The Top 10 Mistakes People Make When Starting A Business
What are the common mistakes that new entrepreneurs make and how can you avoid making them yourself? Here is our top 10 list of mistakes people make when starting a business:
1) Not enough money.
The most common reason why new businesses shut down is that the owner runs out of money. Cash flow is critical to a startup business. You could be profitable and still have to close your doors because your customers are taking too long to pay you. Cash is king in a startup venture and you need to prepare for it.
One option is to make sure you have enough startup capital from your own investments or outsiders (bank loan, private investors, etc). A second option is to ease into the business so that you start doing it on a part-time basis until you know that it will make enough money to support you.
2) Not thinking survival.
Starting a business is all about survival. How do you stay around one more day so that you can learn more about your market and close new customers?
At the beginning stages of a business this may mean doing work that might not be completely what you want to do but it helps pay the bills. You need to do whatever it takes to survive and get through until the business can fully support yourself.
3) Losing momentum.
Many new entrepreneurs have ambitions to start a business so they create a website, try to make a few sales, go all out for a few months and then stop completely. Building a business is all about momentum. If you had 24 hours to spend on a business they would be put to far better use by spending one hour a day than for 24 hours straight.
It takes time to develop a new company and for people to react to what you have to offer. Never lose the momentum and even if your business is only a part time initiative for you at the moment, make sure that every day you are making progress of some sort to move your company forward.
4) Doing it all alone.
Nobody is perfect or has the skills to do everything themselves. You need to understand what it is that you bring to the table and what you need to surround yourself with. If, for example, you are very strong at inventing but don’t want to sell then you need to find a salesperson to help you.
You won’t succeed by forcing yourself to do things that you truly don’t enjoy and will never be good at. Know where you stand and what value you can offer. By getting people around you who complement your skills, you will be able to achieve your goals and have a lot more fun along the way!
5) Not hiring right away.
You should begin looking at who can be brought on board to help you from the first day of starting your company. There will be tasks in any business that you, as the owner, should not be focusing on if you hope to build any sort of sizable organization. Why are you doing admin work when you should be out closing customers, talking to the media, and landing new partnerships?
But I’m broke! How can I hire someone? Even if you have a $0 budget you can find people to work for you through high school and foreign student internship programs. Once you have a budget, you can bring people on board for as little as one hour a day (what I first did) and then increase their hours when you can afford it. You need to be spending your time working on the business and not in the business.
6. Doing it just for the money.
If you don’t truly love your business then you won’t be successful. If you read the stories of famous entrepreneurs and how they built their organizations you will find that it all comes down to the root of loving what you are doing.
Money is definitely important, as most companies are for-profit enterprises, but it will often take a long time to come and if you don’t truly enjoy your work then you won’t be able to convince yourself to keep going. You can only do something that you don’t really love for so long before you give up.
7. Getting to year 1, past year 2.
Many entrepreneurs have a hard time getting to the end of year one. Typically it’s because they started the business on a whim and got excited about an opportunity but didn’t do the proper research. These entrepreneurs usually run out of money and close down after a few months.
A second challenge is getting through year two. It usually takes three years of hard work to make a business. Year one is all about the excitement of getting started. You’re high on energy and ready to take on the world. In year two entrepreneurs often find themselves still not making much money and the startup excitement has faded. You’ll need to work your way through the downturn and know that the money is coming if you keep at it.
8. Don’t build around a customer.
The best way to make a lot of money quickly is to find a customer who has a problem and is willing to pay you to solve it - and then you go out and build the solution. Most entrepreneurs take the opposite mentality of “if I build it, then will come” only to realize that they’ve built it and nobody is coming. Instead of talking to customers as to why they’re not coming they decided to continue building and building. Soon they find out that they’ve invested years of work and nobody is interested in buying from them.
The companies with the highest failure rates are restaurants because they are usually built around an owner’s personal tastes. Meanwhile, the entrepreneurs with the lowest failure rates are lawyers and accountants because they are based around a service that we all need (whether we like it or not!) Talk to potential customers, see what they are interested in, identify who has money and what their pains are and then create your product / service around them.
9. Don’t seek mentors.
A great way to get a business going is to find out what other people have done to achieve success and implement those strategies into your own company. Find mentors who have knowledge of your industry and will give you time out of their day to help you.
You could set up a formal board of advisers and compensate people for their time but if you’re a startup you can play on the fact that most entrepreneurs are willing to help out a fellow business owner as a way to give back. If you show genuine appreciation and approach the right people, the advice you get will help make or break your company.
10. Don’t get involved in the community.
Tied in with not seeking mentors is not getting involved in the small business community. Countless opportunities are generated by connecting with other young entrepreneurs and finding out what they are up to and how you can help. You will get new business opportunities, partners, investment, media attention, ideas for productive tools to use, advice for your company, and many other resources that otherwise would take you years of trial and error to figure out (if you ever do at all).
A great community to be involved in, needless to say, is the Young Entrepreneur Forums, where there are over 32,500 entrepreneurs waiting to meet you and help you grow your business!
Evan CarmichaelYoungEntrepreneur.com Blog Manager
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90 Comments so far
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Wow, that’s a good list. Very helpful to people starting out. Especially the momentum bit.
oh shit, i’m screwed. thanks for the heads up.
Great post. Such simple points yet all so vital for success and so often forgotten. It is so easy to get busy running your business and not realise your not focussing on the right aspects of your business.
Tom Beaton
Having started a few businesses (some successful, and others unsuccessful), I’d have to say this list is right on the mark. I’ve learned a number of things through the experiences, and almost every one is in this list.
Great advice!
Those 10 points are indeed common mistakes. I remember the pain and frustration from making some of those mistakes. Trying to do it all alone, doing it just for the money and not building around customers were three of my biggest mistakes.
Entrepreneurs need a Plan B. This is also a common mistake for entrepreneurs.
Very Insightful. I am always on the look for fresh ideas. Thanks!
Always starting is easy. Enthu, energy will be there at the beginning. Things will go wrong, many things may not work as expected. But still focus, with Sheer determination. You will get success.
Cut the costs always. Save money every where at the beginning. Buy at the every thing at bargain deals. Dont go for costly things, until it is required.
Check the deals in the websites like dealshotdeals.com and save money.
Excellent list, bang on.
There’s one major item you left off the list: community involvement.
This item is mostly dependent on the size of the community in which you start your business. My father is a business owner (a radio station) in a town of about 2,000 people. I have learned many valuable lessons from watching him.
People do business with people they: like, know and trust. Other business are more likely to support businesses they: like, know and trust. If you’re planning to start a business in a smaller community, be ready to be involved in that community. That means joining the chamber of commerce. That means volunteering to serve on boards. It could mean becoming a loyal member of local church congregation. It means volunteering your time and resources to help with local events. BE INVOLVED!!! Develop a relationship with everyone. Help them get to know you and love having you around.
Be available! Your business may close at 5:00, but it doesn’t mean you can’t be available in some capacity after that time. The favor will be returned — and not forgotten.
Buy local! You may not like Chevys, but if the only dealer in town is a Chevy dealer, you should probably consider it. You want that business owner to consider your services too right?
Look for ways to support other local businesses, such as bartering. Nothing says community pride like business owners referring customers to other local businesses when necessary.
These lessons extend outside of smaller communities as well. They may not be entirely applicable to major metro areas or online business, but they are things to keep in mind.
this is good!
While I agree with Dhan, even though he is apparently a robot, do not always go cheap. Sometimes it is better to spend a little bit more now, to save a lot later.
“Even if you have a $0 budget you can find people to work for you through high school and foreign student internship programs.”
Kramerica?
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Great list..
Hey…
great post !!
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Amazing list. As we’re about to come upon our third year in business, I’d recommend all new entrepreneurs print this list and stick it on their wall.
Nice!
the problem with these kind of lists is that they are allways true, but not allways. I could also make a ‘true’ list:
1. don’t advertise enough
2. too much love for the product
3. no network of people
4. too young, no experience
5. floppy presentation (business card, website)
6. no knowledge of the market
7. too lazy
etc.
etc.
Great advice. I would add to go out and meet the competition. Talking to competitors can let you know what niches they’re ignoring and where opportunity lies.
These are great practical tips. With so many other competitors out there, you really have to stand out, and provide an answer to their needs. Thanks for reminding us what we all must know.
Christopher Winkler
Provider of Self Defense Products
http://www.DefendThyself.com
It’s also a good idea to look at free stuff. For example, you don’t need Microsoft Office. You can download OpenOffice. And, maybe you don’t need a fancy GPS. You just need to plot your trip on Google Maps or MapQuest.
Free is good. Free is smart.
Everything mentioned is very True! We’ve started our business reaching our 1yr anniversary. You really gotta find many resources and connect or network as much as you can possible and always ask for advice from peers or family to support you. As you all may hear the common phrase “When the going get tough the tough get going!”
Also what could help is setting reasonable and small goals and milestones. You need to see progress to keep momentum going.
And also…don’t deviate too much from your original mission statement but at the sametime, don’t be so concrete you don’t match the market’s movement either.
-QuasPreneur
http://www.QuasiPreneur.com
For consistency’s sake, shouldn’t the last items be:
8. Building around a customer.
9. Not seek mentors.
10. Not get involved in the community.
???
Another mistake is loosely translated from Chinese as “not be the chef of your own restaurant”.
True, people are a company’s greatest asset, but if you base your company’s ongoingness on one or two really key individuals than you’re setting yourself up for a fall the way Macbeth did Duncan.
Chinese restaurants come and go, but the ones with lasting power are the ones where the owner doesn’t cook, but could if there was an emergency, because the owner worked his way up from dishwasher, busboy, waiter, captain, 3rd wok, 2nd wok, and finally head chef.
I think the corporate world could learn from how Chinese restaurants are run.
I won’t even talk about people who buy turnkey solutions and think they’ll be the next Web 2 dot 0 poster child.
Those things are very important but a huge thing that causes people to fail is to stick to your business plan even if you know it won’t work. If your business plan isn’t working, you should def change it.
http://www.buythatlocally.com
Good list, but not complete. You need to understand your market and competitors — and where both are going. If customers don’t value what you do or you don’t have sustainable competitive advantage, you’re in the business of going out of business. The vast majority (over 95%) of all new small businesses are dead within 5 years.
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Great Article. The Main thing that I find is very important is to have a good trainor or mentor. People get burned out if they have to tackle this big .dot com world on there own. They will get burned out if they don’t have someone to help them guide them. Sad but alot of entrepreneurs drop out after 3 months if someone is not guiding them on how to market and build an online business. Big Thumbs up you nailed this on the head
Megan
http://www.passportmentors.com
It is extremely important to do proper research before you get down to work. Especially in internet business when all you need is peanuts to get started. Great list! Thanks!
Nice list - number 5 really resonates with us although I’m not sure how anyone gets staff for free unless it’s family!
I think, “You need to be spending your time working on the business and not in the business.” is the key
As our business has grown the things we did things 9 months ago when we started that just don’t scale but it’s hard to know when is time to step change…
For example on day one we’d pack and ship boxes almost every night - we recently realised we’d be better to spend a day packing 100’s of boxes and then spend less time each night doing small packing runs.
We also didn’t change our packing/labelling methods quickly enough - thermal printer like a Dymo label printer to save us hand-writting labels, a strapping machine to bind boxes…
I dream of an integrated CRM/Accounting package that hooks into my shopping cart!
Mike
Great list Evan!
As a young entrepreneur still in University, this list helps a bunch.
I would also have to say that many failed businesses don’t focus enough on sales as it is actually what makes you money. Product does this too, but what’s the use if you have a great product but no body buys it.
Peter Kao
Mind of an Undergrad Entrepreneur - http://peterkao.com
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great post. I think I forgot about some of those when I started up - thats for sure.
If American business people didn’t realize these basics before starting a business, it’s no wonder why this economy is tanking. Let’s add “don’t lend to people who don’t qualify” if we are going to keep it this basic.
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I would also add that the entrepreneur must also really dedicate him/herself to excellent knowledge in his service or product being delivered. This makes a big difference. The entrepreneur can work 100 hours per week, and apply the above, however, the customer will know soon if the entrepreneur “knows his or her stuff”. Agree? Self-study is key too….
Cheers, Best of Luck to you with your blog, Keith Johnson, Author, “365 Great Affirmations”
Stick to this list, and you’ll always find a way out of encountered situation however tricky they seem.
Important I think as well, is to understand the roller coaster pattern of emotion entrepreneurs have to get through on a daily basis.
Try to keep a balance, when things go bad, remind yourself of better days and convince yourself that you can turn the situation around. On the otherside, after a big success, appreciate the feeling, but don’t go too crazy. Plan in, that the next success might be a bit away, keep parts of this good feeling in your personal account of emotion, use it when appropriate.
Once you are in business, you’ll understand the meaning.
Enjoy!
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Really interesting article i have same opinion.
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This is great advice, I appreciate it! I have faced a lot of challenges along the way, and have found that reaching out to others who are willing to help is the best way to overcome your obstacles.
I really like this blog, and have also found a lot of help from the videos and people at Club E Network (http://www.Clubenetwork.com). Of course, Entrepreneur (http://www.Entrepreneur.com) is a big help as well.
Thanks again for a great article!
This is a very good list and I especially agree with Cyrus. Momentum is very easy lost when gains are not seen quickly enough. Or at least, not as quickly as we hope.
This kind of list makes you think about what you’re doing and the direction you’re headed in with your business.
I’ve written about a list of mistakes that people can and do make when writing email at: http://savvycopywriting.com/.
I think it fits in quite well with this as part of procedural mistakes.
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Read through the list, kind of makes sense, but whomever added reason 5 needs to think again, hiring somebody means registering with the IRS, getting your insurance to cover from liability, spending time to train whomever you hire. Nobody is productive right away, you have to train them for a while, you need the infrastructure to hire anybody, for many reasons, including liability. This point is totally wrong, DO NOT hire anybody, until you really need them.
5) Not hiring right away.
Even if you have a $0 budget you can find people to work for you through high school and foreign student internship programs.
another mistake they make is whenever a “professional”, let’s say a CPA, gives some friendly unsolicited advice, I say they should at least listen and consider the idea, because most probably, that adviser is almost always right.
Sometime, unsolicited advise/suggestions/comments tend to be most helpful ones at that place and time.
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Very good advise for young people who want to start a new business. I am trying o start one of my own right now. I am in the business of repairing mercedes benz cars in los angeles. My rates are cheap by any standards. My web site is www.mercedes-mechanic.com. Thanks.
Think.
Objective thought is probably the scarcest of all commodities. You, the entrepreneur, must live in unbiased, objective thought.
It will bring the right people into your life. It will eject the wrong ones. It will help you chose between offers of all sorts. Thinking is your armor AND your sword.
What passes for vision is usually just thought that is headed in the right direction.
Great list. These are tips that every freelancer and young business should keep around. It would be nice to see you delve into each step a bit more. You’re now on my reader!
I was so inspired by this list that I linked to it in one my networking communities using the rss feed. I hope you get more traffic now, not that you need it probably.
Starting a business is the easy part
Keeping it going is quite another thing in itself.
Good advice
Good piece read and learn
very nice article … thanks a lot !
It’s kinda weird but I’ve seen some people coming up with some really dumb business ideas. This should be the no1 mistake to avoid.
What to I mean by dumb business ideas ? These are just services or products you propose to others and that you, yourself , wouldn’t buy it or use.
So avoid proposing something that you will not use or buy , because it will just affect your confidence later on when you want to start sth else from scratch.
http://www.myaboo.com
just found your site through another site. you have got me totally fired up! i am building a new media company at this moment. the points you touch on are great advise-perfect inspiration. bull’s eye…
seeking mentors is the most important part. That’s not easy to find someone who can mentor you to success in your business. Besides, it was not cheap to pay someone to mentor you if you just a starting in a business.
Great list!
Very good advise for people who want to start a new business. Mentoring is always the #1 problem for any business. We mentor people in free traffic technology which I have spent years perfecting. With new technology comes big advantages in marketing. People no longer have to spend a fortune on leads. It is now affortable to anyone who is willing to spend some time learning a few different strategies. Thanks for article www.9608.goinetusa.com
Great list. I particularly had problems with momentum, it took alot of small business startups for me to finally realise that I had to stick with it for much longer than I usually did and not to expect to be in profit at least for a few months.
Great advice and a good reminder of how hard it can be to be an entrepreneur. So many people don’t understand what’s involved and I think this list can help them claify what they’re trying to achieve and plan better before they get started!
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I totally agree with most points made in your list, though my experience is that not all of them have to be true. Especially the don’t do it all alone part as well as not hiring early. I’ve run three successful businesses on my own, without hiring people, and they now run perfectly well without my involvement at all.
But I do have one question for you though; Who is that girl? And can you give me her Skype address?
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We have seen a lot of companies struggle with finding the money for a business or qualifying for a small business loan or credit card. The best way to obtain money for a new business would be unsecured finance. It helps people get the money need for the business while placing very limited to no liability on the owner and having all liability on the owner removed within a year. Unsecured finance works like a credit card, you only pay back what you use, but it has a lower interest rate, higher amounts of credit available, and can help build the companys paydex score.
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Good list. Interestingly, I don’t see making a business plan, researching the competition, underestimating time commitment. One of the most fabulous books I have read on starting up which I think everyone should read is “E-Myth Revisited: why most small businesses don’t work and what to do about it.”
Its easy with a Job if you look in at sucess
Good advice, especially doing continued work especially if you are internet based
I see it all the time with the people I coach that are starting a cleaning business. I have seen every example giving in the post. Mainly what I see in young people is a lack of purpose and a strong sense of entitlement that I think stems from the broad culture-wide false self esteem movement of the last 20 years. It has largely become a culture of narcissism and immediate gratification.
Great list. I’m definitely going to go back to this as I start my own business. I’m actually looking to purchase a business. I’ve checked out a bunch different sites. I think the one that I’ve had the most success with is biztrader.com It has a good variety of businesses worth checking.
@Jess - I would check out your local Chamber of Commerce for advice. They’ll also be able to direct you to other entrepreneurs in your area. I would also check out websites like biztrader.com during your search. It has a diverse selection of businesses to look through. Good luck!