Top Entrepreneurial Errors And How To Avoid Them

So you want to be an entrepreneur. Good for you. You have the drive, the concepts, the product and the connections to finally put yourself in the driver’s seat. All you have to do is not make any mistakes – and everybody makes mistakes. To help skirt this potential minefield of errors,

Your Office asked five experts on entrepreneurship to come up with the most common and dangerous blunders. We would like to thank the following people for coming up with these tips for entrepreneurs: Chris Curtis, chief entrepreneurship officer, Centre for Entrepreneurship Education and Development; Mark Ellwood, a consultant and trainer with Pace Productivity Inc.; Cathleen Fillmore, motivational speaker and writer; Heather Ferguson, principal, Caledon Marketing Consultants; Myer Brody, professor, Department of Management, University of Toronto at Scarborough.

So here, in no particular order, are the worst mistakes you can make. Forewarned is forearmed.

Wanting to own 100 per cent of your business

A lot of entrepreneurs are control freaks who believe that giving up any shares means giving up control. But if you own 51 per cent, you still have control. In order to maintain total control entrepreneurs can incur debilitating loans and debt, but crushing debt is one of the biggest killers of entrepreneurial businesses in the early years. To make matters worse, these business owners are also ignoring a great way to raise money (selling equity) without giving up control of the company in any real way. Give up the shares slowly and gradually to fulfill your ongoing cash flow needs. Remember: for many entrepreneurs, it’s better to own 51 per cent of a million-dollar company than 100 per cent of a $100,000 company because they will then have acquired the expansion money to “grow” their company further. On the other hand, it is important to weigh the benefits of bringing in partners, since this can lead to complications in shareholder agreements and decision-making.

Confusing the role of the entrepreneur and role of the manager

This mistake occurs because often at the start of a company, the entrepreneur is the jack-of-all-trades who has to do everything until things get rolling. The trouble is that the qualities that make you a good entrepreneur are not necessarily the ones that will make you a good manager. The primary role of the manager is to make sure the business doesn’t fail, while the role of the entrepreneur is to seek out opportunities and make the business grow. When these two positions are working well, there is a healthy competition between the two that can stimulate growth. This is not to say that the owner of the business can’t be the manager, but a business owner should clearly understand the difference between the two roles and never stop being the visionary. Still, remember: del- egate but do not abdicate responsibility. It is your company.

Thinking you can do it all

Our image of the entrepreneur is often that of the rugged individualist who rides into town and imposes his or her will on the business world. The truth is, you can’t play all of the parts needed for a successful business yourself, at least not for very long. Nobody expects you to be a lawyer, an accountant, a marketing guru and a production expert all rolled into one, and you will shoot yourself in

the foot if you try. What you do have to be good at is forming teams of people who complement each other.

Not having enough capital to start with

One fact that novices tend to ignore is that you need more and more money to finance your receivables and your inventory as you grow in the first year or two. Not managing this could see you growing your business right into bankruptcy.

Growing at the wrong speed

Yes, we know, this is a hard one to gauge, but it is very important to careful- ly manage your growth. Ironically, one of the greatest strengths of entrepreneurs – their willingness to seize opportunities – can also be one of their greatest weaknesses. That’s because every opportunity takes up resources such as time and money and people. If you don’t have enough of all three, you can’t produce. The trick is to stretch yourself so you are doing all you can with your resources, but not so much that you break. Conversely, if you grow too slowly, you will lose out to someone more aggressive. In other words, pick battles that are small enough to win but big enough to matter.

Ignoring cash flow

This can be a symptom of the above problem. No matter how fast you are growing, you need to keep the cash flowing to support it, especially in the first year. You can help this by keeping your overhead down, which is why so many owners work from a home office, at least in the early years when money is tight. Try to give yourself as much financial flexibility as you can, especially in the first two years. Let’s face it, you can speculate, but you don’t really know how much you will need or where your income will be derived from.

Putting on the Ritz before you can afford it

It’s human nature to want to start a business with a splash, with glitzy surroundings, and with someone to answer the phone and make the coffee. But as we have pointed out, the first few years are full of unforeseen hazards and disasters. Don’t rent office space or hire employees unless you absolutely have to. Of course, people you haven’t worked with before won’t have a lot to judge you by, so you may have to put on a professional-looking face to the world. Just don’t go over- board – check out inexpensive alter- natives such as offices with shared receptionists. Spend money on quality literature and a good-looking logo and skip the company car for now.

Not sharing ideas

This is often because we fear others will steal our ideas. But as any successful businessperson will tell you, ideas are a dime a dozen. Very rarely will some- one come up with an idea that has not been come up with before. It’s that rare person who follows through and changes an idea into an opportunity who wins the race. Don’t be afraid to share your ideas and get input and objective criticism from others, especially if they are from people you know and trust.

Not keeping at least one finger in the pie when you’ve done everything right and you’re asuccess

This often happens when an entrepreneur pulls off a winner and goes off to repeat the success with another venture. This is admirable and good, but don’t completely abandon your first baby. The management team you left in place has to constantly be reinvigorated with the vision you came up with. Remember that it’s your vision, not theirs. Many successful entrepreneurs say that creating and running a business is like raising children: As they get older they need different forms of management styles, but you can still be an advisor to them no matter how old they get.

Doing too much research

Successful entrepreneurs can fall into the trap of getting their businesses up and running smoothly and then thinking that they don’t have to change. The truth is that nothing stays the same for very long, so you have to see where the mar- kets – and your competition – are going and try to get there first. To stay on top, you have to keep refreshing your vision and never become satisfied with the way things are, no matter how golden the present might appear. That’s because while you are sitting with your feet on your desk congratulating yourself, your competitors have come up with some- thing new and terrific and the market is beating a path to their door.

This can be as bad as doing too little research because you might find out everything you possibly could about a subject, only to have someone else who was faster scoop you. This is a bit of a balancing job. Getting all the pertinent facts is important, but sometimes you have to be able to act on your gut instinct even if you have insufficient information. Don’t forget that if you have a good idea, you can bet somebody else is having the exact same idea and the race is on.

Not understanding the competition

Successful entrepreneurs can fall into the trap of getting their businesses up and running smoothly and then thinking that they don’t have to change. The truth is that nothing stays the same for very long, so you have to see where the mar- kets – and your competition – are going and try to get there first. To stay on top, you have to keep refreshing your vision and never become satisfied with the way things are, no matter how golden the present might appear. That’s because while you are sitting with your feet on your desk congratulating yourself, your competitors have come up with some- thing new and terrific and the market is beating a path to their door.

Listening to (and believing) discouraging talk

Different viewpoints are valuable when you are starting off on an entrepreneurial adventure, but it’s all too easy for friends and relatives to throw cold water on a hot idea. Say you want to open a restaurant and then sit back and see how long it takes for someone to quote the statistic that 80 per cent of new restaurants fail in the first two years. It doesn’t matter if it’s true or not because that doesn’t necessarily mean you will fail. But someone telling you that your idea is crazy and will never work can become a self-fulfilling prophecy. Of course, if you are successful they will be the first to thump their chests and proudly tell you, «I knew this would work.» The best thing those around you can do is to encourage your dream while remaining realistic. The entrepreneurial spirit is too fragile, precious and rare a thing to crush. It needs to be nourished and supported. Look at it this way: If someone told you they were going to charge people big money to tie huge elastic bands around people’s legs and throw them off a bridge, you would think they were crazy. And yet bungee jumping is now a big business.

Getting so caught up in running your successful business that you stop marketing yourself

The trick is to always have something in the hopper that will come to fruition when your present work dries up. So even if your company has lots of orders and lots work lined up, continue marketing. Stay hungry.

Being a novice at marketing

You can hire specialists but you still have to be at least conversant in this all-important skill. Take a course from an organization such as the Canadian Professional Sales Associa- tion or a community college. Join an association – they always have guest lecturers. Get yourself a mentor who knows how to market.

Not stocking your website with useful information

People go to websites primarily to get information they can use somehow. Just posting your brochure and bio won’t cut it. If you aren’t giving people something that will make them remember you and come back to your site again and again, you’ve blown a golden opportunity.

Having a great website that nobody knows about

You have to stand out in what is becoming a very crowded room. Get your site reviewed, get others to link to you, put it on your voice mail message, on your invoices – everywhere. Search engines are great, but so is word of mouth. (of course, in today’s world, social media is king, so don’t neglect it either — 2017 editor)

Thinking you can have a virtual business and nothing else

Yes, it’s great to sell over the web, but don’t give up on the bricks and mortar route just yet. The web is only one way to sell.

Lack of persistence

As we have mentioned, it’s easy to become discouraged. It’s also hard to discipline yourself. When you work for someone, you have no choice but to work overtime if it’s required. Entrepre- neurs always have the choice to not go the extra mile because no one is mak- ing them do anything. Self-discipline is perhaps your biggest skill when you go it alone.

Being too soft on your customers when they owe you money

This is a tightrope everyone in business must walk. You want to stay on the good side of your customers and clients, especially when you are starting up and you don’t have many. On the other hand, if they don’t pay you (or worse, if they don’t think they have to pay you), you could go under while having lots of work. Pulling it off involves very subtly and very charmingly letting the client know that you must be paid for the work or services, or you will go elsewhere. Try playing on their guilt by acting the poor person – «I’m poor and you’re rich, so give me my due.»

Not knowing your product

Usually, you can’t be successful unless you know the nuts and bolts of what you do: the machines or the raw material or the concepts involved in your product or service. Don’t think you can hire experts to do all that while you fine-tune the vision – you can’t.

Not knowing your niche

By definition, every small business is in a niche. If you run a restaurant, you would be foolish to think that anyone who eats is a customer of yours. Your customers are people of a certain age group, social class, financial bracket and even profession that you are appealing to. You can’t sell to the whole world, but only to a small part of it.

Not knowing what you are really selling

If you sell clothes, what you are really selling is an image. If it’s fax machines, it’s the idea of worry-free use. If it’s a restaurant, it could be anything from the stroking of the customer’s ego to speedy service. Don’t be so literal. Spending too much money on resources (such as advertis- ing and promotion) that you aren’t sure will work Don’t close your eyes and wish when it comes to your precious start up cash. Carefully define your objectives and think it through.

Feeling invincible

There is no such animal as a sure thing. Your idea has to be tested in the market place. Make sure you come up with a worse case scenario plan.

Networking with everyone who has a pulse

Meeting new people is good, but your time is valuable, so narrow it down to people who can really help you.

Promising something you can’t deliver

Sure, you want the job or the contract, but not meeting your commitments will destroy your credibility. Be realistic.

Not having good luck

It’s probably safe to say that behind every successful businessperson there is a piece of luck. Of course, to a large extent you can help make your own luck – doing your homework, working hard. Even the act of just trying something will improve your luck. But after you’ve done all you can, carrying a rabbit’s foot around couldn’t hurt.

This Article was originally published in the Spring 2017 Issue of Office Today Magazine