Six Pitfalls to Avoid When Starting a Business
Is the “be your own boss” bug biting you? The idea of introducing people to an amazing new product or service, of doing it your way, and-drum roll, please- a LOT of money is a very seductive one. We read about people who built a company in a few years, sold it for millions, and then did it all over again. Why can’t that be you? It can- but make sure you know what you’re wishing for and getting yourself into. It’s a bit like cake. It looks great, but it can be messy; and some eggs will get broken to make it happen.
People start businesses for many reasons and under many circumstances. Unfortunately, not all of those reasons are good. We’ve heard the statistics: fifty percent of businesses don’t make it past their fifth year! But does it have to be that way? No, it doesn’t! You need to acknowledge and address the issues that get new business owners in trouble. Do that, and you raise your odds dramatically. So what gets people into trouble?
1. Starting a business for the wrong reason. You lost your job and can’t find another-so start a business. Your boss is an idiot and doesn’t know what he’s doing-so start a business. You think have a great idea-so start a business. Although none of these are reasons not to start a business, what usually happens is that initial research that should go into the idea and the initial and honest self-appraisal as to whether you’re going to be any better than others running a business are not completed. Successful businesses are well planned. Detailed business plans should be reviewed by experienced people. Few of us would jump out of an airplane without some instruction on the use of a parachute. Starting a business without a plan and research may lead to the same result- SPLAT!
2. Not enough money. It always costs more to start a business than you may think. Everyone makes this mistake (including Yours Truly). Add 50% to your predicted cost. People pay late. Stuff breaks. Unexpected costs pop up. For an established business, these are mere inconveniences. For an undercapitalized start-up, they can be fatal.
3. Unclear target market. Who’s going to buy your product or service? How many of these people are there? How much will they be willing to pay? How much competition will you have? Do you think they’ll like what you’re offering-or do you know? Have you done real market research? The landscape is littered with failed businesses that didn’t resonate with their target market-or didn’t target the right market. Talk to others selling to that market.
4. No marketing plan. In the beginning, you need customers. They need to know you exist. You need to market. Surprise! Most folks starting a business aren’t marketers. They build things or analyze things, but they don’t market. But an entrepreneur starting a business has to be a marketer. After creating a business plan-or even part of it- you had better have a cohesive and coherent marketing plan with spending numbers to go with it.
5. Too many hats. Some people start a business to create a job that they love without having a boss. Michael Gerber in The E- myth Revisited calls these folks technicians. The problem is that along with their “job” comes other jobs-finance officer, marketer, networker, as well as “chief cook and bottle washer.” The result is they hate it! In the beginning of a new business, you will likely be all things. You’ll need to do these tasks whether you like them or not. You can’t create a job without building a business.
6. Chasing squirrels. It’s easy to get distracted, to see a new opportunity and want to chase it. The problem is, as a new business with limited resources, you can’t afford to spread yourself too thin. If you end up constantly changing direction to chase the next great idea, you’ll end up never fulfilling even one great idea. You need to stay focused!
Am I trying to discourage you from starting a business? Far from it. It’s great building up your “baby.” But you need to understand and prepare for what you’re getting into, and to understand that entrepreneurship is not for everyone. But if you can prepare, fund, and stay focused, an amazing adventure awaits you. Just be sure to put the odds in your favor.
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