Avoid These 3 Common Entrepreneur Death Traps Like life, there is no one-size-fits-all when it comes to entrepreneurship. These three tips will prevent new entrepreneur failure and ensure a stable journey into entrepreneurship.
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Inexperienced founders and first-time entrepreneurs who are excited about entering the realm of entrepreneurship often find themselves focused on "not important right now" items.
You can generally tell when an entrepreneur is falling for the non-important. Their focus gets drawn out over a longer than necessary period of time for things like branded clothing, business cards and the proper titles. There is a flow of priorities in business that are always at play, and when you're building a business, it is crucial not to waste resources on non-important right now priorities.
To clarify the point, let's look at a general overview of priorities broken down between experienced and inexperienced entrepreneurs:
Inexperienced order of objectives:
- Figure out a name
- See if it's available
- File to incorporate
- Wait for incorporation to go through, then get a business bank account
- Get a logo
- Get branded apparel
- Get the business cards
- Start to build a prospect list
- Get a customer
The experienced flow of objectives
- Get a customer
- Continue to build a prospect list
- Figure out a name
- Maybe get a contact card
Here is a list of three common flaws first-time entrepreneurs and founders face when starting a business.
1. Understand the difference between an order of objectives and a flow of objectives
Inexperienced entrepreneurs tend to think that things must be done in a set order to accomplish a goal. For example, I have seen multiple people start their entrepreneurial journey and turn away customers because they feel it's necessary to follow the order of objectives above.
That thinking — especially in the early stages — slows down execution rates because they bottleneck the next thing to be done. This causes friction, leading to burnout in a new entrepreneur.
Meanwhile, an experienced entrepreneur knows that multiple objectives will be in play, working to accomplish simultaneously — especially at the beginning.
The challenge is that the brain wants a perfect order, but that's not how it always works; sometimes we have to focus on multiple things to see them through to accomplishment.
A flow of objectives will vary on a case-by-case basis. However, the critical point, in the beginning, is to make sure the focus is on the right objective and, most importantly, the business shows some premise of viability. The objectives listed above can be completed in about a day — that's not the issue. The issue is that the inexperienced tend to get caught up on the non-important and it pushes a one-day list into a one-week or one-month list or a not completed "I got distracted" list.
Sometimes even setting up a legal business entity is not important right now. When it comes to small businesses, most can and should be started as a sole proprietorship — at least briefly before filing to incorporate. That said, there are specific industries where incorporating should be heavily considered.
For example, a low-risk graphic design business might want to forge ahead and start conducting business. However, if it's an industry with a risk of personal injury, it might make sense to incorporate it. (Always consult with a legal expert on what could be the best fit for you).
2. Understand the risk and rewards of priorities
Every action or inaction has a risk or opportunity cost, especially at the beginning, where the compounding effect is more significant. That being the case, looking at objectives in a risk vs. reward manner gives us guidance on tackling the objective list.
An experienced founder will start by bringing on a new customer. It is rarely risky, and the reward is great — there is business growth, especially compounded over time. But following the inexperienced route risks all the resources used in steps 1-8 (time, money, mental capacity, etc.) in hopes of generating the reward of 9, bringing on a new customer. Furthermore, the risk is more significant because a founder might find that the actions in steps 1-8 might change with the compounding of time. Example: The logo might not be the best fit, or a C-Corp or LLC would have made more sense.
This means we need to write down the steps and label them in priority of what needs to be done. You can always incorporate it later, change the logo, or get branded apparel later. While you can always get customers later, the focus of getting a new customer offers the greatest return on investment, especially at the beginning.
An inexperienced founder who focuses on the wrong things from the beginning tends to focus on the wrong things until one of two things happens:
- They continue to waste resources sweating the "not important right now" until they run out of resources and the business dies.
- They continue to waste resources until they learn the appropriate type of execution for them. (Sometimes necessary, but why waste the resources when it's preventable.)
Option number two brings us to the third tip for starting entrepreneurship:
3. Understand the type of entrepreneur you are. It's not a one size fits all role
Entrepreneurship mirrors life in that you cannot know who you are and how you operate entirely until you live through it. You might think that you can tackle one step by one step, only to discover that you are the type that needs to make progress on all fronts intermittently.
Like life, there is no one-size-fits-all when it comes to Entrepreneurship.