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!
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 http://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!
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?
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.
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!
Great advise, thanks.
Excellent post. When I started one of my online businesses a couple of years ago, I was guilty of most of these points. Needless to say, the business is no longer. Great information…keep up the good work!
Yes, great post! If you are in the second grade…
I had a boyfriend one time who decided to start a business to help people with disabilities. He bought tons of product but did not save enough money for advertising. He did the social media thing, but that is not enough. I kept telling him he needed business cards but when they did not turn out perfectly, he discarded the idea. The business hardly sold anything and he closed it down. Product is important, but if no one knows about it, then what’s the point?
Nice stuff. I had to close my first venture because of some of these.
Live and Learn
Great info. Being a online business owner and knowing how long and hard you have to work to make an income, the list is pretty complete. There could be information on what you need to do to start a website and get it listed on the search engines.
Great post! I think not going it alone and finding mentors have been of most importance for me and my businesses. The reality is that I don’t know everything and need the expertise of others. Fortunately I’ve been able to find some trustworthy confidants that I can bounce ideas off of and rely on for their expertise.
Its also important to know your credit score during this time
Visit the Forbes Credit Center, its great!
Great read, I really felt the most important one there was ‘Don’t build around a customer’. I’ve seen so many start-ups make this mistake. Obviously this isn’t an extensive list but it’s a excellent top 10!
Great post. You’ve got a lot of great ideas.
#6 I have a hard time with, as I don’t believe you necessarily have to be passionate about your business to make it profitable. I don’t get burned out over my business, though I’m not passionate about it.
I enjoy business for the sake of business, not necessarily for the love of the product/service.
If you were to start a business as a blog where you were writing daily about your given niche, that would be something entirely different.
Great article nonetheless.
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Wow — all in one place; I have tons of small biz clients and this is where I’ll send them to find out more. Thanks!
Great job!
You make some very good points in your list. One thing that I keep doing is to make sure I introduce my business to two people everyday. It may be indirectly thru an email or a postcard or directly by asking individuals I meet if they know of someone who might be interested in making some extra money every month.
I have the opportunity to overhear a couple of people talking about their husbands while we were eatting in a local restaurant. One woman said “I don’t think my husband will stay in the business very long. He doesn’t have the patience to show someone the basics so they can learn how to adequately do their job!”
Next to duplicatible training, I feel that getting involved in the community is the next most important thing. I applaud you for your list. It is pretty comprehensive. I hope you have a lot of success.
Great job!
Audrey
The other woman agreed, that her husband also did not have the patience to work with individuals, until they learn the “How to” of the business.
It was interesting because that is one of the most important things the men could have done, was to provide duplicatable training so that each of their trainees had a means to also train someone else.
It is so important, especially in a network marketing company, for the training to be easily duplicated so that the new distributor can easily train anyone they bring onto their own team.
Training can easily make or break the team. No-one has to say, “Oh, I have a new team player….. what do I do now?” They should already have that basic ability to do what they did when they first signed up.
Good essay. Another important point is to ensure you have your family onside after all they will be the ones putting up with your long hours and frustrations. Make sure you keep plenty of time in your life for them.
Extremely useful information. A must read for all the new entrepreneurs as this can help them avoid the common mistakes. I guess doing some research initially will go a long way to prepare for business sustenance and growth.Its like preparing better with all the facts at hand and learning from the failures and success of others.
Thanks for sharing. I agree with those points. I tried so often to start a legitimate home based business. Fortunately, I found mentoring with an online business.
Great points - one of the things I’ve found that is true for us and for many of our clients also is that persistence and willingness to adapt are the key elements.
If you build the wrong thing, persistence and adaptability lets you course correct until you’ve got the right thing that people will pay for.
If you run out of money, persistence and adaptability lets you take on a consulting gig, mortgage the house, or eat noodles to stretch out your time to getting it right.
Of course, applying the other items first means that you won’t have to be quite as persistent or adaptable to get things working
What a great post!
I absoultely aggree with all the points you make - I feel on of the biggest mistakes people make when starting a new business,in entering an already saturated market.
New to the blog but will definately be subscribing!
Great article and so true. I have seen owners whose cash flow is so tight, they have to pay COD and when the packages come in wait a couple of days to pay UPS, etc. When you do hire, you should aim to hire the best employee you can and not the cheapest.
Great article, found it extremely useful and informative; will be recommending it to others. Thanks for sharing.