Becoming an entrepreneur is not for the faint of heart. In addition to possessing a crucial set of skills, a good entrepreneur should have a good sense of judgment as well. And he should also learn from the mistakes others have made in their field.
In this article, we’re going to touch on some of the most common mistakes budding entrepreneurs make and how you can avoid them.
Trying to Do What Everyone Else Is Doing
One of the most common mistakes new entrepreneurs make is trying to do what everyone else is doing. When there is a wave of new businesses in one industry or types of products tapping into a hot trend, trying to follow the crowd is the worst mistake you could be making. At best, you are competing against more established companies while both lenders and customers think of you as a Johnny come lately. At worst, you are trying to start a business just as that market is saturated and you’re doomed to fail because interest is shifting.
For example, entrepreneur Sam Ovens, out of New Zealand, set up a recruitment website that let job seekers showcase themselves to potential employers instead of applying to jobs the employers posted. He became a millionaire in his early twenties because of the site’s success.
Don’t start a business because that’s what everyone else is doing. Look for the untapped markets, under-served communities and unmet needs. This is where the greatest potential resides, as well as the least competition.
Failing to Deliver What People Need
One of the biggest ways an entrepreneur can fail is failing to deliver what people need. A cool app that doesn’t do what its target market most wants it to do is one example of this. Another example would be an accounting software application that was so far from how customers expected to use it and lacking essential features it was doomed to fail.
One of the best ways to succeed as an entrepreneur is delivering what people need. In addition to creating a website for job seekers, Sam Ovens also created a software application called SnapInspect that simplified property inspection dramatically; too many software companies try to put out innovative product but fail to understand the customer’s requirements.
One way to be successful is to reverse engineer what works and improve upon it. Combining complementary services or products in one bundle for a lower overall cost for consumers is another. In any and all of these cases, you will fail if you don’t know what your ideal customer wants and needs and their criteria for meeting those needs.
Over-Reaching and Over-Spending Before You Have the Income
Some of the worst mistakes new entrepreneurs make are financial. Quitting your day job and only source of income while only having the germ of an idea and no plan on how to make it, much less make a profit, is one case. Another is pouring your life savings into a product design without a plan on how to sell, market or distribute it, risking your financial stability on a shot in the dark.
And for those who manage to get investors or large loans early on, there is a bad tendency to add people to the payroll without a clear plan on how to use them to increase revenue.
Solutions for this problem include doing market research and product reviews well before investing in manufacturing, avoiding debt and investors until you cannot grow without the financial infusion, shopping your product or service and getting contracts or initial orders before you formally go live and never risking it all on a venture. And look into the cheaper options over buying equipment and hiring people, such as paying third party manufacturers to make your product instead of renting space and buying equipment.
The biggest mistakes entrepreneurs make are trying to go with the crowd, failing to deliver what the customers actually want and need and financial over-reach. The latter case includes assuming total dedication without a fall back plan will result in success, spending without a clear understanding of how each expense contributes to the company’s bottom line and not seeking the lowest cost option to delivering a product or service.