Last week I highlighted 5 common errors that many inexperienced entrepreneurs make when starting a business. In this post I want to bring your attention to 5 more and finish with some personal observations from running my own business for 10 years.
Here are 5 more errors that new business owners often make:
- Rushing the process of setting up a business. Now, you may say that rushing the legal and administrative process here in Spain is impossible due to the way our “functionarios” choose to work, and I totally agree! But that does give you time to consider carefully suc important factors such as your business partners, your premises, your bank, your collaborators etc. Take the time to create and work on your business plan and ask yourself honestly, will I really be comfortable working with the people I have chosen?
- Selecting a business that is not aligned with your personality and values. Are you a person that despite having an entrepreneurial streak, actually seeks security? If this is the case, perhaps a franchised business might be a better option for you. Or are you a person who often experiences mood swings? In this case do you really want to open that restaurant where you’ll be dealing with the public for long hours? Besides considering the skills you have to bring to a business, make sure you consider what type of person you are and how this influences your decision on the type of business you might set up.
- Not knowing the exact costs of your business activity. The objective of a company is not simply to sell as much as possible. The overriding objective is to obtain profit – whether this is large or small is often the result of an overall specific strategy, but if we are not aware of how much it costs to produce our goods or services we can be heading for financial problems further down the line.
- Neglecting to pay and neglecting to charge! An employee or supplier who is not paid properly and on time can cause a business a lot of bad publicity which over time can put the business in danger. On the other hand, if we don’t collect what’s owing to us, we are financing the operations of other companies and this can prove to be very expensive. Cash flow problems are the main reason why companies fail, not lack of profits. What good is having profit on paper if it is not in your bank account?
- Not looking after the details. Why is it that some shops selling the same products as others are full and others not? If your business deals directly with the public it’s extremely important to make sure that your premises are clean, furniture is not broken, the staff are well trained in customer service etc. The details DO matter. Customers see what we don’t often see, if they don’t like the atmosphere of a place they don’t come back but they don’t tell us why. Similarly, if your business doesn’t deal directly with the public, take a look at things like the quality of your stationnery, how you or your staff answer the telephone, even how quickly you respond to clients’ emails. Everything counts!
As your business grows it’s vital to keep coming back to your vision and values. Is the business evolving in the way you’r comfortable with? If not, analyse why not, if you don’t do this soon enough you’ll suddenly fing yourself highly stressed and unhappy.
It’s also necessary to be conscious of where the skills gaps are in your business. At the beginning we often have to do everything, and we can get away with doing those things that we don’t have previous experience of, in a rather of amateurish way. But as the business grows and you gain more prestigious clients, more professionalism is demanded in every area. For a long time in our business, we just let the sales grow by word of mouth as neither partner had specific commercial experience. I became aware of the immense danger of this after a business coaching weekend. If we hadn’t identified our skill gap and taken action to rectify it, we would have been in severe difficulites last year when the economic recession started to bite.
Once your business is set up, STAYING IN YOUR COMFORT ZONE is one of the biggest mistakes you can make as a business owner. You might not wish to grow, but it is essential for your business to do so.
If you are thinking of starting your own business or have just done so, I highly recommend the book “The E-myth revisited” by Micheal Gerber.