Avoid The Four Biggest Mistakes Entrepreneurs Make

11 Nov 2013

forbes mistakes2-300x200(The following post is by Kevin Harrington, who plunged into the public spotlight in a big way in 2009 when he appeared as an investor shark on ABC's "Shark Tank" TV show. However, his foray into big-time business ventures started well before that.)

It’s long been said that a sign of insanity is doing the same thing over and over again and expecting different results. An entrepreneur would be crazy to ignore the facts of the past and forge onward with a plan of action that has repeatedly failed for so many others.
Yet that is what too many of us do – time and again.

There are many mistakes you can make while working to get your product or business to the market – and staying on the path to profitability once you do – but let’s start with the top four.

1. Strategic mentors

Entrepreneurs stumble and often fail when they get hung up on owning everything. While control is good, owning 100% is not necessary to your new venture. Other people can bring years of experience to the table. Don’t be afraid to give up equity to someone who’s been there before. After all, owning 90% of a successful business is much better than 100% of a failure. And you just may find you’ll grow more quickly with another expert in tow. Always remember that it’s important to have the right people in place, but you have to stay hands-on. Give rope, but stay on top of the decisions being made.

2. New media

Today a lot of entrepreneurs don’t pay attention to the new media opportunities available to them. Social networks offer fantastic ways to promote a business. The old media avenues – television, radio and print – are very expensive. They’re a few channels broadcasting to millions. New media, on the other hand, is millions of channels broadcasting to a few. Social media helped the Snuggie become popular. TV personalities like Ellen DeGeneres or Al Roker would wear a Snuggie, and suddenly images of them were everywhere. Many entrepreneurs fail to make the transition from old to new. Don’t be one of them.

3. Capital offense

Cash is key in the early stages of business development. In their haste to launch a business quickly, many entrepreneurs set out undercapitalized. It’s important to not only plan for your launch; you also have to plan for the future. We’re talking dollars and sense. There are some serious issues to contend with if you launch an undercapitalized business. Capital is needed to pay wages, equipment leases, suppliers, bank loans, rent, and utility bills while your business catches on with consumers. You should plan for at least six months of capital so you don’t need to pull any money out of your business.

Years ago, I was a commercial real estate and business broker. I sold to small manufacturing companies, bars, delicatessens, etc. If the purchase price was $100,000, the purchaser assumed that was all the capital he needed. But that’s not the case. As the new owner, you need to jumpstart your business. It will take six months before you turn a losing business into a sustainable business – and a salary.

Don’t just focus on the cost to open the doors – that’s just the first part of your capital needs. A marketing budget and sustainable cash for the first six months will be the keys to your success. I recently spoke at a Valley Economic Development Center conference in San Francisco. The VEDC lends money to small businesses. I heard a terrible story about a gentleman who opened a muffler franchise. Four months into the business, he closed the doors because he was out of cash. He expected business to just come in the door because he was opening a nationally recognized franchise. You need enough capital to weather the storm.

4. Big promotion

You need to put a nice chunk of your budget into advertising and promotion. In the early days of your launch, it’s important to set aside a higher percentage of your budget for things like cost per customer acquisition, marketing, and other means of promotion. Once an entrepreneur lands a customer, he or she needs to focus on continued opportunities for that customer. Keep an ongoing relationship via email and be sure to value your customer base as much as you can. Entrepreneurs don’t focus enough on “what else can I sell my existing customers?”


Source: FORBES

Last modified on Monday, 11 November 2013 16:35
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