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The statistics vary slightly, but it's fair to estimate that more than half of first-time entrepreneurs see their initial business attempts fail. Sometimes that ends up being unpreventable, no matter how many smart moves a business owner makes. But there are certainly steps that rookie entrepreneurs can take to give themselves a better shot at being part of the half that succeeds. Here are five ways to avoid common mistakes of first-time entrepreneurs.
1. Know your strengths and weaknesses
It's one thing to have an innovative idea and be the person who implements the first steps towards making that vision into a reality. But once your company is an established business, the founder needs to remain intimately involved as the top manager. In doing so, the entrepreneur must be self-aware enough to recognize his or her greatest skills and weaknesses. For example, someone with big-picture vision may not have the desire to handle the day to day of an entire staff. If you know that you won’t have the time or ability to be involved in those routines, you should consider bringing in a co-founder or hire a second in command who will focus on nothing but those things. It’s tempting to want to do everything -after all, it is your business- but if you’re honest with yourself, and what you’re best able to handle, you’ll be much better off in the long run.
2. Pay attention to your cash
Startup funding tends to come in large doses, often in numbers big enough to make it seem like the cash will never run out. It's tempting to spend money and assume that your great idea will be so wildly successful that you will recoup investor money as quickly as you received it. That's usually not the case. Until the business becomes profitable, every day of the operation is costing money. Be diligent about where your money goes. Examine each part of the business and determine what is non-essential at this time. Spending wildly is one very fast way to put the operation in a rough spot before it's even had a chance to succeed.
3. Do pay for things that will save you money in the long run
While it's important to be responsible in how you allocate your funding, you can't go wrong with paying outside experts to do things that you can't do yourself. This is especially true when it comes to attorneys and developers. Paying a lawyer to renegotiate a bad deal or review contracts after the fact will end up being much more costly in both fees and lost profits than just hiring someone in the beginning to write up proper contracts. The same goes for tech developers- hiring the best people to build an app or platform the right way is better than having to bring someone in to clean up a mess made by a less-expensive person.
4. Choose your team wisely
Maybe your buddy from business school is an incredible marketer. If he is, great. But if there's someone out there who might be a better fit for what you're trying to build, your loyalty should be to the company, not your friendship. As Bill Aulet, managing director of the Martin Trust Center for MIT Entrepreneurship told Entrepreneur, "Choosing who to hire and work with in a startup is like playing basketball in the schoolyard; you can pick your friends and play for them, but if you want to be good and continue to be on the court, you have to carefully pick your team."
5. Time your launch
Picking the best time to launch your company is incredibly tricky. Many people will delay their company launch until they feel like everything is perfectly in place -the product, the staff, the marketing, the market fit- as they cost themselves money due to a fear of taking that final big risk. That said, lots of “lean startups'” opt to launch their company armed only with an idea and a prototype. That's also not a wise move, as there's no point in being a fully launched business if you don't have an actual product customers are willing to pay for. You’ll want to find that sweet spot for a launch. Be ready and polished, but don’t waste time.
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