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Ten Most Common Mistakes of First Time Entrepreneurs 8Hr. Seminar, Baxter Castro Coffee From our many years of experience with start-up companies, we have identified “TEN COMMON MISTAKES OF FIRST-TIME ENTREPRENEURS/MANAGERS” that prevent them (as well as many experienced entrepreneurs) from successfully achieving their goals. Although each of these first-time business mistakes is survivable, because of the “compounding effect” they can be, and often are, fatal when they hit all at once:
1. Not Accepting Full Responsibility 2. Hiring and/or Confronting Employees 3. Not Developing a Balanced Marketing Mix 4. Inability to Manage Cash Flow 5. Procrastination 6. “Egocentrics” 7. Getting Overwhelmed 8. Majoring in the Minors 9. Not Focusing on the Bottom-Line 10. Growing Weary
Overview of the seminar material:
#1. Not Accepting Full Responsibility - “If the desire to succeed in business is not followed by success, the desire is not to succeed in business.” The most common mistake is for the entrepreneur/manager to not take full responsibility for everything that happen in his or her business. It is easy to make money when the economy is strong and/or you are the first to penetrate a new market. However, when the economy takes a down turn, or the competition catches up, “losers” blame and make excuses; “winners” assess the facts and stay focused on results.
It’s been our experience to see a new business fail and have the owner blame the economy, the competition, their employees, but then see a similar business open that same market and become highly successful. (We discuss 7 items to consider before you ever open your doors for business).
#2. Hiring and/or Confronting Employees - “There’s no such thing as an indispensable employee.” One of most common mistakes made by first-time manager is not screening and hiring the best possible employees; much of your success is uncertain when making this decision. If you get lazy, you may start thinking, “This person seems likable and I need them now, so I won’t check references before hiring or do a thorough interview to discover facts about their work habits, integrity, and goals.” The cost for using this “quick fix” approach is extremely high in lost revenue, retraining time, use of the entrepreneur’s time, money and resources.
Remember, if you hire the right people, give them the right training, and provide a reward system that encourages individual expression, you will receive a depth of commitment that permits both the organization and the individual to prosper, and greatly reduce your turnover rate. (We discuss 8 ways to avoid confrontational traps)
#3. Not Developing a Balanced “Marketing Mix.” - One of the most fatal mistakes is not maintaining a balanced “marketing mix” – a variety of marketing tools instead relying on just one approach. 1. Street-smart marketing: A small business is not a miniature big business. Although a small business needs to understand the basic elements of a successful marketing mix (product, process, place and promotion), it does not have the massive research, marketing and advertising budgets of big business. A small business needs to make optimum use of its limited resources in order to maximize results while minimizing costs. 2. Zero-Based Budgeting: “Zero-based Budgeting” is a marketing strategy grounded in the premise that money never creates anything, it cannot identify and can rarely solve a problem; it never leads, it always follows sound marketing principles and proven systems for growing a business. A typical marketing mix will include a variety of marketing tools; the average return on investment in time and money and the average estimated outcome (ratio of efforts to enrolled members) for each phase of your marketing efforts. Establish a “menu” of marketing tools; the ones that best match your personality; work ethic, budget and time constraints. (We discuss 12 items to consider for your marketing mix)
#4. The Inability to Effectively Manage Cash Flow - “Cash Flow is King” One of the potentially fatal mistakes made by first-time managers is the inability to manage their cash flow; having the self-discipline to set aside income for rainy day emergencies, taxes and down turns in the economy. Failure to manage cash and expenses on an accrual basis, and take out money for one’s self on a disciplined and prescribed basis is a recipe for failure; if some clients cancel, or you’re down in your back, or someone fails to pay, you have no cash reserves.
#5. Procrastination - “Every hour of time lost is a chance for misfortune in future life.” Once you’ve made the decision to commit your time and resources to opening a business, you need to hit the floor running, and keep on running until you hit your goal. As the leader of your business, you should assign your time to high pay-off activities rather than have it consumed by the demand of other forces.
There are many reason people procrastinate, re: fear of failure or being wrong; unclear about how to accomplish the task; inability to prioritize; fear of confrontation or criticism; fatigue, etc. (We discuss 7 ways to overcome procrastination)
#6. “Egocentrics” - “The person who won’t be taught can’t be taught.” To be “egocentric” is to focus on one’s self; where this becomes fatal in business is when the owner focus on what he or she wants, instead of what’s needed, or best for your company. The owner’s inflated ego may not allow him or her to admit they do not know what to, and their pride often prevents them from getting the help they need. The single and most recurring cause of failure of a small business enterprise is not a lack of capital or creativity, but is rooted in the ego of the business leader.
Most often, ego problems are something we feel other people have; we do not believe we have it, and we do not recognize it when it is there. Ego and true self-confidence are at opposite ends of the scale. Use of money is often tied to the ego of the business owner, not to the benefit of the business and its ultimate profitability. More businesses fail because of improper control of money, than lack of money.
#7 Getting Overwhelmed – “Either you find yourself equal to a task that you undertake or you do not undertake it. To be overwhelmed is for babies or children.” First-time entrepreneurs/managers often get overwhelmed with having to solve all the problems, all the time. They fail to see that problems are merely opportunities in disguise, opportunities to learn more about one’s self, their employees, and/or the marketplace. A dilemma, by definition, is an unsolvable problem; successful entrepreneurs have learned that there are very few true dilemmas in business; there’s always a way to get from where you are, to where you need to be, regardless of your education, income or station in life.
It has been said that when you are prepared you have no need for fear. Being overwhelmed is the sense of helplessness we feel when we don’t’ believe we are going to be able to solve the problem at hand. The most difficult part of problem solving is not in coming up with the solution, but in accurately defining the problem. (We discuss 5 potential roadblocks to problem solving)
#8 Majoring in the Minors - To “major in the minors” is to focus one’s energy at being efficient instead of being effective. One can be highly efficient, but not very effective; one can be highly effective, but not very efficient. The manager who spends his or her day running errands, cleaning equipment, organizing their office, or checking the mail may be well organized and highly efficient; but if, at the end of the day, they fail to bring home the money, they will not have been very effective in building their business. On the other hand, the individual spends his or her day targeting new accounts, making cold calls, setting up appointments, and closing new accounts, may not be well organized and efficient, but will be extremely effective in bringing new accounts and cash into the business. Do not put procedures over profit.
#9 Not Focusing on the Bottom Line - The dictionary defines the word “capitalism” as, “The economic system in which all or most of the means of production and distribution are privately owned and operated for profit.” The key words here are “operated for profit.” The primary reason for operating a business is to make a profit. Interestingly enough, the majority of first-time entrepreneurs do not go onto business for profit motives. In reality, their focus is on being the boss, having power, stroking their egos, making a difference, etc. It’s not that these are incorrect or inappropriate, but if the focus is not on the bottom line, the business will not survive. Everything you do should be tied to the bottom line. If you activity does not show measurable, tangible results over a reasonable period of time, cut your losses, learn from your mistakes, regroup your troops, and chart another course of action.
#10. Growing weary – “More people quit than fail.” It has been said that the world does not care how many storms you encountered, only if you brought the ship in. New entrepreneurs that are struggling often cry, “My market is different!” When this excuse is made, he or she may be fooling themselves, but not anyone else. If your people are not producing, look at your training; if your profit margins are not working, look at how you are operating your business; if customers start dropping, look at your service. It has been said that people fail in direct proportion to their willingness to utilize socially acceptable excuses for failure.
How does one avoid these mistakes? Create a plan of action, work your plan, test viability, make the necessary adjustments and do not look to the right or the left until you achieve the desired outcome. This requires clear, distinct objectives plus regular evaluation of your plans and strategies. Think yearly; plan quarterly; measure monthly; track weekly, work daily.
Seminar wraps up with a 30 minute, Question & Answer Period
Revised June 30, 2008
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