Every entrepreneur is going to make mistakes, and these are a crucial part of learning. However, just because you can learn the hard way doesn’t mean you should.
Mistakes can be counterproductive, costly, or even fatal. If you’d like to save yourself years of unnecessary challenges, continue reading to learn the 10 biggest mistakes we’ve seen business owners make over and over again.
- Don’t pick a partner just because you like them.
- Don’t try to do everything.
- Don’t make a product for everyone.
- Don’t obsess over your competition.
- Don’t run out of cash.
- Don’t make decisions based on emotion.
- Don’t hire the wrong person.
- Don’t avoid feedback.
- Don’t insist on controlling your company forever.
- Don’t spend all your time on product development.
We hope this list helps you learn from others, diagnose missteps you might be making, or course correct before a pitfall endangers your business. With proper attention, any mistake on this list can be corrected.
1. Don’t Pick a Partner Just Because You Like Them
Many people share an idea with a friend, get excited about it, and then decide to go into business together.
Be cautious who you choose to be your cofounder.
First, make sure you’re compatible. Figure out each other’s strengths and weaknesses and make sure they you can fill their weaknesses and they can fill yours. If you have the same strengths and weaknesses, the partnership won’t provide nearly as much value.
In a good partnership, one partner might be great at pouring over the books (a CFO) while another might excel at taking risks and pushing the company forward (a CEO). These roles balance each other and make for a great team.
Next, make sure you and your partners share a common vision and set of values.
New partnerships start with a honeymoon phase when you’re both enthusiastic about the new business and partnership. When times get tough or new opportunities arise, you’ll need a way to make decisions.
When you aren’t heading in the same direction, you’ll butt heads and spend more time arguing than actually working together.
When your vision and values align, you can have productive conversations about the best strategy to accomplish your goals, but you’ll both agree on the goals you’re reaching for and the ways you’re comfortable achieving them.
Your vision and values will help you eliminate options that don’t fit so you can find the best path forward, whether you’re deciding who to add to your team, what kind of impact you want to make on your community, or how you want to grow your business.
Finally, before you go into business with someone, always set up a clean way for any partner to get out of the arrangement. The most common way to do this is with a buy-sell agreement. Making a written plan like this will make everyone’s lives much easier in the event of an irreconcilable conflict.
2. Don’t Try to Do Everything
Many times an owner of a business tries to function in all roles of their company. This causes trouble when they need to scale because they haven’t developed other members of their team.
This mistakes comes out of the very good intention to understand every part of your business.
Yes, learn every part of your business enough to be a little dangerous, but don’t feel that you need to become an expert at all facets. Once you understand how a process works, hire it off if it’s below your pay grade (or above your pay grade).
You should be an expert at what you do best. In most cases this should be sales and marketing since these are the two essential functions that bring in new revenue.
You also need to create the culture and direction of your business for your customers, employees, and shareholders. This itself can be a full-time job!
Start by reading about the skills you’ll need to be an effective CEO. We have articles that teach you how to effectively lead your team.
As a CEO, you’ll need to:
- deal with ambiguity and take calculated risk
- make fast decisions when needed
- assemble and coach a quality team
- listen to your team and learn from the past
- communicate with clarity and empathy, and inspire your team
- build relationships with investors, employees and customers
- adapt management styles for different employees
- maximize profitability by focusing on lucrative customer segments and ideally moving toward a recurring revenue business model
Sometimes people are great at starting companies, but their experience doesn’t align with the skill sets required to manage a large firm. It’s completely ok if this happens! If it does, your next priority should be to find an excellent CEO to take the company to the next level. The Yahoo and Google founders demonstrated the value of this approach.
3. Don’t Make a Product for Everyone
If you can’t articulate what you do in 20 seconds, you’ll confuse people. If customers walk into your store and they don’t know what your best or most popular product is, people will lose interest.
You can’t add value if you’re trying to add value everywhere.
So be unique and specific. Fill a niche and be the best you can be at it!
Brian Wiley leads a small financial planning firm in Boise, Idaho. His company, Tree City Advisors, specializes in delivering tailored planning, curated coaching, and personalized advice to clients. Tree City doesn’t focus on businesses, annuities or life insurance. Instead the company specializes in helping individuals.
Brian recounts a time he spoke with another financial advisor: “I asked him, ‘What do you do?’ He said, ‘I do it all. I work with everyone from new couples to very wealthy families.’ The more he spoke, the more I realized that he was not really good at anything. He didn’t have a specialty.”
Try eliminating what you don’t do until you get down to just the top 3 things that you do really well. Then define the one service that you want to promote above all others.
4. Don’t Obsess Over Your Competition
Many business owners view their competition as a threat. Either you need to steal customers from the competition or they will come after your customers!
They’re not entirely wrong. But in many cases, there is plenty of business to go around and a healthy ecosystem in an industry can mean more business opportunities for everyone.
Aside from this, refocusing toward an abundance mindset will have more benefits than drawbacks for your team.
Instead of looking at your competition as a threat, focus on being good at what you do and the niche market you serve. When you’re exceptional at what you do, the right customers will be attracted to your business.
When you mirror your competition, you eliminate your uniqueness. You’re essentially giving your energy to your competition’s customers rather than to your customers.
Instead, pave your own road. Focus on what is right for your customers and your business model. Avoid speaking badly about your competition. Instead, speak proudly about what you do and see how people respond.
Your competition may drop prices or introduce new features that their customers like. You could react by copying their prices and features, but it’s hard to beat someone at their own strategy. Instead of emulating, be authentic and create value by focusing on your customers’ unique needs.
At Deliberate Directions, our ideal customer has $1 million to $5 million in annual revenue and a team of 8-20 people, and they’ve usually been stuck at a certain revenue cap for a while. This gives us the opportunity to show our clients a new door to reach their higher potential.
Jeff Bezos says, “Customers are always beautifully, wonderfully dissatisfied.” No matter what is available in the market, people will always want something better once you create it.
Of course, pay some attention to what others are doing in the market. Just don’t feel like you need to fulfill a checklist of every feature or strategy your competition uses. Consider your competitors’ strategies as suggestions. They might fit with your strategy or they might not.
Listen to your customers and your team to figure out what works best for your company.
5. Don’t Run Out of Cash
61% of small businesses regularly struggle with cash flow, and 20% have been unable to pay vendors, loans, themselves, or their employees.
When you use all of your income to spend more money in the business, you risk running out of personal income. If you grow too fast, you can effectively grow yourself out of business.
On the other hand, if you take all the personal income out of the business that you can, and you don’t put money back into the business, the business can die because you haven’t left it with enough capital to grow.
If you encounter cash flow issues, one option is to talk to a banker and help them understand the cash flow needs of your business. Most banks offer loan products that can help you when your receivables are high and then allow you to pay back the loans cash comes in.
6. Don’t Make Decisions Based on Emotion
One of our clients had a TV ad that they loved to see on TV. Analysis suggested it wasn’t profitable, and the ad was costing the company $16,000/month. But he loved it and felt it was his mark. Eventually we persuaded him to try dropping the ad and see how it impacted sales. He did, and his sales didn’t diminish at all.
Family restaurants can be another place where emotional attachment can get in the way of growth. Many family restaurants want to stick to the original family recipes. But times change and customers look for new food, new decor, and sometimes alternative styles of restaurants. If you want to grow your business (or even just maintain it over time), you need to evolve with the times.
Be passionate about your customers. But don’t get emotionally attached to specific products, processes, or parts of your business model.
You always need to be ready to evolve your business to best serve today’s customers, and your customers’ needs and wants never stop evolving.
7. Don’t Hire the Wrong Person
Many businesses like to hire someone they know, or someone who a friend recommended. Someone tells a business owner, “My brother’s father is looking for a job, he’s available,” and the business owner decides to hire based on the personal connection
This is a recipe for disaster because a personal connection can be very hard to fire if they’re underperforming.
Moreover, hiring choices made out of personal bias will lead you to miss out on the extraordinary growth you can achieve when you find the best person for your job opening.
Hire slow and fire fast.
Hiring the right fit can only be done by placing the correct promotion, evaluating candidates through a strict process, and hiring the best A-Team candidate that you can afford. To perfect your hiring process, ensure that you’re following all 8 steps of the hiring process.
You’ll typically know within 30-60 days if an arrangement is working. If you’ve provided coaching and it still isn’t working, don’t try to make it work. The best thing you can do for your company and for an underperforming employee is to let them go. While this can be intimidating to many leaders, there is a straightforward 5-step process to terminating an employee respectfully.
8. Don’t Avoid Feedback
Many businesses put out a product offer, start doing business, and just keep going.
Honestly can be hurtful but also incredibly enlightening.
Before you start selling something, ask what your target customers think. Once you start selling, keep getting feedback and adapting your products and services to follow what the market tells you.
Some feedback is inevitably going to be tinged with negative emotion. Try to figure out what caused the negative reaction so that you can still make use of the feedback.
9. Don’t Insist on Controlling Your Company Forever
Many entrepreneurs call their companies their “babies” and want to run their companies indefinitely.
Sometimes this leads entrepreneurs to avoid involving other people in their business altogether. Other times, people are willing to bring on investors and a team, but they insist on maintaining control of the company.
To scale your business and help as many customers as you can, you’ll need some kind of team. Often you’ll also need outside investment.
Once you have a team and investors, it’s not unusual for investors to recommend hiring a CEO. In a study of 200 American startups, less than half of the original founders were still serving as CEO after 3 years.
The skills that helped you find a product-market fit and build an initial team can be very different from the work ahead: hiring and managing a large team, overseeing more complex financial strategies, and building scalable systems for marketing and customer service.
Instead of insisting on control, focus on growing a valuable, profitable company.
10. Don’t Spend All Your Time on Product Development
Sometimes it’s temping to focus endlessly on your product. You believe that once you have a great product, people will come for it in droves.
However, people rarely discover a great product when an entrepreneur doesn’t dedicate sufficient resources to promoting it to the right prospects across a range of channels.
As a general rule, you should spend about 50% of your time on product development and 50% on marketing.
Sometimes you have to launch sooner than you planned or cut your product development budget. But this is better than having a good product that no one finds out about.
The 50/50 rule of thumb will provide you with the marketing resources you need for your business to have a chance in a competitive market.
Typical marketing strategies include:
- creating great product listings with compelling copy and graphics
- producing videos
- building an awesome website
- blogging for SEO
- promoting with social media influencers
- advertising on Facebook or other channels
What Do You Need to Change Today?
Take a moment to reflect: What mistake on this list do you most closely identify with? How can you take action today to backtrack or sidestep potentially painful results?
If you’re still in business, then it isn’t too late to correct a misstep. If you could use advice on whether there might be an issue in your business or how you can correct course, you’re welcome to reach out for a free consulting session.