I’ve had many entrepreneurs say failure is what made them successful. And many investors say they won’t commit capital to an entrepreneur starting a new business unless they have endured challenges before. However, no business owner wants to fail, so how should one view mistakes? As part of the learning process.
I often tell people, you just don’t know what you don’t know. An early entrepreneur has so many things facing them; the odds are stacked against them. The number of chances they have for failure are significant and high. That’s why 50 percent of businesses fail in the first five years.
There are several reasons businesses fail, though there are only a handful of mistakes that if tackled head-on can lead to creating and sustaining a successful business and being one of the survivors.
- Challenge your business concept and plan
When I visit an entrepreneur, I like to ask them “What will put you out of business?” and “Convince me why this is a great product or service”. Unfortunately, I find too frequently new entrepreneurs haven’t fully vetted their business plan and strategy. The market research hasn’t been done, or the company’s value challenged. They don’t grasp the fundamental truth that people have to give up their hard-earned money for what they’re selling. The value and demand must be there because the competition is high.
Start by asking yourself, why do I want to start a business? Am I simply tired of working for someone else and believe running a business will be the answer to my problem? Then, challenge your idea. Write a business plan and have a strong grasp of the challenges ahead of you. Look at the market capacity and demand for your products or services. Understand whether or not your company is a disruptive technology or service that will attract customers. What makes you different or desired, will you be a lower cost option? Who is your target audience?
Once you have put time into research, having thought through the many variables that will impact your business, create a full business plan. Then, you will be on a much better footing to take the entrepreneurial leap.
Keep yourself from failing in this area in the future by creating a company dashboard of key measurements for company success and revisiting and revising your plan often.
- Limit risk and grow by incubating your company
There is nothing wrong with focusing on one venture and being successful at it. In the entrepreneurial world, however, I encourage people to consider diversifying revenue streams and creating multiple levels of income. In this way, you limit the risk of failure and setbacks, while benefiting from new levels of growth. During the recession of 08’-09’, those businesses that were narrow-focused were hit the hardest because they didn’t have anything to fall back on or other ways to generate a revenue stream. One mistake I often see is people not taking the time to understand their market to see what other products or services may complement each other.
In my personal experience, as an early entrepreneur and owner of a CPA firm, I found I was able to grow my company and be successful, but also had ideas for new businesses. So, I incubated them. I started by leveraging some of the services and people I had at the firm to start these new ventures. I later got into real estate and leveraged that by incubating it into my other businesses.
My advice to entrepreneurs is to incubate themselves. Once you get something going, find a way to start the next opportunity in a way that you can generate another revenue stream that compliments the current revenue stream but doesn’t depend on it.
- Don’t let perfection be the enemy of good
There’s a saying that goes, “don’t let perfection be the enemy of good”. In business, that’s exactly what tends to happen. Take a marketing brochure for example. I’ve seen people fret over every word, leading to dozens of revisions over the course of several months, all to never publish. While having a powerful marketing message is important, perfection can steal your progress. Sometimes you just need to get that marketing piece, webpage, sales proposal, you name it, out there and make adjustments as you go.
Of course, there are things you want to thrive for, in perfection because of the nature of the product or service you offer – be it building a house or performing surgery. But the point here is that it’s far too easy and detrimental for early entrepreneurs to obsess over the wrong things and lose sight of their actual goals. Be good at what you do, rehearse and be prepared, but not to the point that you can’t think on your feet. Because at some point perfection has a diminishing return for business success.
- Don’t cut back on the wrong costs
It’s one thing to run a company when it’s growing and thriving, it’s quite another to know how to manage it when things aren’t going as well. When business owners start to look at cutting costs, the first thing often considered is their people. Maybe their staff has grown too much and they have to make adjustments, but that’s not always the case.
The first place to look is your overhead. What unnecessary costs have accumulated that you might be able to remove, and that will not impact the quality of your product or service? These are costs that may be nice things to have but are not essential. They could also be considered waste – those services or materials you purchase that are not adding value or waste your time. Here’s a thought: cut those clients that are vampires – the ones who suck all the life out of you and your business. Or learn how to be highly efficient with those “c-type” customers. Also, identify those items that are investing in the future of your business; and be careful not to cut those costs. That technology may be what your business needs to grow and be successful. Don’t cut to the bones so to speak and through the muscle so that you have nothing left and can’t service your customers.
When you get to the place of cutting people, which is one of the worst and most difficult things entrepreneurs have to do in a downturn, you have to ask, who are my highest and best performers, and sadly, who is not bringing as much value? In other words, where do you spend your time to make the most money?
Consider how much people are worth per hour in your organization. How much is your sales team worth per hour? Are they hitting or exceeding their goals? Or are they missing targets because they are too busy doing non-productive work that someone else should be doing. It’s that key of asking what is that position or person’s worth and then making sure you spend the time or money where it brings the most value.
- Learn to say no
Finally, learn to understand your limitations. If mistakes are being made, things are falling through the cracks, you double-book yourself for appointments, your list grows longer every day and your resources become tighter – you don’t have the capacity for growth. Be wary of being pulled in several directions. It’s great to give back and participate in volunteer activities but plan ahead for what you think are the best opportunities for you and your business and say no to the others that come through.
Plain and simple – starting and running a successful business is hard. It isn’t for someone who isn’t ready to put in the hard work, take risks, and stick it out. Successful business leaders will tell you what scares them is not knowing what they don’t know. They invest the time and energy to learning more each and every day while keeping highly focused yet nimble to meet the challenges that they face.