10 Mistakes Entrepreneurs Make
- They fall in love with their idea. It’s said “love is blind” and that often applies to the entrepreneur. Don’t confuse love with passion, a pre-requisite for success. You need to continually be pressure testing your concept and walk away when needed. That’s not failure.
- They under-capitalize. Remember when you bought your first house? I certainly do. Borrowed the down payment, knew my paycheque could cover the monthly principal, interest, taxes and utilities. It’s the lawn-mower that killed me. Well not really but it’s the hundred purchases like that you end up making in the first couple of years. Then you have kids. Then interest rates go up and you’re on a variable mortgage and so it goes. Same when you’re starting a business.
- They give up control. This often happens when the business is off the ground but runs into trouble and the “vulture” capitalists appear at the door. There are other ways to refinance and you need to exhaust them all first.
- They don’t protect their Intellectual Property. In some cases your IP is all you have of value. It’s a costly and lengthy process to do it right but budget for it (see point 2) and ensure anyone working with and for you cannot claim IP rights.
- They don’t scale the business. For example leasing office space when you don’t have any customers yet or when the services you provide could be done virtually or on line. In most markets today there are business centres and business incubators where you can attain the basics you need to support you through to positive cash flow. Add contractors as required not employees and be market savvy on hourly rates!
- They overpay for services. You can have a good looking very functional website for $5000 but we’ve seen companies pay five times that. Be wary of the perils of hiring a web-designer who you don’t check out thoroughly. It’s like that home renovation expert that takes your deposit than disappears half-way through the job. That leaves a costly and perhaps crippling mess.
- They don’t have an exit strategy. Hard to think about it when you’re first starting out but the answer to the question “What’s my end game?” is important as it will drive how you structure and grow the business down the road.
- They don’t carry enough insurance. And don’t insure themselves sufficiently if they are critical to sustaining the business.
- They don’t review their business plan on a regular basis. You needed that strategic plan for initial funding and to keep the bank happy right? Looked at it lately? Changed it at all? The world economy is upside down from a year ago. That could be an opportunity versus a problem.
- They can’t get out of their own way. Entrepreneurs are essential. Without their passion, drive and sacrifice innovation can’t exist. However at some point the business goes beyond their ability to manage it. Turning to trusted advisors on a regular basis should provide you with the input you need to make the tough decisions. Don’t let your ego ruin your business.
Managing Partner & Principal