7 Lethal Business Mistakes to Avoid
Join us at Entrepreneur magazine's Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Register here for exclusive pricing, available only for a limited time.
When I go on vacation, I take a lot of books with me. I try to make sure that none of them have anything to do with business, but sometimes business lessons come from the strangest places. One of my vacation reads this year was "Famous Last Words" by Jonathan Green. This sometimes funny, frequently poignant compilation of deathbed quotations offers a glimpse at the characters of famous people as revealed by their final words. My favorite (as a business columnist, anyway) comes from showman P.T. Barnum, whose last words reportedly were "How were the receipts today at Madison Square Garden?"
Whatever words you may utter if your business collapses (most probably unprintable in this column), the failure can often be traced back to some "famous last words" you once said, if only to yourself. Here are some painful examples:
"My customers will be loyal to me." Ask any small town hardware store owner who's had to go one-on-one with WalMart or Home Depot if this is true. While not totally dead, customer and brand loyalties are not as strong as they used to be.
People won't buy stuff from you just because they've bought from you for 30 years. If a new competitor is offering a better price to your customers, and the cost of changing vendors isn't all that great (for example, if the cheaper competitor is located in a faraway, hard-to-reach place, people may continue to pay your higher prices for the convenience of a shorter trip), people will switch to the competitor in a heart beat. By all means provide better service than your competitors, but don't count on that to save you--you should also offer the lowest prices around and keep your costs even lower.
"If I offer people something they need, they'll buy it." Amazingly, people don't always buy what they need, even if they know they need it, and even if they tell you they need it. Example: Brussels sprouts. Probably one of the healthiest foods on the planet, what with all the vitamins, minerals, and antioxidants they contain. Heck, they probably even prevent cancer if you eat enough of them.
People are educated nowadays, and they're saturated with media telling them what foods are healthy for them to eat, so they know they need to eat more green vegetables. Nobody seriously disputes that. But when you're really hungry and you want something quickly, do Brussels sprouts come to mind? Too many entrepreneurs are out there selling Brussels sprouts to people because they need them, and know they need them, but are scarfing down chocolate-covered peanut butter-filled pretzels when nobody's looking.
"I really don't have to market, because if I do a good job, the word will get around." People don't talk much about the positive experiences they have with their professionals or service providers (but believe me, they talk long and hard about their negative experiences!). Also, people aren't staying in one place long enough to learn about local reputations. While your reputation is certainly important, it doesn't get new clients or customers in the room. In any business or profession, you have to get in people's faces and constantly communicate what you do, how you do it and why you're better than the competition, in a way that doesn't turn people off.
"My business has no competition." If you think this, it's because you gave the marketplace a quick look, and saw nobody doing exactly the same thing as you. Not all competitors are obvious to the naked eye, though. Sometimes your competition isn't a person or a company but rather a "thing." Book publishers, for example, compete not only with other book publishers, but with the Internet. Buggy-whip manufacturers at the turn of the last century had little to fear until the automobile came along and folks didn't have to ride horses to and from work anymore.
Sometimes your competitor may be doing something entirely different from you. A pizza parlor in a small town may have a local monopoly on Italian food, but the Chinese restaurant across the street is certainly a competitor for the "quick lunch" or "takeout dinner" customer.
Sometimes your competitor hasn't yet decided to compete with you. Back in 1995, Netscape dominated the U.S. market for Internet browser software. There were no significant competitors. But in Redmond, Washington, a guy named Bill Gates was thinking about getting into the browser market . . . and the rest is history.
"I don't have partners or employees, so I must do everything myself." Just because you're legally the sole owner of your business doesn't mean you have to do everything yourself. Sooner or later, in any business, you learn that there are a handful of things--five or six at the most--that must be done well in order for a business to succeed. They vary from business to business, and sometimes take a while to figure out, but they are there, and you must learn them.
For example, in my consulting business, one of my essential activities is to get written invoices out to my clients promptly at the end of each month. I've learned the hard way that if you don't get your invoices out, your clients don't pay you, and they're more inclined to haggle over your fees once the belated invoice finally arrives.
Once you've mastered the five or six essential activities in your business, it's critical that you do them yourself, because no one--not your employees, not your partners, not your spouse--will devote the same level of attention to performing them that you will. Everything else, and I mean everything, should be delegated to outside contractors, and their fees made a cost of your doing business.
"If I make enough and sell enough, and there's money in the checking account, I'm successful." You wouldn't believe how many entrepreneurs I meet in my travels who truly believe you can ignore profits if enough people are buying your stuff. Every business owner has to agonize over what his products and services truly cost. It seems sometimes that every day you stumble across a "hidden cost" you didn't know you had. One young lawyer told me how proud he was of how successful his solo law practice was--he had literally hundreds of clients--until I gently pointed out to him that when you factored in the number of hours he was working every day to keep those clients happy, he was making only $10 an hour after taxes! Today he works as a paralegal for a large law firm--a little less money, but a much better return on his investment of time.
"I can't really afford a lawyer, so I'm going to do my own contracts." Every business involves some form of legal agreement. They can be as simple as an invoice form or purchase order, or as complex as a 50-page property lease. Sometimes you draft them to be signed by others, sometimes others draft them for your signature. Every one of them, without exception, should be reviewed by an attorney before you use or sign them.
Let's face it. Few people truly enjoy dealing with attorneys, and nobody likes to pay legal fees. Yet unlike you, attorneys live with contracts every day of their working lives, which is why you should never trust an attorney who has 20/20 eyesight and a gorgeous suntan. Attorneys know not only what language should be in your contracts, but what language has been left out that needs to be added to protect you and your business.
Even if you decide to draft your own contracts, using a legal form book or one of the "pay per download" legal form databases available on the Internet, you should always have an attorney review your work before you start using it. I can honestly say in the 20-plus years I've been drafting contracts for clients, not once have I taken a "standard form," filled in the client's name and handed it to them as a finished product. Every contract, even the simplest letter of understanding, needs to be custom-tailored to your specific needs.
As for the legal fees, there are tons of attorneys out there vying for your business. I guarantee it won't take you long to find one who's willing to negotiate his or her fee, especially if you hold out the promise of a long-term relationship.