Posted December 13th, 2012 by bbsadmin & filed under General Business, Motivation.
1. Not finding a customer base
One common pitfall of entrepreneurs is focusing on the product rather than the customer. If you are unaware of what the customer really wants you could be wasting valuable time on details which do not matter to the customer at all or you could be designing a product which customers are not looking for altogether. If you are unwilling to go out and find the facts, you are gambling. If you think your product is valuable, exciting, “cool”, or “just what this world needs”, that’s great, but if you cannot verify it by asking what customers really want, you could be setting yourself up for failure.
2. Expanding too quickly
After reading the heading of this point you may be thinking, “But I thought growth was a good thing?” Yes growth is a good thing when it is handled correctly. For example, whether you are making more products to sell, putting up shop in new locations, or increasing your workforce you have to finance this growth somehow. This financing can come out of your pocket, through investors, or bank loans. If you spread too thin, and cannot meet your current obligations, that can be a big problem. Also, if you end up expanding past the demand, you could end up losing out on profits. For example, Wise Acre Frozen Treats which was a company making organic popsicles declared bankruptcy and went out of business even with orders coming in. This was due to financing issues in the expansion of the company (CBS News).
3. Assumptions versus facts
A visit to the doctor’s office can help us understand the relationship between fact and assumption. Let’s say your stomach is in pain. You drive to the doctor and he asks you several questions about how long the pain has lasted, how much pain you are experiencing, if you have taken any new medications or substances, etc. He might even have a couple of tests ordered and samples taken. After finding the root cause he says, “your appendix is going to burst if we don’t operate on you right away.” Based on countless studies, regular protocol and experience assumptions are made and tested. These assumptions are then tested to provide information. Actions are then taken based on this information. Suppose he decided to assume that you had a stomach ache and never looked any further into it. You would be in trouble. I have never met anyone in business who knows the future, though some think they do. We make decisions based on our current knowledge and our past experience. If your bottom line looks “sick” don’t fall into the trap of thinking that a good explanation will make it better. Also, don’t be like the doctor who assumes a stomach ache without testing. The cold hard facts must not be assumed away. If you use them properly, they may be a help to you.
4. Don’t be blind to competition
If you were to watch a football game where the quarterback of one team was blindfolded it would be entertaining, but the outcome would be very predictable. If you are blind to your competition, your business will be predictable as well. The business world is extremely competitive. Even when there are no direct competitors there may be substitutes for your product. As an entrepreneur you must step into the customer’s shoes consistently to meet their needs. This means seeing things how the customer sees things. If you are doing this you will definitely recognize the competition. You will recognize the strengths and weaknesses of your competitors. If you don’t keep an eye on the competition you may develop a business which is too similar to a competing firm or create a business which cannot produce a good or service at a competitive price. Don’t be a blindfolded quarterback or you’ll end up on your back.
5. The look of success versus actual success
New businesses, unlike new shoes, usually don’t come fresh out of the box with the “new smell” and factory seals. You might find yourself daydreaming about that tall leather chair and the glossy oak desk in a spacious office overlooking the city. The truth is, you don’t really need these things to be successful. The people who do have these luxuries probably don’t need them either. It is easy to get caught in the trap of thinking that you need some of the unnecessary things some businesses have. What might be necessary in the future does not necessarily mean that it is necessary now. For example, You might not need the latest software right now. You might not even need to lease out an office building. If you are starting out, it may be appropriate to work from your home. When in doubt, do the bottom line test. Ask yourself, “how is this going to increase my bottom lines more than what I currently use?”, “Will this bring other costs along with it?”, “am I making a decision because of actual potential performance increases, or is it something which I simply see as a confidence booster?” After deciding that you really need, see if there are used or discounted options.
6. Don’t be overly optimistic
Now, before you start drinking pickle juice, taking cold showers, and making Scrooge your role model lets dive into this argument a little further. Optimism is a necessity. You have probably had to fight off hundreds of critics and had to keep your fire burning all along the way. Without optimism you sink before you start. What I mean by overoptimism is letting your confidence overpower evidence. In my experience, problems don’t usually fix themselves. You want to find and fix the problems soon so they don’t grow with the company. The market provides the evidence. Listen to the market.
7. Separating business from personal
Before becoming an entrepreneur, separating personal life and business life was easy. You had a boss to keep you on track. You probably didn’t watch TV, do laundry and chat on Facebook all day while you were at work. You probably didn’t use your work like a bank, making deposits and withdraws as you pleased. Why should you have these privileges now? Now that you are on your own, you are your own boss and these things are easier to self justify. Don’t fall into this trap. If there are non-business related tasks that must be done, set aside time to do those things. Plan your time but don’t fall into the 9 to 5 routine. When it comes to money, pay yourself a salary, don’t just withdraw and deposit money from the business as you please.
CBS News. My Company Grew Too Fast — and Went Out of Business. 12 August 2010. http://www.cbsnews.com/8301-505143_162-40241795/my-company-grew-too-fast—-and-went-out-of-business/. 19 December 2012.