Opening a business can be both scary and exciting. While it’s the best chance most people have for achieving success, it comes with considerable risk. Regardless of how prepared you are, things will still go wrong and you’ll face your share of adversity. Fortunately, you can also learn from the mistakes of others who have already been down this road. Here are 5 common pitfalls entrepreneurs fall into.
Underestimating the Funds Needed
The amount of money required to start a business can vary considerably. While an Internet-based business might set you back less than a thousand dollars, you might need a few hundred thousand to open up a nice restaurant. A large part of calculating how much you’ll need involves projecting how much revenue the business will be able to generate. You also have to remember that sometimes things break. If you’re tempted to save money by moving into an older building, be sure to set some money aside for repairs. You never know when a roof might leak or an HVAC system might fail and you need to pay for repairs from a company like MTA Australasia. It’s better to have twice the cash you’ll need than not enough.
Selecting the Wrong Partner
It’s common to assume that your spouse, sibling, or best friend would be an ideal business partner. Unfortunately, partnerships don’t always work out and these break-ups can be messier than a divorce. One of the main reasons for this is that many business owners pour everything they’ve got into their businesses. As a result, neither partner may have enough money to buy the other one out. Being stuck with a bad partner in the business of your dreams can suck all the reward out of the experience. The best policy is to pick someone who shares your vision and complements both your best and worst traits. Avoid getting someone who’s too much like you.
Thinking Too Small
Many entrepreneurs are so focused on replacing their old job with a business that they don’t think far enough, beyond their previous salary. Keep in mind that owning a business can be problematic and expensive. Some years will be better than others and your best bet is to milk the business for everything it can provide. Don’t allow yourself to feel guilty about making a substantial profit, just because others aren’t doing as well. That may be the only thing that saves you during tough economic times. Aim high and give it all you’ve got.
Competing Solely on Price
One of the quickest ways to fail is to focus all your energy on undercutting your competitors with low prices. While you may succeed in winning over customers, you’ll still need profits to sustain your business. By starting out with such low prices in the beginning, you may also have a difficult time justifying future price increases. The best way to avoid getting into this trap is to learn all you can about sales and marketing. The right combination of better products, service and support will take you much further than engaging in price wars.
Hiring Cheap Employees
As with any product you buy, you also get what you pay for with employees. It’s ironic that an attempt to save money on your staff could actually become a costly mistake. The more employees you need to sustain your operation, the more problems you’re likely to have. The situation can get even worse when they don’t work out, if you keep replacing them with more cheap labor. The right employees will pay for themselves many times over with their skills, talent and productivity. It’s better to wait until the right people come along than to settle for those who aren’t right for the job.
Remember to research every aspect of your business before getting started. While it’s not possible to figure everything out before getting your feet wet, you can save yourself lots of trouble by avoiding the mistakes listed above. These types of problems can happen to entrepreneurs in any industry and most can be prevented by not getting ahead of yourself.