Common Mistakes Entrepreneurs Make
Common Mistakes Entrepreneurs Make
Starting a business requires a diverse set of skills and tolerance for risk leading to business owners facing critical decisions throughout their entrepreneurial career that can be second, third or fourth-guessed. And as a result, the “entrepreneurial mindset,” a common set of behaviors that business owners adopt, has evolved.
Looking deeper at the mindset, start-up experts will cite several common mistakes made by entrepreneurs including the following five:
- Lack of a business plan Influenced by the intrigue of a new entity, product or market, many entrepreneurs lack the discipline to write a full business plan, which help develop focus for the business. With a plan, a company has goals, metrics and financial standards that it drives towards. Without a plan, emotion often leads the way and adds risk to the business because no framework exists to judge the business’ success. Research by the US Small Business Administration (SBA) shows that companies with business plans are more successful, and as a result, the SBA provides assistance through classes and counseling for business owners working on plans.
- Hiring and keeping the wrong employees The largest frustration of a new business owner is managing your employees. This often results from ineffective hiring, such as hiring personalities just like the owners. Small businesses are also notorious for “hiring on the cheap,” when they try to get low-cost employees who often are not effective because of work ethic or experience. Successful entrepreneurs invest time and dollars in hiring employees with values that fit the specific company and then training them well, resulting in lower turnover and higher quality output. As one entrepreneur said, “I would rather pay market rate or even a little higher to get 120% or more output from an employee than pay 80% of the market rate and get a 50% effort.”
- Focusing on the product rather than people Inventors and innovators especially, can get swept away with the features and benefits of their products rather than their customers and employees. Business owners are well advised to understand their customers as people who have needs, wants and desires and to follow the emotion of their purchases. This applies equally to the relationship developed with employees, who will work hard to keep customers when they are trained well and treated fairly.
- Poor personal management Sometimes the greatest strength and weakness of the company can be the founder. Entrepreneurial advisors often say that the “founder needs to get out of his/her own way.” Commonly, entrepreneurs manage themselves poorly in three areas: avoiding tasks outside of their strengths like the non-accountant who doesn’t keep up with bookkeeping; not asking for or hiring help; and taking care of one’s health and personal balance poorly. Ample research exists showing that time management, surrounding yourself with people who have different strengths; and taking good care of yourself lead to business success.
- Lack of an advisory board The willingness to ask for outside advice is a major indicator for future success. Most entrepreneurs avoid forming an advisory board until their businesses are successful. However, research shows that relationships with key advisors in the first two years of business can mitigate risk significantly. Many successful business owners create a team of advisors from the outset. A common model is to gather advisors quarterly over a nice dinner, and generally the participants are honored to be asked and do not expect payment.
While entrepreneurs are known to accept moderate risk in their ventures, too many make the same mistakes as their peers. Participation in peer advisory, counseling and training programs designed for business owners helps to open their entrepreneurial mindset and avoid risks.
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