5 Mistakes New Entrepreneurs Make When Starting Their Business
Very few business owners set out to change the world or build an empire. Most are accidental entrepreneurs who start a business because they just want to pay the bills, work for themselves, control their own schedule, or work on their craft and be their own boss. As a result, many entrepreneurs are rather unintentional when it comes to structuring their business.
This is a sure-fire way to lose control. If you’re not intentional about how you run your business, your business will run you, and all those dreams of increased freedom and flexibility will come to naught. So, let’s took a look at five common mistakes that new entrepreneurs make and how they can be avoided or corrected.
MISTAKE #1: Taking on any and every interested customer. Most entrepreneurs, whether self-employed freelancers or small business owners, aren’t that selective about which clients they take on. And, sure, in the beginning, you have to pay the bills. I get it. I was there. I had zero standards when I first started. The problem with this is that you end up with a lot of PITA clients. You know the ones. As the acronym implies, they’re a real “Pain in the A**” because they suck up all your time and energy. But, that’s not because they’re bad people; they’re just a bad fit for you.
SOLUTION: Understand who your ideal client is. Even in the beginning, when I was willing to take on less desirous clients, I had a sense of who my ideal bookkeeping services clients were (or would be). This is important because if you don’t know, you can’t actively look for them nor recognize them when they appear. Consider your skills, your working style, the services you’re offering, the timelines you can deliver and what you feel your services are worth. Based on these facts, who are your customers? To find the right fit, look for clients whose needs, expectations and resources align with yours.
MISTAKE #2: Hiring the wrong people. If you’re a small business owner, your team is integral to your success, particularly early on as you transfer more and more responsibility from yourself to others. When hiring, most entrepreneurs focus on shiny resumes brimming with impressive skills and qualifications. Now, don’t get me wrong – talent is important. After all, they have to be able to do the job you’re hiring them for. BUT, the real question is, do they share your vision and your values? It may sound unnecessary, but here’s the reality: if you don’t define what core values your company is going to follow, then your employees will.
SOLUTION: Know your company culture, and hire for fit. You probably won’t like the culture that your employees define for you, so the solution is to define it yourself. Consider your ideal clients and the services you provide to them, and ask yourself, what are you pitching? What does your company stand for? What are your values? How do those make you a desirable business partner? Then, take it a step further. What sort of company culture needs to exist in order to sustain a commitment to those values? And, what sort of people fit in with that culture? Hire them.
MISTAKE #3: Using too many different types or equipment and software. Contrary to popular belief, multitasking is not as productive as monotasking. Similarly, using numerous types of equipment and software to do the same task, or parts of the same task, isn’t as efficient or as productive as using one. Why? Because you simply can’t be an expert in everything. Consider Southwest Airlines. They’re arguably one of the most successful airlines and they fly Boeing 737s exclusively. Why? Because that way the maintenance engineers only need to know how to fix one type of plane, and they become experts at it. The shorter maintenance times that result mean planes spend more time in the air than in the hangar, which means more profit.
SOLUTION: Choose one type of equipment or software, and be firm about it. At my company, Legacy Advantage, we work with one software, QuickBooks®. We train all of our staff and clients on this software and we don’t hire staff or take on clients who are unwilling to use it. This is because we’ve made an intentional choice about the tools we use. Ask yourself, what tool is best for what you do? Decide, and stick, to that decision. Don’t let your clients, or your staff, complicate things by bringing in other technologies. You don’t have time for that. Specialize. Go an inch wide and a mile deep, and you’ll get far more accomplished.
MISTAKE #4: Failing to set financial targets. When starting out, most entrepreneurs have a simple financial goal: to cover costs and earn a reasonable income. Makes sense. And, it’s a reasonable goal. The problem is that many entrepreneurs, freelancers and small business owners, alike, aren’t specific enough about what exactly this means. Your revenue is not simply “however much you manage to sell,” nor is your income “however much is left over after expenses.” The more loose and ambiguous the target, the less likely you are to achieve it. And, if your revenue target is synonymous with your gross income (freelancer) or operating profit (business), you’re going to be disappointed come year-end.
SOLUTION: Set specific revenue targets, profit goals and cash flow management. Think ahead, then plan backward. Consider, what are your anticipated annual expenses? Interest? Taxes? How much profit do you want to make? Add it all up, give yourself a buffer and that’s the target revenue you need to work toward. To succeed, you also have to be intentional about managing your cash levels. How? Be proactive, not reactionary – it’s always better to ask for credit when you’re in a position of strength. Negotiate interest and payment terms with your bank and suppliers in advance, and ensure you have a line of credit for when things get tight.
MISTAKE #5: Using too many marketing channels. There are so many ways to do marketing these days – Facebook, Google, Twitter, LinkedIn, YouTube, blogs and SEO … the list goes on. Many entrepreneurs feel overwhelmed by the sheer number of marketing channels available, and fear missing out if they’re not engaging audiences on all or most of them. This usually results in shallow, broad, sometimes disorganized strokes of marketing that have little impact on driving sales. Consider, if you’re paying for Facebook or Google ads … why are you doing this? Is it because these ads work, or because everyone else is doing it?
SOLUTION: Establish a precise, targeted marketing strategy. Just because there are a thousand possible marketing channels doesn’t mean that you can, or that you should, be using all of them. Think about the product and/or services you provide, and who that ideal client is that you’re looking for. Where are they? What channels are they using? Think about the software and technology choices you’ve made. Are there marketing channels that tie into these? Once you’ve established which channels to focus on, make sure you understand what the sales funnel is and how to measure the impact of your marketing on your revenue. If you’re not intentional about how you spend your marketing dollars, they will disappear and you will have nothing to show for them.