Stepping OutWhen I decided to step into the entrepreneurial waters after a career in financial services, I believed I would be the best thing since sliced bread. Why not? After all, I understood service, accounts, economics and what not. What could go wrong? A lot! To my chagrin, I found out the hard way that there are many pitfalls awaiting SMEs, irrespective of the background of the entrepreneur. Some of these pitfalls are obvious, but most are not – unless someone points them out to you explicitly.
Let’s highlight a few pitfalls to watch out for
“The General who wins the battle makes many calculations in his temple before the battle is fought. The General who loses makes but few calculation beforehand.” — Legendary Chinese Military Strategist, Sun Tzu
not planning enoughThe first mistake you could fall into with your start up isn’t so much not planning (that’s too obvious), it is not planning enough. Most of us have some plan or the other. We make plans to open bank accounts, we make plans to rent a ‘befitting’ office, to design and print stunning call cards and such. These are all very valid plans. Like Sun Tzu said, we need to be making ‘many calculations’. Many entrepreneurs are not making enough tangible and well thought-out plans; hence they choke. Some of these plans include proper market research, understanding your customers, what they want, where to find them and how to serve them. Some people start a business failing to make plans (contingency or pivot) for government regulations. The consequences could be dire.
starting too bigAnother mistake SME owner’s make is starting too big! You hear popular success gurus as ‘What’s your goal?’ Then they challenge you to ‘supersize it!’ We are told to make ‘big hairy audacious goals’. When it comes to a start up, I will counsel differently. I say chunk your goals to bite size pieces, to allow yourself learn, scale and build momentum.
“You need momentum, and nothing builds momentum like getting a few wins under your belt.” Forbes contributor, Lewis HowesEntrepreneurs could lose heart when one big prospect after another shuts the door in their face; and they could just give up and close shop. So, please start small and scale up. Starting small has other benefits including ensuring that you start with manageable overheads, giving you time to learn the business terrain hands on etc. What’s not to love?
Having an unhealthy family to stranger mix in your businessWe see this all the time. A new business starts, and the CEO places his brother as the Chief Accountant, his sister as Head of sales, his wives brother is sent to Business development and his cousin sister is at reception. Sound familiar? This is a third mistake SME make. Having an unhealthy family to stranger ratio. I am not saying that you should not hire family; but let’s borrow from Pareto’s Principle. If only 20% of your team are doing 80% of the work; don’t you think that you should even out the performance odds by hiring MORE outsiders who are driven by performance knowing they do not have the ‘family safety net’ to fall back on? Sometimes we have no choice, but you need to cap it and have no more than 20% of your team with familial ties to you.
Undervaluing/under-pricing products and servicesThis mistake is rather personal, because I fell into this pitfall. I unfortunately started my business undervaluing/under-pricing product and services I offered. Maybe it was a lack of confidence, or fear of not closing a deal; whatever it was I found myself pricing myself so low that people began to doubt the quality of my services. I got so frustrated and began to resent my clients.
Not keeping business income separate from personal incomeThe last mistake I want to highlight is not keeping business income separate from personal income. It is so easy in a pinch to ‘borrow’ money from business income with a view to paying back ‘soon’. Maybe the first one or five times you actually do put the money back. Then you begin to assume you can keep track of the borrowed funds. You know what they say about assuming, right? They say when you ‘assume’ you make an ass out of you and me (ass – u – me)! And that is what happens eventually. No business can survive without keeping discrete books of accounts and accounts from the owner. Remember your Introduction to Business Law (Salomon v Salomon). You and your business are two separate legal entities, and your funds must reflect this. Every SME must ensure that its processes (not having set processes and structure is a big mistake) clearly spell out how the organizations income and funds will be treated. This is non-negotiable. These are by no means all the mistakes you should look out for as an SME, but they are a good place to start. Getting this out of the way gives your business a fighting chance of survival in our knowledge age. I’d like to hear about your own experience and the mistakes you have stepped into and how you corrected it.
Catch up with Liz online and find out what she’s up to:
Instagram – Lizspire and Forevawright1.
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