Being an entrepreneur is all about embracing risks and taking chances, and that comes with the possibility of making mistakes. But, that doesn’t mean you shouldn’t do your very best to ensure your new venture succeeds. In the current economic situation, you’ve likely put your efforts on hold until the world economy improves, which gives you time to avoid these common entrepreneurial mistakes.
First, recognize that making a mistake isn’t the end of your venture or means you need to abandon your dream of owning your own business. As a matter of fact, if you look at the story of the most successful entrepreneurs out there, you’ll notice that many had to fail time and time again until they made it. For instance, Henry Ford failed several times and blew through all investor money without producing a single car [source]. Ford said this about his failures:
Failure is simply the opportunity to begin again, this time more intelligently
However, recognizing the potential for failure, potentially accepting its potential, doesn’t mean you shouldn’t learn from the mistakes of others, thus committing the same mistakes. You should try to do your best to learn from the mistakes of others, and refrain from making them in your operation. Let’s take a look at some of the most common entrepreneurial mistakes you should avoid.
Choosing the wrong financing options
One common entrepreneurial mistake is expecting banks to give you the keys to the safe because you have a great business plan and pitch is unrealistic – and so is the idea that you can do it all yourself. In fact, most banks are very stingy with startup funds, knowing that 50% of startups won’t be around after 5 years and 70% likely won’t be around in 10 years [source]. And, if you don’t have substantial experience in a business similar to the one you’re starting and significant collateral, you can kiss bank funding goodbye.
Back in the ’70s the SBA (small business administration) guaranteed these bank loans, making them easier to get. A series of loan defaults changed the SBA program, making these guarantees much less common.
Wasting time searching for bank financing or counting too heavily on getting a loan to fund your startup is a common mistake entrepreneurs make. This time and effort may mean the entrepreneur misses the opportunity to get their business off the ground when the market is hot.
Today, many businesses seek funds from venture capitalists. This is a great source of funding except you give up ownership in your business, which may mean losing control. Just look at how Steve Jobs was removed from his own company, Apple, when the board didn’t agree with the direction he took.
Venture capitalists also want a sound exit strategy that allows them to take their investment (and a hefty return) out of the business within 5 years. Not only does this force a short-term outlook on the business, but it also forces the business into decisions not based on the best interests of growth.
For this reason, many entrepreneurs rely on friends and family, as well as maxing out their credit cards to fund the startup. They also commonly hire employees based on their willingness to work for free or under market value to reduce burn. And, while this may help the burn rate (see below), it means the firm may be handicapped by inadequate employees either in number or skills.
Funding a business using your own credit/ credit cards places the business at a serious disadvantage by starving it for cash. We call this bootstrapping.
Bootstrapping also applies to the duties and responsibilities of your business. While you should use your skills to do what you can yourself, over-reliance on your own efforts eventually becomes a detriment to your business, and possibly your health.
First, no one has all the skills necessary to successfully run a business, which takes managerial skills, accounting and financing skills, marketing and sales skills, technical skills, and possibly even engineering skills. Second, there are only so many hours in the day and only so much you can reasonably accomplish in those hours. When you’re overcommitted, you miss deadlines, make poor decisions, and fail to consider decisions with sufficient input.
Hence, you need to find others to help run the business, although you might not have to do that right away. Knowing what and when to delegate frees up some time that you can use to concentrate on core functions, but will also make sure you get professional results.
Not taking care of yourself
You’re not a machine; you’re a human being with needs, and when these needs aren’t met, you’re putting your own health and sanity at risk. You have to listen to your body and know when it needs rest.
One of the worst things you can do as an entrepreneur is to neglect sleep. Not only is sleep a great mood modulator, but poor sleep affects your motor skills, memory, and cognitive performance, all tools that you need to run a business efficiently.
So, one piece of advice that might not be intuitive when you consider common entrepreneurial mistakes, look at your sleep habits and try to correct them if you find you’re not getting the recommended 7-8 hours per night. If you find you don’t routinely meet this goal, make your environment as conducive to sleep as possible.
Improving the quality and quantity of sleep might mean changing something as simple as your mattress. If you’re a side sleeper, consider getting one of these. Side sleepers need a different mattress than people who sleep on their backs. They need a mattress that offers enough support to make sure their spines remain properly aligned without applying too much pressure.
Don’t expect overnight success
A lot of people don’t realize the long journey to a successful business.
Forecasts are a great tool for avoiding common entrepreneurial mistakes, but life has a way of intervening and the Peter Principle almost always holds true — anything that can go wrong will go wrong. Hence, you just don’t know where you’ll be six months or a year from now. Market conditions change. Prototypes cost more than you plan, with multiple iterations necessary to produce your MVP (minimum viable product). You might encounter intellectual property issues, and so on.
It sometimes takes years for your business to lift off, so be realistic. This also goes for your burn rate, which is always higher than expected, taking longer to reach revenue positive. So, plan for sufficient cash reserves and don’t expect to make much of a salary for a while. Try to extend your cash by renting rather than buying, outsourcing rather than hiring, bartering rather than paying cash, and other creative ways to make your money last longer.
Bad advice or no advice
This one is tricky. Intelligent input is a godsend in the right situation, but listening to too much feedback could end up creating confusion with advice that is wildly different. If you plan to take advice, make sure it comes from business owners within your niche who are successful or who have learned from their earlier mistakes. Counterbalance that with the advice of a few trusted advisors.
Make sure that only work with consultants for specific aspects of your business, not as a whole. This ensures you’re working with an actual expert, not one pretending to understand aspects of your business when they have no expertise in that area. A common entrepreneurial mistake is taking strategy advice from your accountant. Accountants are great at managing numbers but know little about strategy, especially involving the tradeoff between customer experience and cost. It’s never a good idea to sacrifice customer satisfaction for lower costs or to delay the purchase of equipment that helps you leapfrog the competition in favor of a larger bottom line.
So, don’t commit these common entrepreneurial mistakes and, if you have already, pick yourself up, and try to recover. You’re bound to make mistakes – just make sure you learn from them instead of letting them stop you.
Need marketing help to support business growth?
We welcome the opportunity to show you how we can make your marketing SIZZLE with our data-driven, results-oriented marketing strategies. Sign up for our FREE newsletter, get our FREE guide to creating an awesome website, or contact us for more information on hiring us.
Hausman and Associates, the publisher of MKT Maven, is a full-service marketing agency operating at the intersection of marketing and digital media. Check out our full range of services.