The idea of entrepreneurship is not as glittery as it is made to appear, no doubt. And this explains the pull towards it. Many people will continue to quit their 9-5 jobs to go into business, expecting to have a walk in the park. As a result, they fall into a ditch, making mistakes first-time business owners make, especially in their first year. That is why the statistics from the Bureau of Labor Statistics say that about 20 percent of small businesses fail within the first year, and another 30 percent fail before the end of the second year. By the end of the first decade, only 30 percent are left standing.
There are tons of common mistakes that entrepreneurs make in their first businesses or their first year of operation, but this article limits it to the 5 most fatal mistakes to avoid when starting a business, especially if you have the long term in view.
Starting without a plan
The first and maybe most fatal mistake a first-time entrepreneur can make is starting without a plan. I know a general motivation says “start first and figure out the rest as you go on”, but this does not mean you start with zero plans.
You cannot jump into any business without a clear plan of where the business is headed and how it will get there. The general idea behind “start first and figure out the rest as you go on” is that waiting to know everything could mean that you would never get started. It does not mean you have to get a business plan, although it would be a great idea if you do. Have a clear picture of the problem you want to solve, consumer needs and expectations and how your product or service meets that need. On the financial part, you should define how the product or service you have will bring in money, and how many customers would be willing and able to pay the price for it.
The major danger of starting without a plan is that you could be ignoring or underestimating major market risks in your sector.
Too much Product research without market research
The fact that you know how to build or create products is no reason to run into the entrepreneurship street, creating products as you go. Right from conception, your product should be focused on delivering real business value to the market, not just showing off your technological capabilities. Many passionate ‘techbros’ find themselves on this table.
Just in case you didn’t know, there are hundreds of awesomely built applications on the play stores that never get downloaded. Problem – zero market research. In fact, it is safer to adopt the reverse product development style where you first do market research and establish the need for the product, before creating it. If not you would end up with one of those products that our teachers from secondary school would have described as “beautiful nonsense”.
Some experts advise that you spend six months on market research to understand the needs of your potential customers and validate your idea before you start investing time and money into creating it. Being wrong about your market needs means you will have an awesome product that no one really wants, or maybe they want it but not enough to pay for it.
Lacking sales ability
This item will make the top 10 mistakes entrepreneurs make, irrespective of who is drawing up the list. If you want to start a business, but you hate selling or do not even have the ability to, then take a deep breath and have a second thought. Entrepreneurship is about selling, from beginning to end. Some first-time entrepreneurs come in with the thought that they just have to create or get the product, and they can simply employ salespeople to do the hard work. In reality, it does not work that way.
You will stand before entrepreneurs to ‘sell’ your business idea to them and convince them that it will be worth their while and their money. If and when you start to recruit, you will ‘sell’ your business ideas to employees and get them to believe in them. You will keep selling your brand every step of the way. Selling is a must-have skill for entrepreneurs who want to build a successful business.
Trying to grow too fast
For the lucky ones who start a business and start making significant revenue almost immediately, it could be tempting to start spreading your tentacles all over the place.
Some startup commentaries suggest you must go first and go fast, but you should not try to grow too fast. If you do not have a firm grip on one market section or product, why do you want to churn out more and more products in a bid to take over the market? This is a fatal mistake you should try to avoid especially in your first year of business. Once you get your feet firmly on the ground, maybe in your second year, you can start spreading. Like it is with plants, the depth of the roots is a better indication of the strength of the tree.
Not defining rules for customer relations
This is one of the most common mistakes that first time entrepreneurs make. They assume that all is well if you can find a customer and make a sale. What about spelling out return policies? On what grounds can customers return a product? Dissatisfaction? Wrong product? Or a simple change of heart? How about delivery and pickup services? What about payments? Are you going to be accepting payment on delivery? Or do your products have to be paid for in full before you dispatch?
Put all these rules together from day 1 and communicate them to all stakeholders. It will make your life a whole lot easier.