The Deadly Mistakes Entrepreneurs Make That Kill Their Business Fast
While there isn’t a fool-proof plan to reach business startup success, there are several common and deadly mistakes many entrepreneurs make that can negatively impact and kill their business fast.
While mistakes are unavoidable, you can use the lessons learned by others to prevent them from taking you down.
Mistakes are embarrassing. No one wants to get caught with one, most especially get caught red-handed. However, no matter how much we want to avoid it, mistakes are inevitable because we live in a world that is constantly evolving, changing.
Yes, starting a business isn’t always easy.
There are so many things to think about and decisions to make; the pressure can cause you to make a poor decision that can hurt your potential for success, or at least set you back.
Since mistakes are a fact of life, committing mistakes, therefore, is not really the issue.
Along with every change is a new learning curve and because we are learning, we are prone to making mistakes, especially in the world of business and entrepreneurship. The real issue is how you learn from them because if you don’t, you will see yourself in a rut committing the same mistakes over and over again.
Don’t let these common mistakes trip up your business.
In this article, we will discuss the seven deadly mistakes that entrepreneurs make most often and that kill their business fast. Read through and you can save yourself and your business from making the same mistakes.
Mistake #1: They Pour Money Down The Drain
While the whole idea of having your own business is to give you the freedom to do whatever you want whenever you want, you have to be very careful about how and where you spend your resources — especially during the early stages of your business.
Being a good business owner does not mean you necessarily are a good account-keeper.
In fact, most business owners and entrepreneurs excel at their business niche but fail when it comes to their finances. Common problems are overspending, not invoicing on time, and making grave tax errors.
Overspending is a very common business mistake that a lot of business owners make.
It pays to be conservative in your spending until your business has a consistent track record of profits. Some common items entrepreneurs go crazy on — business travel expenses from hotels to meals to drinks. You can easily reduce them. Same goes for fancy equipment, web hosting and software costs, office space, etc.
The #1 reason that businesses fail is lack of cash. End of story. Watch your cash flow and do whatever you can to protect it.
You wouldn’t grow too fast if you didn’t have the cash, if you knew to watch the cash. You’d have good financial statements and review these on a regular basis. You would practice good cash flow control and make sure you weren’t overspending when you couldn’t afford it.
So, create a budget to get a rough idea of how you are earning, saving and spending.
And, if your earnings are less than what you are spending, re-think the way you run your business. If not, it won’t be long before you start accepting rates that pay much less than what you deserve just to make ends meet, which is the exact opposite of why you stepped into the business world.
Debt is a strategic tool for growth, but it’s not something to become overly reliant on.
Many well-intended founders have relied so heavily on debt to grow that they unwittingly handcuffed themselves and eliminated future flexibility. Whenever possible, try bartering instead of taking on more debt. If you’re in the B2B world, you can offer your services to a company in return for theirs. By building out this network, you lower your overhead expenses and prevent the need for excessive debt.
As a new entrepreneur, money is likely to be one of your biggest concerns.
Pre-launch cash flow is likely to be close to nil, so making and saving money will usually take priority over everything else. Spend your startup cash wisely, but don’t be afraid to invest in good people and quality products. This will bode well for you in the long term.
Mistake #2: They Make Poor Hiring Decisions
When the rush of new business happens, it’s really tempting to hire any and everyone. The problem with doing warm body hiring is twofold. First, you may or may not be getting quality employees. And second. you could very well experience a sales slump and be stuck with a big payroll.
When funds are tight, it’s tempting to skimp on the cost of new hires.
The problem with this strategy, however, is that you’ll end up paying in the long run. Low-cost employees and consultants are usually low-cost for a reason — they are more likely to be inexperienced, unskilled or unreliable (or all three).
Many entrepreneurs have fallen into the trap of hiring the wrong people just to save a few bucks during their business’s initial stages.
But, if you are truly willing to compromise the quality of work or goods delivered by your business to the clients/customers, then be ready for the moment when your customers turn the other way and go to your competitors for what they want. So, even if you are giving newcomers a chance, make sure your interview process is rigorous and really tests the abilities of your potential employees.
A common drawback with new entrepreneurs is that they generally hire fast and fire slow.
If a person has shown that they have no respect for their position as an employee then you need to fire that person immediately. This should not be an emotional decision that makes you question if you are making the right choice. This is about business. If that person is having a negative impact on your business, then they need to be let go before they cause serious damage.
In addition, you may use outsourcing to fulfill staffing needs rather than hiring employees.
When you do hire employees, always make sure you do background checks, verify references, and get signed non-disclosure and non-compete agreements. Look for an experienced provider who has the staff and resources to stay up-to-date with the latest requirements, get all of your filing done, and keep you aware of upcoming deadlines.
Last but not least, you may utilize your resources and own personal network when searching for relevant candidates.
While displaying favoritism in the hiring process for those that are friends is a common mistake, business owners should not discard their personal network in attempting to find people who are qualified to take on the job that they are seeking to fill. In fact, because the employer already knows the people in their personal network, they do not have to worry as much about discovering bad secrets or lies hidden by the candidate, and can use their personal experience with the applicant as a testimony to their qualification.
Mistake #3: They Are Jack of All Trades
Each of us has only 24 hours a day, or 168 hours a week. What is the best use of your time this week? If you’re like most entrepreneurs, you’re trying to do everything yourself, all the time.
Often entrepreneurs get so carried away by the idea of bringing in new businesses that they start listing all kinds of offers and expertise that doesn’t fit their cup of tea.
While doing so does bring in more business initially, what’s the point if you can’t keep your promises? All it does is make a huge blow to your reputation! So, instead of trying to wear every hat at once, you should focus on what you do best. Even if you do decide to go the other way, make sure that you bring someone on board who has enough expertise in what you start offering.
The smarter move is to outsource any tasks that don’t require your direct involvement.
While there is a short-term financial cost to outsourcing, the long-term payoff comes from freeing up your time and energy to grow your business. Focus on what you do best and let the experts handle the other pieces. It will pay huge dividends in the future.
The main objective of operating a business is to generate money. You do this by providing value to your customers.
If you are wasting time on anything other than this, you are focused on the wrong thing. So what you have a lot of Facebook and Twitter followers. Are these social media followers customers of your business? If the answer is no, you have wasted your time on something that is not even making you money. Time is money. Spend your time on making money.
It is very important for an entrepreneur to guard the amount of time that they give out. Wasting time is opportunity for your competition to gain an advantage over you.
You must be strict with your time if you want your business to be successful. This is to not say you cannot have a personal and social life. But, if you want your personal life to be great, then you need to dedicate the majority of your time to creating a successful business that enables a successful lifestyle.
In the beginning, it’s common to think that no one can do the job as well as you can.
You know your products inside out, and are the only one who truly has the passion to make the business succeed. But this is not only a recipe for burnout, it can actually significantly impede your success. Having a knowledgeable, experienced mentor can give you much-needed objective perspective on your business and market.
The sooner you learn to delegate, the better it will be for your business and mental health.
While it’s tempting to design your own logo, do your own bookkeeping, run your own payroll, it’s usually a bad idea. Just because you can do it, doesn’t mean you’re good at it. And that’s not an insult. Even if you’re good at it, you have to determine whether that’s the best use of your time.
Mistake #4: They Stick Only To Their Passion
Many aspiring entrepreneurs take the advice of “follow your passion” too seriously. You can be passionate about something but be horrible at operating a business around that passion. Building a business is a process of many different functions and not just your passion.
Business owners should be sensitive to the kind of response they get from their audience. It is observed that entrepreneurs often go with their own ideas.
These ideas flourish in their mind and lead them to burn out mentally. Due to which they don’t tend to focus on their customer’s needs and just implement their ideas to get success. So, it is not good to stick to your passion only and try to understand your target audience for whom you have started this business.
Passion means you love doing one particular thing. A business means you will have to do many things you do not love in order to make a profit from your passion.
This means you will have to do marketing, sales, customer service, and administration task. All things which you do not particularly like, which is why your business ends up failing. If you are not passionate about building a successful business, then you should not pursue starting a business just because of a passion you want to pursue.
Following your passion might be the most often given business advice. But it just might be steering you in the wrong direction.
One major problem with this advice that very few people ever talk about seems the most simple, if you ask me. It’s this: not every passion can earn you a paycheck. I mean, it’s great to be passionate about pig grooming. But if there are no business model that could make pig grooming profitable you’d be better off searching your repertoire for another passion or skill that can be profitable.
When you create a product, you obviously have a bias towards it. You probably think it’s the best in the market.
While that’s probably great for your ego, it’s important to not lose sight of all the work that could be done to improve the product. Finding a healthy balance between knowing when perfection is not needed and good will do can go long ways in your career.
The excitement about a new business can often lead entrepreneurs to think that their product is so head-and-shoulders above those of their rivals that they’re in a category of their own.
In reality, it’s extremely rare to have no direct competitors. Unless you’ve invented a completely new product, there will be someone who already has market share in your niche. Do your due diligence to find out what these companies are and how you can differentiate your business.
When people open a business looking to appease their passion, they are coming from a ‘what can the world do for me’ perspective.
There is a sense of entitlement that since they are passionate, money and admiration should follow. Instead, we should be focusing on what we can do for the world. What skills and abilities do we have and are good at, or could get better at, that can help someone else solve a problem or make their life easier? When you are committing yourself to the benefit of others in this way, passion will arrive as a result of your dedication to this cause.
Mistake #5: They Don't Know Their Customers
Thinking that everybody is your customer is one of the worst mistakes many business owners make. Everybody is not your customer because everybody does not need your products or services.
Therefore, you need to create a customer profile that helps you quickly identify if the person you are talking to has a real chance at becoming your customer.
If they do, then you nurture them further along in your sales funnel. If not, then you move on. Never try to force someone to become your customer. If they do not fit your customer profile, the effort of trying to convert them into a customer will be a waste of time.
42% of startups go out of business because there isn’t any market need for what they sell, according to an analysis of failed startups by CB Insights.
Why do nearly half of all entrepreneurs fall into this trap? The root cause is often a lack of robust market research. If there isn’t a hungry market for what you’re selling, or there is no way to differentiate yourself from the competition, then you’re at risk of becoming yet another cold statistic.
A common startup mistake is not taking the time to understand the market or customers you’re building for.
For technical business owner, writing pieces of software can seem easier than talking to customers, but there’s no way to know if you’re on the right track unless you’re constantly getting feedback from current or prospective customers. It’s important to recognize that building a great product often doesn’t translate into a successful business. Many companies find themselves focusing on a market that’s simply too small to build a big business in.
Every market in every industry will experience frequent changes.
Your job as business owner is to keep on top of market trends, and make the appropriate, proactive changes to your business model. If you no longer meet your customers’ evolved expectations, or don’t keep up with technological advancements in your industry, your business could suffer and sink.
Appealing to everyone at once means that you give the same amount of effort, and budget to the people who don’t care about your brand, as the people who do. That’s not the best way to make a profit.
If you gather up all that money and marketing potential you’ve been wasting on people that are never going to invest in your business and funnel it into nurturing and engaging the leads that count, guess what you get? That’s right, a successful business.
There are no established rules when it comes to marketing. The mistake is to assume that you do not need to market and that the business will come to you.
Customer engagement does not mean just advertising your products and services to them, it means actively listening to their wants and needs, solving their problems, and even just interacting with them on a personal level. Are you pushing instead of engaging?
Mistake #6: They Don't Charge Enough
Many times, lack of confidence in our ability and fear of failure causes us to underprice our products and services. This is a dangerous path to take because it undermines the unique value you bring to the table and opens up the possibility of resentment and frustration.
Don’t price too high, but don’t price too low just to gain market share.
If you are good, price like it! Many entrepreneurs start with the best of intentions and give things away for free, or do free things for charity, community or visibility. Be very careful with this, because you don’t want to be known as a source of freebies. Ring the cash register first.
Having a healthy profit margin is critical to your success.
Setting it too low now will make life infinitely more difficult for you in the future — your customers likely won’t be thrilled when you need to raise your prices later on. Take a look at your production and operating costs, and determine how much flexibility there is. Can you reduce these costs in the future if necessary? If not, choose a higher profit margin now to accommodate these costs.
You might think that charging less than your competitors will help get you more customers, but this isn’t always true.
Lowballing your fees won’t necessarily generate more business. Instead, many potential clients believe that they get what they pay for, so they’re actually willing to pay more for a higher quality product or service. Don’t undercut yourself- know your worth!
You will want to charge for your expertise and structure that you bring to the table.
Not only will it make you more money because it will be an additional revenue stream, but it will also dramatically increase your closing ratio in converting prospects into paying clients. Best of all your new clients will benefit from the extra value they’ll receive now that you help them understand and appreciate the tangible value your expertise delivers to them.
One of the biggest challenges for any business is pricing.
Going in too low might be great for your top-line revenue number, but it wreaks havoc on your bottom-line profit number — the one you will need to survive. You need to profit and price accordingly. You might not get business out of all of your price-conscious customers, but that’s OK. Your competition will — and then they will have to figure out how to profit from the “price shoppers” when there is little or no profit to make.
Mistake #7: They Don't Ask For Help
You might be reluctant, or even ashamed, to ask for help. Don’t be! Hiring experts will have a huge impact on growing your business. And the money that you spend on good expertise could be repaid many times over because you avoid costly mistakes along the way.
The most successful entrepreneurs have mentors and coaches who help them get to the next level and avoid mistakes they have made themselves.
Mentors provide valuable insight about how to create a successful business based off of the knowledge and experience they have gained over the years. You need these people in your corner to advise you about important decisions you plan to make and introduce you to other people who can help advance your business.
A big mistake that entrepreneurs make is thinking they are all alone, and they try to operate without surrounding themselves with wise counsel.
Don’t try to run a new business by yourself. Find and onboard trustworthy seasoned advisors to discuss your business ideas, strategy, challenges, and progress. Wisdom and power exist in the multiplicity of counsel. Incentivize people to join your company as advisors in order to receive continuous feedback so that fewer mistakes will occur.
Paying for quality expert advice early on can save a massive headache further down the line.
Whether you’re reaching out to discuss a business plan, get advice in terms of your marketing funnel, or just straight-up hiring a consultant to help structure your business, it’s worth paying to take advantage of their expertise. You get what you pay for, so don’t expect quality advice to come cheap, but when the alternative is losing 10x more money than you spent to correct fundamental flaws later down the line, it’s a small price to pay.
Be careful; you only need to listen to the advice of people who can help you become a better business owner.
So many people will tell you what you should and should not being doing, but they do not have any experience in what they are talking about. These are usually people who do not want you to become more successful or people who want to be known as an expert when they have no knowledge or experience to support their claim.
Some newbies are blindly following advice (whether it’s professional or from a friend who runs a business in another field).
While you should always get professional advice, it’s important to be objective about it and put the advice in perspective of your business. Just because you heard it from an expert, doesn’t mean you should follow every single word of it. Try to get multiple opinions and do your best to make an informed decision.
Everyone makes mistakes — even the savviest entrepreneurs. And there’s no shame in making mistakes! But your business is your baby and you want to do everything the right way, the first time.
You don’t have to be a biz wiz to avoid making mistakes.
Instead, you can learn from what others have done wrong. Knowing the most common, and biggest, mistakes that people make when starting a business helps you avoid the very same problems.
Making mistakes is an integral part of being an entrepreneur.
The ability to overcome these mistakes, however, is what really makes a successful entrepreneur distinct from one who ultimately fails. If you can convert failures and mistakes into positive motivation, you’re on your way to becoming a successful business owner.
Avoid these common pitfalls and you’ll give your business an even greater shot at succeeding.
Mistakes happen to the best of us, so if you find that you’ve already started down one of these roads, fear not — take adequate corrective measures and you can still set your business down the path of success.
With the freedom that comes with working for yourself comes a lot of responsibility.
But, being aware of the most common mistakes means that you can be proactive about doing things like getting the right amount of funding, protecting your assets, and keeping accurate records.
It’s not easy being an entrepreneur, and mistakes will be an inevitable part of the process. But that doesn’t mean you need to repeat everybody else’s!
But, what do you think about these mistakes? What are the biggest mistakes most of the new entrepreneurs make, in your opinion? Have you made any of these business mistakes? Got a mistake that you see others making that I didn’t list? Let us know in the comments section below.