Starting A Business? Here Are 4 Common Mistakes You Need To Avoid

I work a lot with start-up entrepreneurs, many of whom are so passionate about starting a business based on an idea they have invested a considerable amount of time and money.

Here’s the first and most important question I usually ask the prospective entrepreneur;

“How does money move from your client or customer’s pocket into your bank account in exchange for the value you are providing?”

A typical answer I get is – “Well, I haven’t figured out that part yet”.

Unless you are providing value as a hobby or running a charity, this is a fundamental question, the answer to which could mean success or failure of your business venture.

To this end, here are four common mistakes you must avoid when starting a business:

1. Majoring on the minor issues

It is all too easy to waste money on things that are not important before you even have a proven business model.

This includes designing logos, fancy business cards, branded stationery, and anything else that does not directly generate a sale.

Right from the onset, you should be able to articulate what you’re selling and at what price, how many units of product or service you have sold and gotten paid, and how many more you can sell to make this a viable business.

2. Tying up capital in fixed overheads before testing the business model

This includes renting a fancy office or store, complete with furniture, and hiring staff before you have any proof that you can acquire the viable minimum number of customers to sustain your business.

A typical mistake for budding entrepreneurs is parting with six months’ rent, for instance, to open up a shop or establishment only to realize the business is unable to generate enough sales to cover operating costs.

This is usually due to wrong pricing, poor positioning, ineffective marketing and a lack of research.

After the sixth month, they find themselves at crossroads.

Close down the business, or inject another six months of rent in the hope that they can recover the losses – a decision that requires a very high level of emotional maturity.

3. Getting into a business without an exit or succession strategy

In his bestselling book The 7 Habits of Highly Effective People, Stephen Covey pointed out the importance of always beginning with the end in mind.

You can start your business for fun, to earn a side income, or as your main source of income and livelihood.

Being clear on your end game allows you to structure your business in such a way that you can easily dispose of it when you feel it is time to move on to other things.

You therefore have to treat the business as an investment if you intend to sell it, or hand it over to the next generation.

4. Borrowing money to invest in an idea you don’t fully believe in

The false notion that capital is the major constraint to starting a business forces many prospective entrepreneurs to borrow money and invest it half-heartedly in an idea they do not fully believe in.

Many business failures can be attributed to proprietors who borrowed money to fund an untested or poorly thought out idea, usually on a large-scale, in a haphazard way.

When starting a business, you have to come up with creative ways of raising the money you need to lift your business off the ground, instead of throwing borrowed money at real or perceived business problems.

Learning how to be a good negotiator can go a long way in helping you leverage other people’s resources.

Strange enough, avoiding these mistakes does not guarantee success, but can help improve your chances of starting a business successfully and growing it steadily.