What makes a great entrepreneur? There are numerous theories on the subject. Is it their hard work, dedication and commitment? Is it their invention, imagination and ability to think outside the box? Is it their ability to parse metric data and use it to keep their finger on the pulse of what their customers want and need? Or could it be their ability to motivate and rally their employees; helping them to work with gusto towards a shared goal. Ultimately, these are all extremely important but it’s arguable that the most important quality of entrepreneurship is…
There are lots of people out there, right now, slaving away in jobs they despise who have a great idea for a business. They have spotted a gap in the market, devised a concept for a product for a product or service that neatly fills that gap and they have a clear vision in their heads of how that can be extrapolated into a living, breathing, working SME. They may have cobbled together something resembling a business plan in their free time. They’ve had some preliminary thoughts about what their business’ mission statement might be and how it would be reflected in their branding. They might even have crunched some numbers to create a reasonably accurate cash flow forecast. But they never reached the point where they reached out to sources of funding or even registered their business’ name. Why? Because they were paralyzed by their fear of the unknown. This perfectly natural and perfectly human impulse may be understandable but it can keep potentially successful entrepreneurs stuck on the path of wage slavery; languishing away in jobs where they’re underpaid, underappreciated and undervalued when they could be at the head of a thriving enterprise.
By far the most crippling of fears when it comes to starting a business is the fear of failure. After all, the numbers are not on the side of nascent entrepreneurs. We’ve all heard that 50% of SMEs fail within their first four years and we’re paralyzed by the fear of what will happen if we fall within this damning statistic. But here’s the thing…
There’s nothing to fear but fear itself
If you have a fantastic idea for a business that would benefit your local high street, create jobs, fill a gap on the market, benefit the local economy and liberate you from a job you despise, it behooves you to overcome your fear of failure and at least attempt to make your business a reality. Very often, failure in small business is not the end but simply a blip on a long learning curve. At worst, you will be made bankrupt (although this is certainly not an inevitable consequence of failure in small business). But in most cases bankruptcy is not the end of an entrepreneurial career. Some of the most successful people on the planet have been made bankrupt at least once.
That said, failure is never an appealing prospect. If we can forego the expense and emotional turmoil that come with failure in small business, so much the better, right?
Learning from the mistakes of others
The beauty of living in the digital age is that we have unparalleled access to a wealth of information which can give you and your business the inside track. As well as learning from our own mistakes (an inevitable and necessary part of small business) we can benefit from the mistakes of other nascent businesses. While there may be no surefire way of avoiding failure in the world of small business (if there were, everyone would be running their own SME), there are certainly commonly made mistakes that you can sidestep when you plan your operations and strategy around avoiding them. Here we’ll look at some of the commonly made mistakes made by businesses in their first year and how you can prevent your business from replicating them…
Under investing to insulate profit margins
When many entrepreneurs start out, they do so with one goal in mind… turning a profit. So long as the numbers are in the black month or month that means the business is going well, right? Well, not necessarily. As important as it is for small businesses to guard against irresponsible, reckless or vanity spending, it’s also vital that they avoid under investing in their enterprises. Under investment in personnel, capital investments like software or equipment, or maintaining / renovating your premises can impede your business’ growth. Unless you’re prepared to invest in better infrastructure for your small business it will only ever stay small and its scope will be limited. While you should certainly learn to walk before you can run and it can be counterproductive to set out with growth in mind before you know how to facilitate that growth sustainably, you should avoid the temptation to under invest in your business for the sake of insulating your profit margins.
Small businesses need to be agile and adaptable and if you fail to invest adequately, you may fail to capitalize on opportunities that come your way and your competitors will leave you in the dust.
Dipping into personal funds to finance aspects of the business
Separating personal and business finances can be a real learning curve for nascent entrepreneurs. When you have a lot of passion and personal / emotional investment in your business it only makes sense to put your money where your mouth is… but this can be a serious mistake. Not only should you have separate accounts for your personal and business finances, you should take pains to ensure that one doesn’t bleed into the other. Otherwise you could find yourself on a slippery slope.
Trying to do a grade A job with grade B materials
In your first year of business, the name of the game is reputation. With such a plethora of competition out there, prospective customers need a reason to choose your business and not the legions of others who do exactly the same thing. This means that your reputation must be beyond reproach. While a big part of this is in how your employees deal with customers and the experience that your customers can expect, let’s not forget that you can’t do a grade A job with grade B materials. If you work in the construction industry, for example you know that you wouldn’t compromise on materials or make rush decisions when building the foundations of your project. You’d go to HelitechCCD.com and invest what you had to in materials that are right for the job. Otherwise, the whole thing could come tumbling down and take your reputation with it. Whether you’re in construction, catering or content the principal remains the same.
Spending too much time “at the coalface” and too little time on strategy
Entrepreneurs tend to have a proactive and hard working nature and when they see their employees struggling, their first instinct is to roll up your sleeves and join them at the coalface. But while noble in its intentions, this approach can be counterproductive in a number of ways. It can make your employees dependant on you at best or at worst turn you into the kind of relentless micromanager that employees hate to work for. Moreover, this is rarely the best place for you to invest your time and efforts. As the CEO of your business, your time is better spend in your office, concentrating on the strategic running of your business rather than day to day operations. It’s your responsibility to analyze your performance metrics and use them to influence your operational strategy month by month.
Having a resistant approach to new technology
Technology these days moves at a blistering pace. Investing in your technological infrastructure is rarely cheap and often requires an investment not only of capital but of time and effort as you and your employees get to grips with the software and hardware that your business needs to succeed. Thus, when equilibrium is achieved between a business and its tech, it can be extremely tempting to resist technological change. But technological change is an inevitable part of doing business in the 21st century. You need to maintain an agile approach to tech and be prepared to throw out the rulebook when a technological advancement necessitates an overhaul of your operations. If you resist technological change you could end up a dinosaur in your industry, like Blockbuster video in the age of Netflix. If this involves a prohibitively expensive overhaul of your IT or tech infrastructure, you may wish to consider outsourcing your IT operations. Not only will it insulate you from a lot of the cost of staying current, but your tech solutions can be scaled up as your business grows.
Failing to keep an eye on the competition
As important as it is to stay ahead of the curve, keeping your eyes too closely on your own work can be counterproductive. Your business does not operate in a vacuum and competitor analysis is an essential component of any sound business strategy. If your competitors offer something you don’t, run a promotion that you don’t or offer the same services at a price you can’t match you can’t assume that your customers will remain loyal to you.
Steer clear of these common pitfalls of first year businesses, however, and you stand every chance of laying a firm foundation for success.