Every day, literally thousands of regular, sane and normal people take the plunge and start their own businesses. As they survey the hazardous landcape, little do they know how easy it would be to avoid the traps that so many of us have fallen into.
If you're in the initial phases of starting your own business, then I must warn you: Avoid these mistakes as if your life depended on it. Because it does--your financial life, that is.
Let's look at the pitfalls I've seen entrepreneurs have to dig themselves out of all too many times:
- Buying a job rather than a business. Yes, you'll have to be involved in the daily operations at the start, but remember that the ultimate goal is to grow your business into much more than just a job where you work hands-on every day. Work on the business, not just in the business.
- Being a great plumber but having no idea how to run a business that sells plumbing. Your former jobs are all an apprenticeship to running your own business. Be an apprentice in all areas, not just in the trade or profession of your business. Most important, be sure you've paid attention to all aspects of business in your past jobs, no matter what they were, so you've done your basic, "how to run a business" apprenticeship.
- Taking on a business partner. Most people give away equity upfront to a partner. Yes, there are examples of partnerships that work, but most don't. Unless you're absolutely sure about your partnership, hire people to help you out instead.
- Starting a business from scratch rather than buying an existing operation. Starting from scratch may seem cheap, but it'll cost you the most expensive asset you have--time. Buy an undervalued company, and build it up, rather than start from scratch.
- Thinking the business idea will make the company. It's the people who make a business successful, not the product, not the service and not the new invention. Focus on building a great company as much as you do a great product.
- Thinking too small. Many startup entrepreneurs want to generate a wage for themselves and nothing more. Instead, aim to build a profit, aim to build something large, and aim to build something great. If you shoot for the stars, you may fail, but at least you'll make it to the moon.
- Competing on price and price alone. This is by far the fastest way to send yourself into bankruptcy. Business is about profit, and having a smaller revenue with a larger profit margin will always beat out winning tons of business but earning almost no profit. Learn marketing and sales so you can get out of the price wars.
- Trying to cost-cut your way to success. By saving a wage and doing the work yourself, you forget that nobody's out there drumming up new business for you. Focus on bringing in the business, not saving a few pennies.
- Hiring cheap employees. You get what you pay for. Getting the right people is crucial, so don't just hire anyone. Wait until you find the right someone.
- Focusing on only one area of your business. Business success involves three main areas: sales and marketing, finance and administration, and operations. You have to keep all three working and growing in unison, not just the area you're good at.
- Not testing or measuring anything. Knowing your numbers is vital. In fact, you can't manage what you don't measure. Measure everything from day one, from how many new prospects you have to how many sales you make.
- Doing the work once and getting paid once. The key to success is to do the work once and establish a long-term, income-generating relationship. Learn to structure your clients, your business and your income that way, and you'll build a great business.
You might have noticed there are 12, not 11, pitfalls to watch for. That's because a good business will always deliver what it promises, but a great business will deliver more than promised.