Small businesses fail. Roughly 50 -70 % of small businesses fail within the first 18 months. These failures are due to a number of mistakes. Some mistakes can be discouraging but you should be able to bounce back. Other mistakes can be too severe but even then, serial entrepreneurs will still rise again. Eventually, there should no longer be mistakes but learning curves. Here are some common mistakes that first timers are making.
1. Picking the wrong partner
Many start ups find it difficult to find the right partner with the same vision as theirs. Forming a partnership with someone who you are not a perfect fit with can be detrimental to your business. You may want to partner with someone because they provide the required financial resources but if that is the only thing they bring onto the table, they may not qualify to be a partner. A proper due diligence is needed on all your potential partners because they may not be able to fulfil their commitments. As an example, if you are partnering with someone to provide transportation for your products, you need to know their vehicles are properly registered, reliable and they value punctuality. You also need to know if their drivers are licenced. Ignoring all these may result in late deliveries and losses for you business. And it is your reputation which will be dented.
2. Failing to test your concept
A great number of first timers go into business because someone else is doing it and they are successful. This is wrong. You need to test your concept and check if you are targeting the right market. Markets differ. You may be selling something that no one wants in that area. Go out there and research about your product, the people who may need it and how much they are willing to pay for it.
3. Hire qualified and complimentary workforce
You may be good with numbers, but numbers are not the only thing you need in order to run your business, you need to hire experts in other skill sets where you lack. In addition, hiring friends and relatives is not advisable unless they possess special skills which you cannot do without in your business. The problem is that if your friend or relatives makes a costly mistake it may be difficult to reprimand or discipline them without any implications on your relationship. Some first time entrepreneurs make the mistake of hiring for cost and not for fit. They hire someone on the basis that they can afford to pay him rather than based on professional merit. Somewhere along the line, this person’s performance will be below standard.
4. Taking in too many investors
The temptation when you are starting a new business is to take many investors along. The truth is that when you are opening a business, you feel like you need all the investment you will get but taking on too many investors can be dangerous. The investors may end up taking control of your company to such any extent that what started out as your idea will end up being something else, diluted until you cannot even identify with it. In terms of decision making, too many investors may mean too many loud voices, each demanding to be heard and taken seriously. It becomes chaotic.
5. Pretending to know everything
There is nothing wrong in admitting that you do not know something or that you are a first time entrepreneur. When you are stuck and need a helping hand, do not be afraid to call for help. This is the reason why many successful entrepreneurs are surrounded by mentors and advisors. There are always many experienced businessmen and women who are willing to stand in your corner and offer a helping hand. You need to surround yourself with people who will make up for your lack of knowledge in certain areas.
Be flexible. When you test your assumptions in the marketplace, be prepared to relook, redesign or even discard certain concepts. It takes a lot of flexibility until you come up with your proof of concept. By flexibility, we are not advocating for changing anything and everything that you come across but your product needs to be tailor-made to match the market and the environment within which you are operating. The one size fits all assumption will not work.
As a first timer, a misstep can cost you your entire business and with it your passion and all your investment. Whenever you are not sure, call in the experts. At the back of your mind, you need to know that starting a business is inherently risky and comes with a fair share of anxiety.