We know that a significant percentage of new businesses do fail, even when failure is the last thing anyone wants to focus on when starting up as an entrepreneur. However, having these common pitfalls in mind will enable you to prepare against them and build your business faster.
1. STARTING FOR THE WRONG REASONS
If the only reason you would be starting your own business is so you can make a lot of money, I will advise you to think again because starting a business for the sole purpose of making money limits your chances of entrepreneurial success.
Have a passion and love for what you will be doing, and believe – based on educated study and investigation – that your product or service would solve an existing problem or fulfill a real need in the marketplace.
If money is the sole reason why you are starting, failures will defeat you and you will throw in the towel when others do too. In starting up, you need to have drive, determination, patience and a positive attitude, so that when ‘failure’ comes and others throw in the towel, you are more determined than ever to trudge on.
2. INSUFFICIENT CAPITAL
Yes, there are a number, if not a lot of businesses you can start with almost no capital, but if your business is capital intensive, do not make the mistake of starting up with insufficient funds. A lot of capital intensive business owners have been forced to close down before they even had a fair chance to succeed because they underestimated how much money was needed to start up.
It is imperative to ascertain how much money your business will require; not only the costs of starting, but also the costs of staying in business until sales can eventually pay for these costs. It is important to take into consideration that many capital intensive businesses take a year or two to get going.
3. HIRING IMCOMPETENT EARLY EMPLOYEES
Your earliest employees are supposed to have the right skills because they are the ones to help you in setting your company’s culture. When you are just starting up, it is easy to think that you just need a few people who believe in your idea, who are confident they can do the work and would probably do it at a low price since you are just starting up; anyone will do, right? Wrong.
When you are starting up, you might understand the tasks needed to be completed, but might not truly understand the skills that your early employees need to possess to complete those tasks. If you lack that knowledge, your early hiring mistake is inevitable. So what do you do?
Talk to more experienced entrepreneurs and people currently doing the role that you’re hiring for. Talk to anyone that can help you identify the right skill sets and help you set key performance indicators and deliverables for each role. This will allow you to hire competent staff and have proper expectations.
4. ILL-TIMED OVER-EXPANSION
Ill-timed over-expansion often happens when business owners confuse success with how fast they can expand their business and this is one of the leading causes of business failure. A lot of companies have gone bankrupt because they over expanded at the wrong time. Some hire more staff than they can pay or take on projects they cannot finance because the business is now experiencing some level of growth.
The trick here is to let the business’ success help you set the right measured pace. When you notice your inability to meet customers’ needs in a timely basis, and employees are having difficulty keeping up with production demands, then expansion is warranted. But that should be done only after careful review, research and analysis. Carefully identify what and who you need to add in order for your business to grow. Then with the right system and people in place, you can focus on the growth and expansion of your business, and not expanding it just because you feel your business needs to be bigger than it is.
About the Writer: Chris Bamidele is a passionate and unapologetic Nigerian, who believes in God and humanity. He is a writer, blogger, and an aspiring Television Director; and an optimist to the core. He blogs at www.chrisbamidele.wordpress.com and tweets @Chrisbamidele
