When it comes to building a business, mistakes are bound to be made. Some business mistakes are unavoidable but there are silly mistakes new entrepreneurs make out of inexperience. I will be using this medium to highlight 15 common business mistakes most entrepreneurs make in their startup phase.
These business mistakes might look common but its effect on any small business startup could be devastating. Below are 10 common business mistakes you must avoid. The aim and objective of this article is to help small business startup owners avoid some silly mistakes that might prune down their hard earned capital.
15 Common Business Mistakes You Must Avoid
1. Choosing the wrong business entity
This is the most common business mistake made by entrepreneurs who are new to the game. Many entrepreneurs who desire to build a business usually end up using the sole proprietorship type of entity because they fancy their business being in their name; they think it’s cost effective.
The problem with running a business using a sole proprietorship form of entity is that you stand to lose everything you’ve ever owned if things go wrong. Same goes with the general partnership kind of entity. What’s the essence of building a business at the risk of losing all you’ve ever owned just because of a slight mistake?
To avoid making the mistake of starting a business with the wrong business entity, it’s advisable you consult an attorney or legal adviser to decide which entity best suits you. But to the best of my knowledge, a limited partnership, limited liability company, or a C corporation would be most preferable.
2. Not protecting your idea
The next business mistake entrepreneurs make is to take their idea to the market without first protecting it. Entrepreneurs, in their usual excitement tell family and friends about their ideas; they show their prospectus to potential investors without first seeking legal protection. This is one of the deadliest business mistakes of all because anybody can take your idea and profit from it. I have seen young businesses with strong potentials been wiped out suddenly because they failed to protect their idea.
As a case study, Robert Kiyosaki started the nylon and Velcro wallet company. It was an innovative product that came at the right time but his company’s success was short lived because of a simple mistake. He failed to patent the nylon and Velcro wallet and competitors came in and ripped his company apart. So to avoid making this same mistake, make sure you increase your knowledge base by learning about trademarks, patents, copyrights, etc. Please sort the advice of an attorney with respect to intellectual property protection.
3. Choosing the wrong business partner
The third common business mistake you must avoid is that of choosing a wrong business partner. Forming a business partnership is a delicate issue that must handled with care because a lot of them have ended on a bitter note. Now how do you avoid choosing a wrong business partner? You can avoid choosing a wrong business partner by thoroughly interviewing the proposed partner. You can also ask yourself the following questions to access your present partner:
- Does your proposed partner share the same mindset with you?
- Does he/her share the same core belief with you?
- Does this partner of yours thoroughly understand the business mission and vision?
- Will this partner of yours be committed to the business venture?
- Does the strength of your partner complement your weakness and vice versa?
- Will your proposed partner be an asset to the business or a liability?
The questions above will help you decide if to accept your proposed business partner and if you already have one, you can re-access him/her and decide if to go on with the partnership or quit.
4. Hiring fast
“If you own a butcher shop, don’t hire vegetarians. To hire the right people, you have to let the wrong people go.” – Rich Dad
Many entrepreneurs make the mistake of being in a haste to hire employees. Smart entrepreneurs are very choosy when it comes to hiring employees. You must make sure the hired employee perfectly fits job description. If you hire hastily, you will get a bad taste and your business will bleed.
5. Firing slow
“Don’t be too familiar with your followers; it may at first inspire affection but eventually, like all familiarity; it will breed contempt.” – The Mafia Manager
This is one of the deadliest business mistakes you must avoid like a plague. Most entrepreneurs get attached emotionally to their employees to the extent that the said employees become arrogant. A good rule of thumb is that you must get rid of the bad eggs among your employees very fast. Just like a mentor of mine says:
“You must fire bad customers just as you would fire a bad employee. If you do not get rid of your bad employees, the good employees will leave. If I do not fire bad customers, not only will my good customers leave but many of my good employees will leave as well.” – Rich Dad
6. Failing to take risk
“You must take risks, both with your own money or with borrowed money. Risk taking is essential to business growth.” – J. Paul Getty
Many individuals shy away from building a business because of the risk involved. Many entrepreneurs fail to take their business to the next level simply because they are afraid of taking risk. They think avoiding risk is cautiousness, not knowing that avoiding risk is tantamount to avoiding opportunity.
“In today’s rapidly changing world, the people who are not taking risk are the risk takers.” – Robert Kiyosaki
Some times in business, growth comes with a little bit of risk. Instead of avoiding risk, I will advice you put in place a risk management system that will help you curtail the risk.
“Seek advice on risk from the wealthy who still take risks, not friends who dare nothing more than a football bet.” – J. Paul Getty
7. Giving up too easily
“Most people give up just when they are about to achieve success. They quit on one yard line. They give up the at last minute of the game one foot from a winning touch down.” – Henry Ross Perot
I once wrote about the entrepreneurial process to building a business from scratch and I stressed the point that; of all who dare to start the process, only few will make it to the end of the process.
“Think about it, no one can win a race in which he had given up. You can’t win a battle for which you have surrendered.” – Mary Kay Ash
This is usually a common trend with most new entrepreneurs. They give their business everything they’ve got and just when the breakthrough is about to come, they give up. I don’t know how to convince you never to give up, in fact; no one can. It’s up to you to decide when to quit.
“You can always quit, so why quit now.” – Rich Dad
8. Relying too much on external advisers
Hiring professionals and bringing them on as part of your business team is a smart move because their advice will strengthen your business. But the wrong comes when you rely too much on their advice.
“Before making an important decision, get as much as you can of the best information available and review it carefully, analyze it and draw up worst case scenarios. Add up the plus or minus factors, discuss it with your team and do what your guts tell you to do.” – The Mafia Manager
As an entrepreneur, you are the chief decision maker of your team and when the time comes for you to take a decision that might contradict professional ethics and advice; don’t hesitate to do it.
“The most important aspect of my personality as far as determining my success goes; has been my questioning conventional wisdom, doubting experts and questioning authority. While that can be painful in your relationships with your parents and teachers, it’s enormously useful in life.” – Larry Ellison
9. Serving the customer on assumption
This is another business mistake most small business startup owners make. Serving the customer on assumption can break your business. Most entrepreneurs serve the customers based on what they think the customers need; instead of what the customer actually needs.
“You can’t just ask the customers what they want and try to give that to them. By the time you get it built, they will want something new.” – Steve Jobs
To avoid this critical mistake, you have to dedicate a little budget to market research. Market research is simply the process of getting to know your customer, their wants, need, taste and how they want their desires fulfilled.
10. Wrongly cutting back on expenditure
This is also one of the commonly made business mistakes. When a business is experiencing recession, most entrepreneurs and managers will cut back on their budget and one of such will be the marketing budget. I think cutting back on the marketing budget is insane. Instead, I will advise you spend more marketing because it’s the best way your business can survive a recession.
11. Absence of a business mission statement
Building a business without a mission statement is just like setting out on a journey without a purpose. I have seen a lot of businesses operating without a mission statement and this is utterly wrong. Without a mission statement, your business will not stand the test of time. The reason I say this is because your entrepreneurial spirit is found in the mission and the mission is the bond binding you, your employees and the customers together.
12. Operating without core values
Many small business startups don’t see the importance of operating with a set of core values. Core values are a set of guiding principles or standards on which your business is/was established. When your core values become strongly instilled on your team and employees, it becomes the culture of your business.
“I greatly admire GE, their utterly ruthlessly focused management, to get the cost out and get this integration done. Ok, we may make a few mistakes along the way but we are not going to waste any time.’ They make decisions; they are incredibly disciplined and focused.” – Larry Ellison
13. Absence of a vision statement
A small business startup without a vision is a business operated on a merry-go-round. A journey can never be complete without a destination. A vision statement is your entrepreneurial future for your business. You should have a picture of where your business will be in the time ahead.
“It’s my job for Oracle, the number two software company in the world; to become the number one software company in the world. My job is to build better than the competition, sell those products in the marketplace and eventually supplant Microsoft and move from being number two to number one.” – Larry Ellison
If you don’t have a vision for your business, there will be no benchmark to access your business progress and there will be nothing motivating your employees to give your business their best.
14. Operating without a personal objective
“I intend to be, the richest man in the world.” – Howard Hughes
Before ever starting a business, you probably had a personal objective. As an entrepreneur, you must a find way to leverage your business towards the actualization of your personal objective. If your business will add nothing to your personal life, then that business is not worth the stress and effort.
“I think I am very goal oriented. I’d like to win the America’s cup. I’d like Oracle to be the No 1 software company in the world. I still think it is possible to beat Microsoft.” – Larry Ellison
15. Frivolous spending
This is one of the common business mistakes made by new and established entrepreneurs. Most entrepreneurs put their personal need ahead of the business need. Many make the mistake of spending business capital on luxurious office space and equipments.
“I am stingy and I’m proud of the reputation.” – Ingvar Kamprad
They throw expensive parties and declare bonuses to the peril of the business. As a smart entrepreneur, you must spend money shrewdly. Any money expended must be justified by an increase in sales or value addition to the business.
“IKEA people do not drive flashy cars or stay at luxury hotels.” – Ingvar Kamprad
In conclusion, these are the 15 commonly made business mistakes made by most small business startup owners. Avoid them like a plague and I will see your business at the top.