Becoming an entrepreneur is a dream many people have. This is because it offers freedom and a chance for increasing earnings. However, not everyone succeeds in entrepreneurship due to various reasons. Hence, this article will focus on the entrepreneur mistakes you should avoid.
Entrepreneurship requires huge amounts of work and time before hitting success levels. The initial stages of starting a business will require you to put in many hours while earning little or no profits.
Due to the pressure of starting and running a business, many entrepreneurs fall out of business soon after its launch. According to statistics, 20% of startups fail within the first year, 30% in the second year, 70% in their fifth year, and 90% of businesses do not make it to their tenth year.
As an entrepreneur, you should be ready to deal with the challenges that arise with running a business. There are some causes of business failure that have been identified through studies and experience.
These form part of the mistakes you should avoid as an entrepreneur. These are not necessarily all but they form part of the key ones.
1. Failure to do proper market research.
The first step when starting any business venture should be performing adequate market research. This helps in understanding product or service viability in the market. It also ensures market decisions are made of existing market facts rather than emotions and expectations.
Lack of market research hinders understanding of market demand and opportunities. This is a key mistake that entrepreneurs make leading them to introduce products and services that consumers don’t need.
Another factor you should consider when performing market research is the effect of unforeseen factors on the business model. As an entrepreneur, there are various factors outside your control such as government regulations and security.
Understanding them helps in better business planning through taking mitigation measures such as insurance.
The market research also helps in understanding the business competitors. As a starter, you need to keep an eye on the competitors to help compete effectively. Some of the factors to consider in your market research are competitor pricing and business location.
From the above, market research is critical for any business’s success. As an entrepreneur, getting into business without market research is a big mistake that could result in business failure in the long term.
This is comparable to gambling. Market research is what leads to the development of a business plan.
2. Starting a business without adequate capital
Capital is the resources needed to start and sustain a business. It is what an entrepreneur puts in to start operations.
Normally, startups take time to become self-sustaining. Depending on the nature of business, this could take up to 10 years. However, the average duration is 3 years. With this in mind, a business requires adequate capital to remain afloat before its self-sustaining.
Some entrepreneurs fail to secure adequate capital before startup this results in business challenges if the business doesn’t break even soon. With the business requiring continuous capital injection, lack of it causes business failure resulting in closure.
You should research to identify capital requirements before starting the business. once this is done, ensure you obtain the capital and this can be done from various sources such as dept and savings.
However, if you do not have the means to raise the required capital, you can consider getting capital-rich investors on board. The only challenge with this approach is that you have to cede some business owners.
Lack of access to capital remains among the key challenges facing entrepreneurship today.
3. Lack of a business plan
You need a plan to start and run a business. This is like a map that defines what needs to be done, by who, and by when.
A plan is a critical tool for entrepreneurs and lack of one may result in a business under performing and extreme cases, it may cause business failure.
Planning is a critical part of any serious businessman. Some entrepreneurs do ignore this part and move straight to starting a business. In the long term, this confuses as there is no guiding tool.
If you don’t know how to make a business plan, you should engage the services of a professional at a small cost.
4. Paying yourself the wrong amount of salary
We all need motivation in life. For an entrepreneur, the best motivation is receiving a salary at the end of the month. Hence, the need to ensure they pay themselves adequately.
However, many startup entrepreneurs approach this aspect wrongly by either underpaying or overpaying themselves.
It is important to strike a balance between the two. Underpaying yourself results in low motivation levels while overdoing it could result in capital and working capital challenges.
So, what is the right amount of salary for an entrepreneur?
The amount of salary you should pay yourself depends on the cash inflow to your business. Analyze your business finances and identify a percentage that could work as your salary. It is also important to benchmark with the competitors to enable work within the industry standards.
Finding the right balance is important since it will determine the motivation level.
5. Trying to do everything alone
When you start your business, do not be a Jack of all trades but a master of none.
I understand that your startup business is your baby and you would like to manage all aspects of it in the beginning. However, you need to understand that you are not gifted in all business aspects.
Depending on your job profession, there are some things you can do with ease, while others might trouble you since you do not possess the technical know-how.
It is okay to ask for help by engaging other professionals in running the business. This ensures some tasks are done by people with the best skills. Some of these include legal, finance, and sales tasks.
Getting professional to these tasks helps in saving time and increasing output.
At the early stages, most entrepreneurs do most of the tasks themselves. However, as the business expands it is necessary to get help.
6. Hiring incompetent workers
In the previous point, we have talked about employing assistants to help in running the business. Another mistake that many entrepreneurs make is hiring incompetent employees. Among the reasons for this is to reduce on costs.
However, this is a short-term strategy and a mistake that could end up being expensive for the business in the long term.
When starting a business, many entrepreneurs like minimizing their business costs to maximize their profits. However, always prioritize quality over quantity.
In some instances, cheap labor is an indicator of inexperience and low qualifications.
Among the ways to mitigate this is by offering training to the new staff to ensure they understand and align with the business strategy. You should also ensure the remuneration is competitive to attract the best skills and increase the retention levels.
Your employees are the face of your business; hence, you should ensure staffing is done appropriately and adequately.
7. Little focus on the customer relations
The key reason for starting a business is to earn profit. However, do not let this override the need to maintain good customer relations.
Customers are the sole reason why a business succeeds. The goal of any entrepreneur should be to grow customer loyalty in the long term. This is what ensures there is growth and success.
Attaining customer loyalty is achieved through good customer relations and offering quality goods and services. In a market where competitors are eyeing your customers daily, the only way to beat them is to ensure customer relations are top of the game.
Some entrepreneurs fail to consider their customers by offering low-quality services and products and other detrimental approaches such as overcharging.
Customers are also key to word-of-mouth marketing. Hence, if you don’t offer the best service, customers will spread negative reviews about the business. this would in the long-term result in loss of business as other potential customers will keep away.
The profits are guaranteed as long as the customer is happy. Offering customers’ choices will also ensure loyalty grows. In the current times, businesses are also creating a dedicated customer care desk to respond to customer issues faster and timely.
8. Thinking short term instead of the long term
Thinking and planning for the short term is another major mistake some entrepreneurs make. For a business to last, you need to think in the long term. This includes factoring in some elements such as future capital requirements, business expansion, and mitigation of challenges that could arise.
Focus on the long term also helps put the customer at the center of the business. Lack of long-term strategies is what makes some businesses fail in the long despite performing well in the short term.
Depending on the nature of business, some require a long time to break even. For such businesses, you have to think and plan in the long term to remain in business.
9. Failure to take care of the mental health
Entrepreneurship can take a toll on the health levels due to the many challenges that come with the undertaking. This is most common when the business is not performing as per the expectations.
High-stress levels, and working for long hours are some of the common traits of entrepreneurs. without proper considerations and management, these challenges could result in mental challenges.
Lack of good health will result in low performance that could result in business failure in the long term.
10. Expanding too quickly
Business expansion is an indicator of success in many industries. However, expanding too quickly could result in business challenges. There are many instances of businesses that failed after uncontrollable expansion.
Expansion requires good planning both in management and resources. Expanding the business requires capital to sustain. Without proper planning, this could cause working capital and staffing challenges.
Some of the key factors to consider before expanding include where there is adequate staffing both in capacity and numbers to deal with the new business challenges. If there is a gap, you should ensure the gaps are filled before embarking on expansion.
However, some entrepreneurs do the opposite. They expand then face these challenges when it is already too late. One of the key strategies to avoid these challenges is engaging professionals to advise on the expansion strategy.
11. Poor financial management
Finances are the lifeline of any business. At the end of the day, the key motive for getting into business is to make a profit. However, profit comes last after taking care of all other emerging costs and expenses.
Hence, poor management of these expenses hurts the profits. A business that is not making any income is not sustainable in the long term and could end up failing.
One of the ways to ensure there is food finance management is through engaging the right staff to take care of the finances. You should also put systems in place that prevent losses through employee and customer thefts.
Some of these include having a stock management system and installing anti-theft systems such as cameras.
As an entrepreneur, you should also separate business money from personal money. This ensures you have a full understanding of the business performance.
You should also manage the cost of finances such as when taking debt. Always strive to pay the debt faster as it reduces the interest costs and bargain to get credit cheaply.
Conclusion on mistakes you should avoid as an entrepreneur
Avoiding these mistakes improves the chances of success in the business. Although some mistakes are inevitable, you should learn the lessons quickly if they do occur and strive to do better next time.
Below is the breakdown of the most common entrepreneur mistakes.
- Failure to do proper market research
- Starting a business without enough capital
- Launching too quickly
- Paying yourself the wrong salary amount
- Trying to do everything by yourself
- Hiring incompetent workers
- Focusing more on sales than customer relations
- Thinking short-term instead of focusing on the long term goal
- Failure to consider your mental health
- Expanding too quickly
Failure to manage the business finances
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