What do you think is the most common mistake new business owners make?
Entrepreneurship is one of the best career paths, driving personal development in ways no other endeavor does. However, it is a long and winding road paved with challenges, uncertainty, and often solitude.
I put together a list of mistakes that I’ve seen many entrepreneurs make, myself included. While there are undoubtedly many more, I’m speaking from my own experience and my background in finance. Below, I share the three I find most dangerous.
1) Lack of a clear vision, purpose or goals
Who do you want to serve? What service do you want to provide? What product do you want to manufacture? What raw materials can you produce or supply?
We all need to make money, but that’s not reason enough, as there are countless ways to earn an income. If you don’t have a clear idea of what you want to achieve and why, you risk being a leaf carried by the wind. You won’t be able to develop the strategic mindset it takes to run a business.
Just think about it: What would you do if you had a bad year and earned nothing? Would you jump to the next idea, or would you analyze, reorganize, and hold on for as long as reasonably possible to keep the business alive? Why would you do that?
2) Falling in love with your idea instead of your customer
Do you want your product or service to help others, or are you just attached to an idea that works perfectly in your head? Maybe you’ve seen it work for others and assumed it would work for you too.
Sometimes it’s hard to distinguish between what we like and what the market actually needs.
The mistake here is not having the humility to discern and admit that our idea isn’t as solid as we thought; or as good as we want it to be. Sometimes, the issue is not the idea itself, but the context in which we try to execute it. How many times in human history has the truth been mistaken for madness? Even great projects fail.
It is also essential to test and validate your idea before pouring all, or a significant share, of your resources into it. Entrepreneurship often implies innovation, and innovation usually faces initial resistance. You never know how long it will take for your business to take off, which is why committing your capital without real market feedback is dangerous.
Get to know your customers deeply. This will help you to determine whether they are ready for what you offer, how to unveil it to them, and roughly what you can expect in the months and years ahead.
3) Overlooking legal and financial advise before launch
Whether you planned your business meticulously or jumped in during a personal crisis, it is common for new founders to neglect the legal and financial fundamentals. All too often, they only pay attention once an issue becomes an active problem. Think of surprise tax liabilities or cash flow crunches, for example.
You might have been a model employee or a successful executive for years. You may know your product or service better than anyone else. Yet, that doesn’t mean you are equipped or even aware of what it takes to manage the legal and the financial realities of running a business. Crucial as they are, the law and bookkeeping often feel like foreign territory for most people.
Having a legal advisor is non-negotiable. You need someone to help you navigate industry regulations and your company’s legal structure, as well as contracts and relationships with clients, partners, employees, and the government.
Likewise, a financial advisor should help you design and build the foundation the will sustain your business, and ultimately protect it from the inevitable shocks and volatility of the market.
Bringing two professionals of this caliber on your team provides your business with two major assets. More than that, it acts as an essential defense strategy, both entrepreneurially and personally.
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What other mistakes have you seen? Would you like to explore the rest of the list? Keep the conversation going at hola@abrahamalba.com . I’d really love to hear you.
Abe Alba
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