Common Mistakes Made by Entrepreneurs
Sticking with one idea for too long: While a single idea may be your catalyst to entering a market, don't be afraid to continue to explore new ideas and options. Remain open-minded, and explore new ideas to see which ones will pan out into feasible market opportunities.
Being product-driven, not customer-driven: In the world of capitalism, the customer is king. Even if your product is faster, better, or stronger than the competition's, if it isn't what your customers want, then they won't buy it. Understanding what your customer wants and needs should be your number one priority.
Thinking legal problems can be solved later on: Many important legal decisions must be made early on. Neglecting to deal with these issues during the appropriate stage can cripple a business. It's important to hire a competent lawyer with experience in working with entrepreneurs. He/she can advise you on the next steps to take as you are growing your business. It can be much more costly and time consuming to fix the legal blunders you made unknowingly early on than to take care of them at the outset.
Spending money before you make it: Cash is key in the early stages of a business. Money owed to you only forecasts future cash flows. While you may have a booming business with many customers, you cannot pay your bills and staff without cash.
Not having a clear focus: Write a business plan early on, even if it is only for your benefit. Set both short- and long-term goals for the business and check your progress along the way. Without a clear vision of where you are heading, your great idea can get muddled along the way.
Catching key customer syndrome: Having that one large customer in the beginning may be just what you need to get your business started but use that advantage to work on acquiring more customers—large and small. Having one customer who generates more than 50 percent of the revenues can be a recipe for disaster if that customer goes out of business or stops buying from you for some reason.
Performing inadequate market research: Entrepreneurs often overestimate the size of their potential market. So be careful about defining your market segment too broadly, and make sure to conduct sufficient research on potential and exiting competitors. Ask relevant questions, such as: What are potential customers buying now? What is their incentive to switch to buying a new product? Is there enough market demand to support the introduction of a new product?
Having too much overhead: Many startups fail due to overspending on overhead. The best entrepreneurs know how to use their cash for business-building processes, such as product research and development. Think carefully before spending and remain focused on the bottom line.
Lacking experience: Your lack of experience in the industry you are trying to enter can lead to many costly mistakes. Before trying to launch a startup, gain experience in the field through an internship or a related job. On-the-job experience is the best way to learn about a business.
Maintaining equal partnerships: When starting a business, it can be tempting to divide ownership equally among the partners and attempt to make all decisions via consensus. But while partners may agree in the early stages, disagreements will inevitably arise. Partners also often have different ideas about how much time to put into the business. Ensure that there is a defined leader with adequate authority to make final decisions and sufficient compensation to remain motivated.