The Most Common Mistakes Entrepreneurs Should Avoid When Starting Up, Cash Management and Setting out The Business.
Have you ever thought of starting up your business but the fear of failure is acting as a repelling force to forge ahead?
You desire to start up your own enterprise but seeing other start-ups fail makes you rethink and lose confidence in your vision. According to the U.S Bureau of Labor Statistics (BLS) though not necessarily true; approximately 20% of new businesses fail during the first two years of operation.
You are a student planning on starting up a business outfit but the fear of taking the risk which might involve your time, effort and resources is making you doubt your ability to succeed.
What if we tell you that you avoid the mistakes other failed start-ups made and excel in your business? All fingers are not equal doesn’t mean you should be the smallest finger and most people fail at start up doesn’t mean you would fail too.
Starting a business requires strategic planning whether you are introducing a new product or modifying an existing product. If you do not plan well, you tend to lose everything and all your effort goes to waste.
You will definitely make a couple of mistakes in your startup but these mistakes shouldn’t be the downfall of your enterprise. In as much as you can overcome those challenges or mistakes; you can also avoid them. This is why we always recommend that you reach out to successful entrepreneurs and business owners so as to gather knowledge from them.
This is why we have strategically compiled this article to highlight twenty-two (22) most common mistakes that first time entrepreneurs make in starting up their business. We also divided the twenty-two (22) mistakes into three categories for a better understanding. These categories are:
- Most common mistakes you should avoid as a first time entrepreneur in starting up your business
- Most common mistakes you should avoid as a first time entrepreneur in cash management
- Most common mistakes you should avoid as a first time entrepreneur in setting out your business
There are many other mistakes you can make apart from the twenty-two (22) we will be discussing in this article but carefully note that these twenty-two (22) mistakes are the most common mistakes we have found out to be the reason first time entrepreneurs fail in business. So we will be guiding you through the so as to start up a thriving and successful business outfit.
MOST COMMON MISTAKES YOU SHOULD AVOID AS A FIRST TIME ENTREPRENEUR IN STARTING UP
The starting up phase is the phase where you identify the problem to be solved, generate ideas on how to solve the problems and set out goals to turn your ideas into a reality. But even at this stage, many people make the most mistake as they do not have basis and don’t really know what and why they want to venture into the business in mind. Even when they know what they want to do, setting out a realistic plan in achieving their goals becomes the genesis of their problems.
Let us too at eleven (11) most common mistakes you should avoid as a first time entrepreneur in starting up.
You should avoid:
- Believing so much in the “fantastic idea” and forget to put in much work
You have such a great idea and your zest to launch this idea is so much that you tend to neglect the part where you need to work hard. We didn’t say that having a great idea isn’t good for your business but you should know that it is just an idea and needs hard work to become a reality.
You should avoid being carried away by your love for the idea so you wouldn’t miss seeing the red flags. You shouldn’t become infatuated with this idea; instead fall in love with the problem you want to solve. Your idea can be great but try listening to advice and criticism and know how to use them to your advantage.
Before you fall in love with your idea, your idea should be something people need but they can’t get or something you will have to persuade them to try (creating demand).
- Seeing entrepreneurship as a get-rich-quick scheme
This is a myth about entrepreneurship that many first time entrepreneurs see as true. Starting a business is never a get-rich-quick scheme and shouldn’t be seen as one. You do not expect to start up your business and boom!! It becomes a success. This is not how it works. You will certainly meet some roadblocks along the way. Most times nothing might even be working out.
So never start up a business with the mindset that you will become wealthy in no distant time because you are definitely calling on frustration. Like we said earlier, focus on the problems you want to solve and find the best possible way to proffer solution.
Focus on adding and giving value rather than making all the profit because when you get a foothold of the market, your customers will become loyal and continue patronizing you.
- Making an unrealistic and immeasurable business plan
You will hardly see a business that is being set up without a business plan in this present dispensation whether written or unwritten. Starting up a business involves critical planning and analysis of the risks and benefits of setting up the business enterprise.
Many first time entrepreneurs fail to map out a realistic and measurable business plan. Your idea can be fantastic but your business plan can be awful and put a damp on your great idea. Your business plan should show where you are now and where you want to be.
It should be structured to show the total cost (fixed and variable cost), estimated sales (not overestimated), break-even point, target customers and market and reason for setting up the business. It should show your cash flow projections and your marketing strategies.
- Taking too much time to launch and also launching too quickly
They say timing is everything. There is always a perfect timing to launch and when you do so, everything falls into place. Most first time entrepreneurs fail because the either take too much time to launch or they launch too quickly.
You have identified the problem and drafted out a goal and plan to proffer solution; you have analyzed the cost-benefits and estimated the break-even point but the problem here is;
When do you launch your business?
Well, let’s answer the question.
Businesses cannot start up or be launched at the same time and mind you the time of launch can either make or doom your business. Let us look at the season to season launching of businesses; some businesses will thrive well in the spring time, others in the summer time, others in the autumn and some others will do well in the winter.
There is no best time to launch a business, you just have to prepare yourself and understand the kind of business and market you want to venture into. You wouldn’t want to launch a lemonade or ice-cream stand business as a student in the winter; it is best suited for the summer time where the weather is hot and people are relaxing. Also you wouldn’t want to launch a coffee service business in the summer; it is best suited for the winter where the weather is cold.
Launching just depends on how well you know and understand your business and industry and have researched about it.
- Not researching about competitors
Who would go into a business without researching about potential competitors? Your competitors should be one of your biggest concerns in business. You have to know what they do that makes them different. Whether you are launching a new product or modifying an existing product, you just have to think about your competitors.
You have to know about them and how you can be at an advantage when compared to them. The competitors give you a reason to create a business and solve the identified problems. They are there to make you improve both creatively and innovatively.
Starting a business with no competition is possible but if the problem you are trying to solve or need you are trying to meet is widespread, competitors will definitely start coming into the industry.
- Quitting your job too soon
It is understanding when you become eager to start up your business thereby wanting to quit your job if you have one. Well, it is a great move but also it is a very crucial one.
Have you carefully analyzed your main source of income and the profit from your business?
Can the profit from the business cover up for your personal and business expenses?
Every entrepreneur is a risk taker no doubt but successful entrepreneurs take calculated risks, that is why they thrived and survived. Every start up business needs finance and time but if you are working and getting a consistent salary, you can put the money into your business as they come and carefully plan to know the right time to quit your job.
11 MOST COMMON MISTAKES YOU SHOULD AVOID AS A FIRST TIME ENTREPRENEUR IN SETTING OUT YOUR BUSINESS
After setting out your goals and plans, it’s time to set out the business and many first time entrepreneurs make series of mistakes in this stage. Let us look at some mistakes that should be avoided in the stage of your business.
You should avoid:
- Seeing everybody as your customer
You cannot please everyone so never try to do so. But it doesn’t mean you shouldn’t give the people what they need. It is their problem that geared you towards starting up your business. So you should try as best as you can to satisfy them.
One thing you should have in mind is “know your customers”. Create a unique product; it might not be a new product but make it specific. Your customers will definitely come around. Understand your target customers; their needs and why your need to give them solution.
Channel your product to solving their problems and meeting their needs. Knowing and understanding your target customers will help you figure out the best marketing strategy to use in attracting new customers and also how to continue adding value so as to retain the loyal customers.
It will also help you in creating demand for your product.
- Trying to do everything
Why try to engage in everything when you can do one thing and do it perfectly. It is necessarily about how far or how many but how well.
Napoleon Hill said that “If you can’t do great thing, do small things in a great way”. When you have a target audience and a problem you need to proffer solution to, you wouldn’t waste your time and limited resources on trying to do everything. You will strategically go for the opportunity for which you have a greater advantage over other (comparative cost advantage).
The market is large to accommodate any product provided it is meeting a need. Therefore carefully study the market for your product and see how best it can meet your customers need.
That unique product can turn out to be a legacy just like Harland Sanders, KFC (Kentucky Fried Chicken).
- Seeing failure as an embarrassment
Failure seems to be negative and nobody wishes for that but have you looked at it from the positive angle. Do you think when you fail, you have lost? Well, the truth here is that when you fail, you learn. Failure is part of the learning process and the success journey.
Every business at one point encounters failures but you should see them as temporary setbacks and you should work towards overcoming them. Never see failure as an embarrassment instead hop on the positive side and become better.
Never be afraid to fail instead look at the next option peradventure you fail.
- hiring based on cost rather than competence or experience
A competent and experienced worker will definitely deliver the best job and promote your business. Most small enterprises or new businesses try to avoid the high cost of labor and therefore they hire people that are not best suited for the job.
It is normal to look at the salary requirement when hiring workers especially as a startup business but your business will flourish if the best workers and team are at your disposal. So you should try to hire people that are competent and experienced and most importantly have the same passion you have for your business.
- Being a control freak and that you can do it all yourself
Starting a business certainly means that it is your idea and no one seems to know your product more than you. Well to an extent, you are right but don’t you think your workers are also creative and could come up with breath-taking ideas.
You shouldn’t act as an all knowing person but mind you they should know that you know what you are doing and believe in you. Give others the opportunity to air their opinions, seek for their inputs and in most cases delegate responsibilities.
When you are always in control and do not give people the chance to bring what they have to the table, you will not give them room to be creative and innovative. The creativity of your workers has a long way to go in the success of your business.
The start-up idea might be yours but the idea for continuity can come from their creativity. Just give room for flexibility.
- Focusing on your product instead of your customers
The customers’ sovereignty is a marketing concept that will help every business to succeed especially new business and first time entrepreneurs. The customer is always right and should be treated as king.
They are the reason you are in the market so if they do not buy, you will not sell and you will not make profit too. So do not focus on your product or selling your product instead focus on what your customers need, focus on satisfying the need and adding value. It is when your product adds value that your customers are satisfied and your business begins to flourish.
Many first time entrepreneurs are focused on putting their product in the market without taking the customers into consideration and that is why many of them fail.
- Working with friends
Well there are many arguments regarding this. While some don’t have any issue working with friends, some others totally frown at it. We are not writing off working with friends totally but don’t make the mistake of mixing friendship with business; you will certainly fail. Do not hire them because they are your friends, the relationship will in a way hamper the growth of your business.
Remember they are your friends, you wouldn’t want to spoil the relationship or create tension between you and the person so instilling discipline when they fault would be difficult.
Your relationship will in most cases cloud your judgement. While some others can manage to work with that maybe because some friends are devoted to the growth if the business; in some other cases, you might encounter issues.
So just look to hire talented people that are not necessarily your friends and build a team.
- Being overly obsessed with competitors
It is true that competition is important in business as it makes you better but being overly obsessed with it is really bad for you and your business. There is a saying that if you are always thinking about competition, you have already lost.
You research about your competitors doesn’t mean you always watch what they are doing too closely. You will get distracted from what you are trying to create. Take for instance being in a marathon and instead of focusing on getting to the finished line, you are trying to see if your competitors are getting closer causing you to look back every now and then. You might trip and fall and at this point, you have lost because you were not concentrating on what you want to achieve and where you are going to.
- Disregarding legal protection
This is equally important and you shouldn’t make the mistake of setting up a business without a legal framework.
Heather Green Miller, attorney and owner, HGM law office said that “the biggest mistakes that startups make are not registering their business, picking the right business entity or protecting their intellectual property. These three areas are crucial to business starting up and where if not done properly, will cost valuable time and money to correct”.
- Not giving more than expected
I don’t know if I rightly said it but try to do more than your customers expect. Do not overpromise and do not under-deliver but most times, exceed customers’ expectations.
Give them a reason to comeback; give them a reason to remain loyal to your brand. Do not let them get used to how your product is, be creative and innovative with your brand. It will prove useful in your business even years to come.
Look at the Apple Inc. for instance; they deliver more than the customers expect and they make their customers remain loyal to the Apple brand especially the iPhone users.
- Giving up too quickly
You took the risk, so why quit too sudden when you encounter setbacks. You shouldn’t even think of throwing in the towel, you have to look for ways to go around obstacles when you encounter them. There is no point complaining or trying to give yourself an excuse for failure.
There is no fun in giving up; the fun and true quality of an entrepreneur is trying and failing a couple of times but not losing sight of your vision and zeal.
MOST COMMON MISTAKES YOU SHOULD AVOID AS A FIRST TIME ENTREPRENEURS IN CASH MANAGEMENT
Understanding your cash flow is very important in managing cash. Cash management will help you not to run out of money or become bankrupt in business. Here are so mistakes to avoid in cash management.
You should avoid:
- Cash flow management
As a first time entrepreneur, financial stability should be a big concern for you. You should have a decent plan on how you spend money whether for business or personal reasons and also how you save. It is important to save up money while running a business but mind you, taking it to the extreme could be harmful and also spending too much especially on irrelevant items could also put your business in jeopardy.
You should be able to account for every penny that goes in and comes out of your pocket and keep a record. As a first time entrepreneur, focus spending on quality products and materials and also competent employees so as to increase productivity.
- Engaging in impulse spending
As a first time entrepreneur, you might be tempted to purchase items just because you feel they are important. You might have consulted business experts, read articles and books and felt the need to follow their route of spending but you should know that not all businesses are set up to have the same cost or spending pattern.
Some businesses can incur a high cost so as to yield maximum profit, some others run on a low cost and still yield maximum profit. You have to analyze the cost-benefits of every expense you have to make in your business. What will be the benefit of getting that water dispenser or television set for your office?
You should create a budget and discipline yourself to stick to it.
- Not having cash reserves
The honest truth is that there are good days in business and there are also bad days in business. There are moments you will have a decent cash flow and some other days you may encounter interlude in your cash flow which is part of the business.
Having a cash reserve will become a life saver for your business as you will have where to run to cover up expenses. Never make the mistake of running your business on a zero account balance; it is not good for business else you will be running into debts every now and then.
Always have cash reserves and in doing this, you have to cut down your expenses like we have said earlier.
- Keeping your personal and business finances together
In as much as this is very common with first time entrepreneurs, having one account for business and personal expenses will definitely make you lessen any boundary you are supposed to put in your spending.
It is advisable that you open a separate bank account for your business and your personal finance. This will help you track down your expenses and also lessen the burden on your business.
When this two accounts are together, the expenses incurred can cause confusion and lead to cash flow mismanagement.
- Overestimating the volume of your future sales
This is one problem many entrepreneurs face in their business and it affects their cash management. It is good to be optimistic as it is one of the qualities of a successful entrepreneur but it is important to know that too much of it is bad for business.
Your future sales volume cannot be the same for every season or every month so do not overestimate it so as not to disrupt your cash management. You estimate your future revenue from tracking past revenue of your business over the past months or even that of other business owners in the industry.
For someone that is just starting up, you might not have past revenue record so you will have to look for someone possibly a mentor that you can draw experience from in predicting future sales as this will also help you in creating a budget.