- Elon Musk, Investor & Entrepreneur
Starting a business is a stressful affair, no matter how skilled you are or how lucky you end up being. Furthermore, many people who start their first business end up making tried-and-true mistakes that other entrepreneurs have already learned from. Instead of making those mistakes and hampering your future success, wouldn’t it be more worthwhile to get ahead of those possible issues and avoid the repercussions entirely?
Today, let’s break down the top five mistakes people make when starting a business.
IGNORE GOOD FEEDBACK FROM MENTORS/FELLOW SELF-STARTERS
One of the biggest mistakes that beginning entrepreneurs make is ignoring feedback. Specifically, they may be so confident that they think they won’t make the same mistakes as their predecessors.
While confidence is always great in the entrepreneurship industry, having too much of it can have the opposite effect: it can hamper your growth and cause you to make dramatic missteps that result in your business plummeting to bankruptcy.
If you’re an entrepreneur and have any business professional network, chances are you have one or two peers that might work as mentors. In other cases, you can look at the advice of previous entrepreneurs or those who already have lots of life experience starting their own companies.
One of the worst things you can do is ignore the feedback from these people. They might tell you that your business idea stinks, or that your business proposal needs another few rewrites to really sing. All of this feedback is great even though it’s not what you want to hear: that your business idea is perfect and success is right around the corner.
Try not to ignore valuable and constructive feedback no matter how much it hurts. It’ll be a lot more beneficial in the long run to hear these messages from your friends and mentors, or even from distant entrepreneurs who write an advice book, then it will be to learn the lessons the hard way.
IGNORE INHERENT MARKET RISK
Another big mistake that people make when starting a business is they ignore the inherent market risk for whatever niche they plan to fill. For instance, consider a restaurant run by a new entrepreneur who wants to start up a new eatery in their favorite neighborhood. This is a classic new business idea that almost always fails.
Why? Because the restaurant industry is notoriously competitive and profit margins are often razor-thin for even up to five years after the opening date. In order to successfully run a restaurant, you need to:
- Do tons of market research beforehand. Theoretically, this will tell you whether opening a restaurant, in general, is a good idea.
- You’ll also want to pay attention to what kinds of food are needed in the local market. For instance, if a seafood restaurant is already in business, starting another one down the street probably isn’t a wise idea.
- Learn the operating costs for the type of food you want to sell at this restaurant. This can impact the prices you’ll set, and certain neighborhoods are better for budget-friendly eateries while others are suitable for luxury restaurants.
This is all a bit specific, but the bottom line of this example is that you must pay attention to market risk. Don’t ignore it; your idea is not good enough to just sweep all the market concerns aside and achieve instant success. Risks are real and they can and will sink your business if you don’t alter your business plan appropriately or come up with solutions beforehand.
TRY TO GROW TOO FAST
Furthermore, don’t try to grow your business too fast if you’re just starting out. Let’s say that you do achieve some measure of success in the early months or years of your first company. This is great, but be careful not to overextend.
Don’t, for instance, open up another few stores when the first store hasn’t even made real profits beyond those needed to stay above water. While you do have to grow eventually, it’s always smart not to tax your limited resources in the beginning.
This is especially true when it comes to employees and treating customers. It’s always tempting to hire as many people as possible and be kind to your customers to dress yourself and the business in the trappings of success.
But growing this way leads to financial trouble down the road. Your golden age may very well be short-lived if you aren’t careful.
HIRE FRIENDS INSTEAD OF THE BEST PEOPLE FOR THE JOB
One classic mistake that new entrepreneurs make when starting a business is they hire their friends or college partners instead of those who are best for the job. There have already been volumes of literature describing the folly of these decisions, so we’ll be brief: your friendship doesn’t matter when it comes to business.
In fact, try to keep feelings out of the equation entirely. There’s definitely some wisdom in avoiding friends and family for positions in your business entirely, even if you get along well or have a great working relationship with them right now. Money always complicates things and, in the end, someone has to call the final shot for the good of the business.
If you hire your friends, making the tough calls that will let your business succeed instead of flounder will be all the more difficult. In other cases, you may need to fire somebody who is underperforming – you don’t want this to be your best friend.
IGNORE THEIR OWN HEALTH
Lastly, new business owners often neglect their own health, to their long-term detriment. While starting a business comes with tons of stressors and there’s almost always more work to be done, be sure to carve out a little relaxation time for your mental health, and remember to take care of your physical health as well.
You can’t run a business successfully with a body that’s falling apart or suffering from an overdose of stress. Exercise, eat well, spend time with friends and family, and remember to participate in recreation regularly.
All of these tips will help you start a business successfully without floundering as dramatically in the beginning as you may fear. While there will undoubtedly be hurdles to overcome, you can start a business relatively smoothly if you know the mistakes to avoid.
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Thought leaders & celebrities share their tactics for success on the Lisnic podcast by Lisa Teh & Nick Bell