Being an entrepreneur and starting your own business is a rewarding venture, but like anything there are some risks involved. As a fledgling entrepreneur, chances are you’ve heard the oft repeated statistic: more than half of new businesses fail in their first year. While you shouldn’t let these numbers intimidate you and scare you away from pursuing your dream, it is worth reviewing some of the common mistakes new entrepreneurs make in order to avoid them.
I can’t stress how important mindset is for entrepreneurs. You face a lot of setbacks on the road to success. If you don’t steel yourself and prepare for these ups and downs, you run the risk of burning out and setting yourself up for failure. In working with clients, one of the first questions I ask is the reason why they are pursuing their business. The majority respond with a story of how their business ties back to a passion of theirs or is derived from a meaningful personal experience. While this isn’t a requirement, having a business that is a passion project helps put you in the right mindset. It helps you channel the commitment and resilience you’ll need as you a face the various challenges of starting a business.
Vetting, Researching and Planning
You need to vet and research your idea. The most successful entrepreneurs are the ones that are passionate about their business. However, there is a fine line between a viable passion project and a hobby. In order to tell the difference, you need to take the time to research and flesh out your business plan. In my last article, I discussed many of the resources available to do this. Don’t skip this step and be honest with yourself about the results. If you realize there isn’t a market for your idea or you don’t have the resources to pull it off, then take the time to reassess the pros and the cons of continuing with your business plan.
There is some truth to the adage that you need money to make money. As your developing your plan, be conscious of the time and money that are required to start a business, and remember that for most there will be a lag between when you open and when you actually get paid. This is especially true for the professional service entrepreneur. Make sure that you have enough money saved to cover your personal expenses as well as your business expenses. I also like to remind clients, especially those working a job while trying to launch a business, that time is almost as valuable as money. Make sure you understand the toll pulling double-duty will have on you. Know how it will impact the time you have available to work on your business. Note that overdoing it and burning out is not a good long-term plan.
Too Big Too Fast
Like in a marriage, the first year is an important one for a business. Once you’ve launched, you need to make sure to not get over ambitious early on. This can take many forms. It can be an overexpansion of services. Buying expensive media and advertising spots instead of a slow and steady sales plan or not planning for dips or seasonal changes in demand. Enjoy your success, but make sure you don’t get too blinded by it and over commit your resources. Successful businesses plan for a marathon, not a race.