Ten fatal mistakes entrepreneurs make
Robert Kyasinyan
CEO ArattaTech │ B2B Partnership│ Entrepreneur | Startup adviser | Help businesses grow through digitalization
More than 50% of businesses fail in the first five years. And I am sure that the biggest enemy of an entrepreneur is himself Despite the fact that business owners have a huge motivation and desire to make a great product, entrepreneurs often make mistakes that could have been avoided.
Today we will look at 10 mistakes that entrepreneurs make and that destroy their business. Here goes!
Mistake №1: Unjustified Expectations of Easy and Quick Success
It seems to many aspiring entrepreneurs that just starting a business, everything should go like clockwork: start selling, suppliers will line up with tempting offers, all the problems with a low-cost accountant or lawyer, and competitors will quietly disappear from the market. This is not at all the case, so a businessman must be prepared for difficulties and disappointments.
Practice shows that people somehow become high-ranking to achieve a successful career in someone's business than to develop their own business. Remember how much effort and time it took you to get your current position? Years of study at a university and higher courses, internships, learning the rules of working in a team and communicating with superiors, continuous development of professional skills, etc. Why does owning a business seem more important?
But instead of one boss, an entrepreneur has at least ten: clients, clients, authorities, suppliers, landlords, etc. It is necessary to be able to interact with all people and structures, understand their goals and requirements, and fulfill obligations. So running your own business is no easier than working for someone, although it requires a different order than in a hired job.
Mistake №2: Not having a plan of action
Business is like a car, by itself it only rolls downhill. If you have no idea what exactly you have to do and what the client or buyer pays you for, then you start to take real action early. Study all available information related to your business: business plans, books and articles, franchisor offers, income cases, etc. If you have the opportunity to work temporarily in a company operating in your chosen investment or related to it, then it must be a legal entity.
Common mistakes in business planning include:
The other extreme is the desire to work out the plan to the smallest detail, in order to protect yourself from all possible manifestations. Unfortunately or fortunately, no one in business can find you anything. Unfortunately, in such cases, you have to work with your competitors. In addition, unpredictability is not always a bad thing, if you believe that life can present an entrepreneur with pleasant surprises.
Mistake №3: Misunderstanding Your Observation
Another mistake of a novice entrepreneur is a misunderstanding of his audience. There is a category of businessmen who do only what they like. For example, you want to practice slalom, so open a mountain equipment store. But think about it - is there enough entry of solvent buyers who are interested in manufacturers of goods in the future settlement? Maybe you should open a store for goods with a large audience, mountain equipment, since you really like it so much, only sold to order?
Ask yourself these questions:
Focus not on what you can sell or offer, but on what your consumer needs and what he is ready to answer.
Mistake №4: Not Selling
Any business is a sale. You make a profit only after the need for clients or buyers is revealed. But advertising your service or product must also be conveyed to users. Think about what advertising channels you will use and what techniques of techniques to apply. If you have opened a store in a nearby shopping center or use in-demand services, then advertising costs take up space. Nevertheless, it is necessary to think about how you will advance in the market.
Mistake №5: inability to manage money
Experience shows that the easiest way to start a business is not to waste your own money, but someone else's investments or loans. If you have a solid start-up capital on hand, then there is a temptation to spend it "for the benefit of the cause." Some start-up entrepreneurs (although there are fewer of them every year) are too fond of business attributes: an office in a prestigious location, an expensive company car, a corporate website with an individual design, etc. As an excuse, the fact is given that such expenses are the formation of an image and reputation, without which there is nothing to do in a serious business. In fact, start-up capital should be spent on organizing the first sales, building a customer base, improving the quality of a product or service, establishing business relationships.
Experienced businessmen advise beginners to start with minimal or no capital. Do not immediately aim at some grandiose projects. Try to get at least modest amounts from the provision of services to start with, or integrate into the chain of wholesale and retail sales as an agent. Nothing can replace your own experience in earning income on your own.
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The mistakes of novice entrepreneurs in the management of finances are not limited to the inept spending of start-up capital. As soon as the first money from the business appears, there is a desire to spend it on personal needs. Still - after all, this is honestly and independently earned income, why not buy a new car on them? It is especially easy to succumb to such a temptation for individual entrepreneurs, because for them there are no legal restrictions on the use of money received from the business. As a result, working capital is spent on personal purposes, and further business development plans are not implemented due to lack of finance.
Mistake №6: Ignoring Your Competition
If you have chosen a profitable line of business, then you will definitely have competitors. And, of course, a part of the market will be occupied by those who started before you, invested their money and efforts and expects a certain profit. The presence of competitors should not immediately stop you from starting a business, but you cannot ignore them either. To understand how competitive your chosen niche is and how you can stand out, you can order a market research or conduct a quick analysis yourself. An example of such an analysis when opening a beauty salon can be found in our book, it is available in the user's personal account.
Mistake №7: lack of special legal knowledge
An entrepreneur should not only have a good knowledge of his product or service and the methods of its promotion, but also have at least a general idea of the laws governing business activities in Russia. To help you understand the basics of this knowledge, we have prepared a series of articles for you, which we highly recommend reading:
In the process of activity, you will gradually begin to understand these issues, but at the start of a business, the mistakes of novice entrepreneurs when choosing a legal form, tax regime, registration of employees and relationships with partners can lead to serious financial losses and even become fatal.
Mistake №8: inability to delegate authority
“If you want everything to be done well, do it yourself!” - this phrase has ruined more than one startup. What happens if an entrepreneur believes that no one can do anything better than him? He himself has to look for and serve customers and customers, negotiate with suppliers, accept goods, deal with accounting, documents and other routine. The workers are all, as if by choice, slow, irresponsible and stupid.
Perhaps it is so, but hiring the wrong employees is the mistake of the businessman himself. Remember Steve Jobs: "We hire smart people to tell us what to do." It is impossible to build a business without a well-coordinated team of professionals, so finding and attracting such people is one of the main tasks of a novice entrepreneur.
Define areas of responsibility and assign them to employees. Some functions, such as accounting, can be outsourced. Where possible, introduce a flexible remuneration system - a small fixed salary and interest for meeting targets (sales volume, service provision, production volume). And moderate your perfectionism a bit - even if something is not done as perfectly as you think, but the business is developing, then everything is in order.
Mistake№9: unwillingness to enter into a business partnership
About 70% of LLCs in Russia are registered by a single founder, i.e. the partner business model is not taking root well with us. Moreover, partnerships are avoided even where it would be justified. Why? First of all, start-up entrepreneurs are unwilling to share the expected profit, although at the start of a business this is tantamount to sharing the skin of an unkilled bear. Another good reason is possible disagreements in the joint management of the business and personal problems in communication. To a certain extent, it can be recognized that the specificity of the Russian mentality is to mix personal and business relationships, and this is not always beneficial. But after all, many successful projects, especially in the West, are developing precisely according to the partnership model.
Let's see what a good business partner can offer you:
Yes, it is possible that it is not so easy to choose your business partner, but it is wrong to refuse profitable cooperation just because you are afraid of possible problems. Of course, all the conditions of a joint business must be carefully discussed before the start of activities, be sure to fix them in writing. Also keep in mind that an equal partnership, when the shares in the company are distributed equally, can lead to a stalemate in case of disagreement. It is desirable that one of the partners be the main one and bear the main responsibility for business development.
Mistake №10: Giving up early
If you have read the inspiring success stories of famous entrepreneurs, you know that almost every one of them has had to go through a series of big and small failures. But only the one who gets up one time more than he falls wins. You don't have to look far for examples - the business portal you are on now also developed through crises.
We would love to hear from you stories of overcoming difficulties and successes, and perhaps it will be you who someday will tell aspiring entrepreneurs about the mistakes to avoid when starting a business.