There are 10 Mistakes that Entrepreneurs make that can prohibit them from creating a very successful business. By learning how to avoid these mistakes you can get your business started up quickly, draw top line revenue, and be able to create a very profitable entity for yourself. So here are the 10 mistakes that business owners and entrepreneurs make.
Mistake #1 – Undercapitalization –There are many businesses out there that simply don’t think about how they are going to growth the business from a financial point of view. Do you have the right lines of credit? Are you going to equity out part of the company? Or, are you going to try to fund your growth through the cash flow each month knowing you may sacrifice your own pay? Have I assessed the appropriate pro forma analysis to figure out my real profit and loss in the business? Should I lease or buy equipment? Essentially, what is the best way to capitalize my company?
Mistake #2 – Poor Pricing of Products or Services – The second mistake that people make is incorrectly pricing their products or services. You need to make sure before you take the business live that you shop the competition, and you get yourself in a position to beta test five people you know that will buy your product or service and figure out what offers and options you should try from a pricing mechanism. This will ensure that the price for your product will be right so you can uptake it quickly.
Mistake #3 – Know Your Role – Business owners don’t often know their role as the owner. When people get into a business, they often try to be the general manager, the dishwasher, the server, etc. New owners try to do all of the jobs all in the business. You need to make sure your role as the owner is to really figure out what is it that you like to do and what are you good at, what your passion is, what your skills are and most importantly what’s your vision of what your job will be in the company. By not knowing what your job will be, you can confuse people as you hire them into the business.
Mistake #4 – Avoiding rookie mistakes – Rookie mistakes are making decisions very quickly over a certain dollar amount. You should employee something called the 48-hour rule. This is asking yourself if the decision is $1,000, $5,000, or even $50,000, what amount will make you sit on that decision for 48 hours before you actually make the decision. Do you know specific areas in your business like technology or other areas like financial that if you don’t have the expertise, will you get somebody in there who will help you make those competent decisions so you don’t waste countless hours, time and money? Do you know which staff would best to hire for different jobs in the company? If you’ve never hired anybody before then you ought to be asking yourself when would be the right time to get somebody in to hire.
Mistake #5 – Not hiring professional consultants – There are really three big areas in here. Legal is an important one, financial and accounting help is an important one and HR is an important one. Most importantly at the top is legal. Many business owners should focus on potential legal issues, trade marking, important documents they should have like non compete. After the fact, not before the fact is a huge mistake that can hurt an entrepreneur.
Mistake #6 – Poor staffing decisions - Poor staffing decisions are things like hiring family members that may not be able to do the job the way that you want it done. Or you’ve got no set interviewing process; you don’t really know the outcome of the kind of employee you want to hire in your business. Whenever you hire somebody, a good thing to do is make sure you have a dating period. This is a period of time before you are actually going to hire the employee full time.
Mistake #7 – Milking the business - You need to establish when you start your business on the right level of cash reserve for the busines. You need to make sure that cash level of reserve is there before you start taking salary or income from the business. This is important in case the business has a lean month or you miss projections on your sales or there are unexpected expenses that come up. You need to make sure that you run some sort of pro forma every year to project out where you think your revenue and expenses will be so you can judge how your income can grow in the business. What will be your check and balance system? I’ve met many business owners over their career that simply milk the business for themselves and inevitably it hurts the bottom line of the business.
Mistake #8 – Lack Of A Marketing Plan - A marketing plan is thinking about how much percentage of your overall revenue you will invest back into marketing for new client acquisition. Do you have a tracking system on how you’ll track your clients, your leads, etc. to figure which marketing techniques are working and which aren’t. Make sure that if you build the marketing plan that you don’t cast too wide a net and you know what specific market you are going after. And specifically, why are you going after that market? Good marketers figure out how to make a mistake once, and then fix it and not do it again.
Mistake #9 – Poor Execution – Once you develop a business plan, you need to make sure to stick to that plan for at least 6 months to see if the plan actually works. Often, new business owners change the plan on their employees all the time which can create confusion and dissatisfaction for working for a startup company. Or there may be no bench marks or no review process so people don’t know how you are doing against progress. Most importantly, entrepreneurs because they have it all up in their head often are very poor communicators and that can hurt a company and its growth.
Mistake #10 – Passion Fades – The last mistake that people make is not thinking about passion, persistence, and perseverance. In order to be a successful entrepreneur and get a business up and going quickly, you’ve got to make sure you’ve got a passion; you know exactly why you are doing this business and what you want the outcomes to be. You’ve got to be extremely persistent, you may lose money in the beginning, you may have a lot of people tell you no, you may not make a sale for 3 weeks but you’ve got to keep on going and ultimately persevere. Just like Colonel Sanders many years ago when he made Kentucky Fried Chicken it was legendary that he made over a thousand cold calls to different restaurants and bars before having someone saying that the chicken recipe was perfected.
That being said being an entrepreneur can be one of the most fun ventures that you’ll ever undertake just make sure that you follow these 10 steps and not make these mistakes and you too can be a successful entrepreneur.
Visit oXYGenFinancial.net to request a consultation on how to make smart money moves for your future.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder of oXYGen Financial, Inc - The Leaders in Gen X & Y Financial Advice and Services
Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
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