home-based business. Under the "accrual method", you would record business income when it is earned, without regard to when you may get paid for the product or service you sold. And you record an expense when it is incurred, without regard to when you will get around to writing a check to pay for it. This accrual method is too difficult to keep up with for a small and home-based business.
6. Not Keeping Track Of Your Money
You must track your income and expenses every month so that you know where your money is going. You can do this yourself with inexpensive accounting software, or simply download your monthly statement from your bank and credit card. Cash-flow is the life-blood of a small fledgling business.
7. Not Doing Enough Market Research
This is a very common problem with start-up businesses. Market research can take many months and lots of research to do correctly. You must know who your competition is, and who your customers will be. You must understand all aspects of your industry - inside and out. Read all the books and articles you can find about your particular type of business. Talk to others that are in that industry.
8. Not Doing The Correct Marketing
Every business must have an online presence. It does not matter what business you are in, you must be online. It is now possible to do extensive and sophisticated marketing for no cost - free. Whether is it a simple website, Facebook, LinkedIn, Tumblr, or an online telephone-book listing, you must be online.
9. Spending Too Much Too Soon
If you are on a tight budget, do not start out by spending thousands on business cards and letterheads. Do not spend thousands on paying a company to build your website when you can very quickly build a great website on your own. Keep using that older computer until you have the cash-flow and the actual need for a new computer. Before very big purchases, like a new truck or machine, get advice from your accountant.
10. Giving-Up Too Soon
A major part of being an entrepreneur is having stamina, drive, and determination. Not giving up your dream because of a few bumps in the road is an essential part of entrepreneurship. Developing the intestinal fortitude to weather the tough times is essential if you ever want to achieve any kind of success. Don't believe anyone that tells you that starting and managing a business is easy or simple. It also takes time, effort, faith, and a vision.
Knowing where you are going and how to get there, takes courage and a leap of faith to step out of your comfort zone.