A new entrepreneur may feel as if he or she is on a roller coaster ride, especially when starting a new business. A majority of small-sized business entrepreneurs who experienced failure will still vouch that the risk was worth taking looking at the potential rewards. However, it is essential for new entrepreneurs to adopt a cautionary approach. Irrespective of what kind of preparation goes into that new business of yours, learning hard lessons in the way becomes an integral part of this journey.
An essential component of beginning a business is to have a well-structured plan in place and then practice a disciplinary approach to take quick and timely action on it. It is not exactly an exciting proposition to be associated with a startup as you may need just to submit yourself to the flow of the process. Ranging from stiff competition to inadequate funding, a new entrepreneur has to be prepared for different types of hurdles and challenges. Taking necessary actions to avoid such mistakes is highly imperative while beginning a new venture.
Following are some of the mistakes all new entrepreneurs should try to avoid:
1. Getting confused between an excellent opportunity and a good idea
It is indeed a wow moment for every entrepreneur when they hit upon a new idea related to a service or product. Plus, such moments help to reignite the passion within an entrepreneur leading to a great deal of perseverance. However, even if the idea appears to be highly unique, if it does not fetch equivalent market acceptability or fit, it is difficult for your business to succeed.
There is hardly any guarantee of your customers demanding it merely because you conceived and then built it. While the birth of new ideas is essential, it is even more crucial to assess its opportunity in the market to get the desired return on investment; In fact, opportunity stands at the crossroads of a problem if a low requirement is felt by your customer and the capability to fulfill that requirement. If conditions are favorable, extracting an opportunity needs to be translated into the creation of value.
If you refer to past cases, you will find that some of the most prominent tales of success were that of businesses, which began as something else. For instance, when Flickr started its journey, it operated as a tool for photo-sharing for Game Neverending, an online game. Another good example is Instagram that started its mission as a photo and gaming app. Even the journey of Twitter began in the form of a side project with a podcasting organization to transmit SMS messages. Groupon’s operation started as a website for social-fundraising.
2. Improper estimation of the cash required
Expenses to begin a new business may not be the same as it may range from just a few thousand bucks to millions of dollars. The amount of cash required will be determined based on the kind of business an entrepreneur launches. Trying to figure out the type of money you may need to start your business depends partially on facing a projection of the kind of revenue the new company is expected to generate to offset startup expenses. However, it can be a complicated calculation, which depends on plenty of shifting variables. However, you need to keep one crucial point in your mind. A majority of businesses fetch modest returns in the first year. In fact, over 75% of new ventures are known to have their annual revenue at less than 50,000 USD according to a report published by Kauffman Foundation.
Regardless of the kind of business you are in, a great practice is to keep more provisions in your budget than what you think will be required. According to Eric van Merkensteij who was a professor at the University of Pennsylvania and then owned a restaurant for five years, there is a strategy to deal this. He shared this with SmartMoney. Eric said that an entrepreneur needs first to calculate their upfront investment expenses. After that, the figure needs to be doubled and then redoubled.
You will come across several online tools that can calculate the upfront cost required to start your business. However, seasoned entrepreneurs will still advice that you are perhaps underestimating in arriving at the cost in the beginning.
3. Giving first preference to your product and last preference to your customers
While ascertaining your business model and designing your products, you need to have the mentality of providing the first preference to your potential and existing customers. Several such new entrepreneurs are engrossed just about earning more money that is entirely understandable. However, they overlook the importance of creating a sustainable business. It is extremely crucial to have loyal and satisfied customers who will be repeat customers and purchase from you even in the long term.
Starting your entrepreneur journey for the first time is a tough job, and there may be mistakes in the process. That does not signify that an entrepreneur has to go on repeating the mistakes of everyone else’s.
4. Overestimating that you can do everything all by yourself
When you start a business, it is normal to feel that you are best at that job and no one else can match your ability. You think you are the best connoisseur of your product and are the one who possesses the desired passion for getting success in your business. However, such a notion can be a perfect recipe for getting burnout entirely and can impede the progress of your business in a big way. It is essential to have an experienced and knowledgeable mentor or consultant to help you in your much-required objective in the market and your business.
5. Thinking that you have the entire world in your hands
While the emergence and popularity of Internet have made it an indispensable part for companies, if you feel that your marketplace constitutes of a borderless globe, you are sadly mistaken. It is precisely applicable to a majority of small businesses.
While tech-based organizations with only some employees but dealing in billions of dollars could be grabbing the news headlines, Internet companies comprised of even less than six percent of the total number of new businesses in 2013. The Kauffman Foundation shared the data. Nevertheless, it may sound a bit strange the reality even today is that a majority of new companies do not mint money from around the world. Instead, they earn their revenues around the corner.
6. Being deprived of strength by the apprehension of many what ifs
The prospect of starting a new company can be scary for any first-time entrepreneurs, and it is not something a fearful person can do. It is entirely logical to feel afraid of rejection, disappointment, and failure. However, making yourself utterly powerless by such thoughts can become a big stumbling block for the progress of any entrepreneur. The first significant step to combat such fear is to recognize your common worry since there is a reassurance for you that there have been others in your position at some point in time.
7. Setting a small profit margin
It is critical to have a significant profit margin for the success of your business. If you set the margin too low now, life can be quite tough for you going forward. After all, your customers are hardly going to be happy if you decide to increase the prices afterward. You should start taking a close look at your operational and production costs. You should then try to ascertain the kind of flexibility there is. Will you be able to lower these expenses in the future in case it is necessary to do? If that is not the case, select a higher margin of profit now for accommodating those costs.
8. Overlooking the importance of marketing
It is a misperception among some entrepreneurs, especially the new ones that they would launch revolutionary products or services. They feel their products will speak for themselves, and a positive word of mouth and free public relations will work wonders for earning impressive revenue.
Still, the bitter reality is that most of the startup businesses may have to make a substantial investment in marketing activities. These channels may include content marketing, Search Engine Optimization, paid advertising and public relations. Make sure you do a study on where your business rivals are spending money on marketing activities. Do a self-retrospection on how you can differentiate or compete yourself.
9. Setting up unrealistic goals
A new entrepreneur could get too carried away by their so-called big or innovative idea. As such, they may fail to work with a stable and well-structured plan. In reality, you should set up attainable, realistic and measurable goals for getting success in your business.
Make it a regular habit of setting up long-term as well as short-term goals. You also need to ensure that all these goals are specific. Start your goal setting prices by defining a reasonable goal. Then, ascertain the kind of steps you should take for attaining it.
10. Using cost as the only criteria for making hiring decisions
It is a regular phenomenon seen even in some established businesses. When a company has problems related to funds, often it tries to reduce the cost of hiring new employees. However, the strategy is a faulty one since you may end up making more payments in the long term.
If you plan to hire low-cost consultants and employees, you should remember that they are charging less probably due to a particular reason. It is likely that such workforce is unreliable, unskilled or semi-skilled or inexperienced or a combination of all three.
11. Assuming that there is no direct competition
At times, the excitement about launching a new service or a product can make a new entrepreneur think that there is no direct competition in the market for them. They may also assume that their products are far more superior as compared to their rivals and they are in a class of its own.
The fact is there is hardly any business that does not have any direct business rivals. Unless in the rarest of rare cases when you invented a brand new product, it is very likely that there are existing players in the market who share the same niche.