Many people start doing business inspired by success stories such as those of Steve Jobs, Jack Ma, and Colonel Harland Sanders. Most of these stories highlight passion and hard work. What they also do, though, is neglect the details on how these entrepreneurs became successful.
While the entrepreneurial values of passion and hard work are great starting points, they aren’t enough. Like most things in life, coming into anything unprepared can lead to failure. Here are 5 examples of common pitfalls that destroy businesses and how to prepare for them.
Yes, These Entrepreneurial Mistakes Happen All Too Often.
Underestimating Cash Expenditures
Many people know that doing business takes money. While many consider the initial capital outlay in their calculations, such as the cost of franchising or product production, they don’t go beyond that.
People often forget that there are weekly and monthly upkeep costs that can significantly impact their financial plan. Aside from upkeep costs, the expenses required to market a product or service are often forgotten or underestimated. You can’t just execute your idea and then expect it to sell itself. Building a strong brand with a loyal client base is the only path to success. It takes time and money to do just that.
Before you start a business, it’s important that your financial plan is feasible for the long-term. Many successful entrepreneurs and financial consultants, such as New York Times Best-Selling Author Ramit Sethi, recommend that you keep your job while doing a business on the side. The cash flow you get from your job can be what sustains and grows your business. Once your business provides you with a stable cash flow, it might be a good time to start focusing all your attention on it.
Focusing Only on Short-Term Wins
Running a successful business isn’t easy. If it was, then everyone would be doing it. Another aspect of business that many people underestimate is how long and arduous it takes to actually be successful.
At a certain point, many entrepreneurs would start getting impatient and fed up. This situation might lead to making decisions that have short-term benefits but long-term disadvantages.
Many analysts attribute the U.S. financial crisis to the focus of financial institutions placed on short-term gains — which led to their eventual collapse. The same can be said for businesses, no matter how small, that get impatient and reap only short-term gains. Let’s face it: running a business is hard and success shouldn’t be expected to happen overnight.
It’s understandably difficult to resist the temptation of a quick income, though. However, it is important to remember exactly why you started doing business. Is it not for long-term financial stability and freedom?
When you’re focusing on running your business, it can be easy to ignore external factors that you can’t control. One such factor is competition. Sometimes when entrepreneurs have already done something successfully in the past, they will keep doing the same thing. In most cases, that’s okay. However, you might be in trouble when an innovative competitor has changed the industry and you just keep doing the same thing.
But should you always do something in response to your competition’s moves? The answer is no. In the end, the solution to this problem lies in the hands of your clients. Always be up-to-date on what exactly your market wants and what they will pay for. If you know this better than your competition and act accordingly, then you should be able to win and retain more clients.
Forgetting to Invest in Talent
Entrepreneurs, by their very nature, are independent. However, there will be many things that you won’t be able to handle on your own – especially if your idea becomes a hit.
Another common mistake by entrepreneurs is skimping on investments in human resources. Some entrepreneurs hire people who aren’t the right fit but do so because these people get paid less. Others stubbornly do the job themselves to save money when it can, and should, be outsourced to a professional.
As the leader of the company, your focus should be on the big picture, and to help each employee do their assigned work well. This can only be achieved by assigning people who you can trust to do their job right. Only then can you focus on your own job.
Finding these people takes effort, time, and money. Look for people who believe in your entrepreneurial vision. They should also have the skills that complement your strengths and weaknesses.
Refusing to Acknowledge Problems & Mistakes
Strongly believing in your idea is a requirement for every entrepreneur to succeed. However, it is wrong to believe that your ideas and methods of execution are perfect from the start.
Many entrepreneurs fall into the pitfall of executing ideas bull-headedly while ignoring the warning signs popping up along the way. It is important to admit that mistakes were made and to identify solutions for them. This can be achieved again through understanding your market. But you’re never going start listening to them if you don’t first admit your mistakes.
It is also important to get feedback from your employees. If you hired them for their talents, then they should have useful advice that you can work with to resolve the issues at hand.
Learning from Others
There are many more pitfalls out there and preparation is important to overcome them. However, what do you do when there is a lack of information? You learn the details from others.
You can read and use many practical books about entrepreneurship; however, they might eat up a lot of your time. Instead, consider getting a mentor. It can be someone that you already know who is successful, or someone who offers classes online.
Make sure to allot time for learning, even if it is only for an hour a week. The entrepreneurial road is difficult but you don’t have to go through it blind nor alone.
About the author: Arthur Gibbs (Art) is the current executive content director for Project Macro. He has covered health care, lifestyle trends, and business for more than 10 years for different publications. Born and raised in NYC, he prefers biking around the city and traveling the world searching for the next mountain to climb.
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