I’ve been a entrepreneur for a number of years now and I’ve made my fair share of stupid business mistakes. I’ve also coached numerous people about how to start their own business and I’ve seen some of them make the same or similar mistakes. The advice here is focused toward small business owners, especially those who are just about to start or have recently started their own ventures.
1. Selling to the Wrong People
Every business must have sales in order to survive. But you don’t have to pressure everyone you know, including family and friends, to buy from your business. It’s a total waste of time to attempt to sell to people who have no need of what you have to offer. You also don’t need to try to sell to everyone you encounter. Some people are much more open to sales than others. For example, a friend of mine does web consulting for small business owners. She’s learned that some clients are harder to work with than other clients. If a potential client is short on funding, worrying about every penny, if they want a website because other people have them but have no idea how it will help their business, or if they don’t comprehend the internet, my friend knows they will not be a good client. It is ok to say no to customers who are certain to be more trouble than they are worth. One of your competitors can deal with the hassles associated with those customers. You’ll reduce headaches and free time to focus on serving your best customers.
Simply because someone wants to do business with you doesn’t mean you must accept. During my first year in business, I said yes to at least half the people who came to me with a potential business relationship. I ended up wasting a lot of valuable time chasing deals that were too much of a stretch to ever work out. I went to lunches with random business people who “wanted to just see if we could do something together.” None of these made any money for me. Don’t network randomly just to network. Today, I accept as few as 1 in 10 invitations. If an offer doesn’t interest me immediately, I decline or simply ignore it. Many relationships are not worth pursuing. Learn to say no to opportunities which are weak so you have time and energy for the golden ones.
2. Spending Too Much.
Don’t spend money unless absolutely necessary until you have a good cash flow coming in. When I started my personal development business, I had only borrowed funds. It was behind in my mortgage and about to lose my home. I had no money to toss around. I had no logo, fancy web design, business cards or custom stationary. I just paid to register my domain name and that was all. Everything else would have to come out of money generated by cash flow.
You should be clear on how you are going to invest any money and how you will be able to recoup it from your cash flow. Some businesses cost a lot of money to start but Internet businesses can start with little money at first.
3. Spending Too Little
It can be a big mistake to be too stingy also. Frugality can prevent efficiency. Use skills contractors to do certain tasks if that is more efficient than doing them yourself. By good equipment but be sure it is worth the money. You have no need of fancy furniture, so just functional items that lets you be productive. Replace an outdated computer if you can because it can slow you down.
4. Learn When To Spend
It takes some time to learn when to spend and when to avoid spending. When starting out it can be wise to get a second opinion. Often if you know you are going to have to justify an expense to someone else, you’ll readily realize the right choice. If you can not defend the expense, you shouldn’t spend the money. There are, however, situations when spending makes good sense.
5. Thinking Contracts Will Be Honored
I’ve had signed contracts with companies with great reputations only to find they were worthless once the CEO decided s/he didn’t want to complete the deal. It can be an expensive waste of time going to court over contracts like these when you could be doing important, money-making work instead.
A contract is only paper. The relationship behind the paper is what counts. If the relationship does not go well, a contract will not bail you out. The purpose of the paper contract is to define roles and commitments. The relationship is what enforces the commitments ultimately. Once I learned this, I began to focus on developing sound relationships and counting less on paper. Lucrative, creative contracts almost always end up coming out different than the original contract. An attorney told me that no contract he had ever worked with ever exactly followed the written contract and many were vastly different, yet these were big money deals. Business relationships are much like personal friendships. They change over time and take twists and turns.
While written contracts are necessary, especially when working with large companies where staff turnover occurs frequently, they are still secondary to business relationships. Don’t assume the contract makes the deal. The contact only shadows the deal and the deal is really the relationship. Keep your relationships in good standing and you won’t have worries over paper.
It is a sad fact but there are tons of scoundrels in the world of business and many of them hold fancy titles such as CEO, CFO, President, or similar. People will steal, lie and cheat over money and some of these despicable scoundrels have been indicted and sentenced to jail time. There are still plenty of them out there, however. People will string you along indicating they are about to make a deal simply to learn about and steal ideas from your company. Business is not for people who are timid.
6. Ignoring Intuition
Intuition can be a huge help in business dealings. Many huge deals are approved or disapproved based on the CEO’s gut instinct. While you probably believe logic is how business is done, that is far from true. If you base all business decisions on logic alone and ignore your intuition, you will make many errors.
Humans are not very logical to begin with. We don’t have enough data to make decisions based on pure logic and we have no sound system to predict human behavior. This leaves a big gap in our logic. Intuition must fill this gap. Assuming everyone will behave as logic dictates is very unrealistic. No business deal ever goes perfectly.
It can be hard to refuse a deal which seems lucrative even when your instincts say no, but if you go ahead anyway, you will likely regret
Intuition is a key part of business decision making. Business deals are made based on relationships and you need to read other people involved in business deals. If get feel a person is not one to deal with, turn the deal down. If you get an instinct they are good business associates, go forward.
7. Too Much Formality
Business is about relationships. While some formality in some situations is correct, in most cases being too formal only causes problems and wall-building. People work best together then there is a person-to-person connection.
It is a mistake to become too formal even when trying to establish new business relationships. If I get an email which begins “Dear Ms Stevens” and the has a lengthy proposal, I generally ignore it, especially if there are lots of “we”s in the content. Instead, an email that begins “Hi Wendy” and asks me informally if I’d be interest in some type of business arrangement will get my attention.
Treat business relationships like friendships. Being too formal builds walls and doesn’t build good business relationships at all. Formality is tedious and very boring. People want to enjoy their work. They want to work with people they can relate to.
8. Hiding Your True Personality
Too often people in business feel they must avoid showing who they really are. They become stiff, formal, humorless, and have mask-like faces. Becomes comfortable with yourself and who you are and your business will benefit. Show humor in your communications when appropriate. Don’t take yourself too seriously. Let your true spirit show and never pretend to be what you are not. You’ll enjoy working more and your customers will notice that you are fun to be around.
9. Failing to Create Value
Business is not just about making money; it has to create value in order to succeed. While a business can make money for a short time without adding value, it won’t last long. When you know you are creating value for your customers, you will feel good about your business and be really motivated to succeed and grow.
You want to create value for both your customer and yourself. The more you know about creating value, the more you will be able to gain happy customers. Business owners must be clean on what they are providing and how it adds value. Customers want real value creation and this knowledge should be your focus.
10. Failure to Optimize
While creating value is important, you must also focus on operating your business efficiently. Unless you do so, you can create value but still lose money. You need to deliver your product in the most cost effective manner possible. Your first attempts may not be well optimized and you’ll waste some time and money as well as resources. Most businesses start that way but you can’t allow yours to continue that way.
Periodically, review your business processes and look for ways to optimize them. Find ways to do things faster, cheaper, less often, maybe as an outsourced task, and sometimes you can cancel a useless process completely.
At first, I processed credit card orders manually. I had to use software to input and run the orders via modem. At month’s end, I had to manually tally sales. This worked okay but my business grew and the process became impractical. I upgraded so that online orders are fully automated and the monthly reporting is completely automatic as well. I get real-time reports and this saves me tons of time and effort.
Automate tasks where possible. Most repetitive tasks can be automated. It requires a little work up front to transfer to an automated system but you’ll save thousands of hours and save money too.
It takes lots of effort to build a business that is a big success but it is a growth experience like no other. Many people quit high paying jobs to operate their own businesses. Some do not do well and regret their choices. But if you follow guidelines and learn from others who have succeeded, there is nothing like controlling your own future.