10 mistakes entrepreneurs make that will kill your business

Every second employee thinks about opening their own business, but just over 20% decide to take real action. Moreover, half of those who finally started in business lose interest in their own business as soon as they encounter the first difficulties. We have counted ten common mistakes of aspiring entrepreneurs that prevent your dreams and ambitions from being realized.

Mistake one: unjustified expectations of easy and quick success

Many aspiring entrepreneurs think that as soon as they start their own business, everything should go like clockwork: sales will begin, suppliers will line up with tempting offers, all problems with government agencies will be resolved by an accountant or lawyer, and competitors will quietly disappear from the market. This is not at all true, so a businessman must be prepared for difficulties and disappointments.

Practice shows that for some reason people are ready to put in much more effort to build a successful career in someone else’s business than to develop their own business. Remember how much effort and time it took you to get your current position? Years of studying at a university and taking additional courses, internships, learning the rules of working in a team and communicating with superiors, constant development of professional skills, etc. Why does owning your own business seem easier?

But instead of one boss, an entrepreneur will have at least ten: buyers, clients, government agencies, suppliers, landlords, etc. You will need to be able to interact with all these people and structures, understand their goals and needs, and fulfill your obligations. So running your own business is no easier than working for someone else, although the difficulties in it will be of a different order than in hired work.

Searching for a product, not an idea

95% of entrepreneurs make a serious mistake at the thinking stage. They give preference to searching for a product (idea) that will bring money, rather than creating a valuable product themselves. Hamburgers and Coca-Cola existed before the creation of the McDonald's chain, but it was here that the new (at that time) idea of self-service was implemented. The innovative approach reduced prices and attracted visitors; This is where the popularity of McDonald's began to grow.

A novice businessman poses the question this way: what am I interested in? An experienced entrepreneur sees the problem differently: what is interesting to the market? It is very important to imagine the target audience and their needs before starting work.

Mistake two: lack of an action plan

Business is like a car; on its own, it only goes downhill. If you have no idea what exactly you should do and what the client or buyer will pay you for, then it’s too early to take real action. Study all available information related to your business: business plans, books and articles, offers from franchisors, real cases, etc. If you have the opportunity to work at least temporarily in a company working in the field of your choice or adjacent to it, then be sure to take advantage of it.

In your personal account you can get our books on the development of different business areas: retail store, beauty salon, wholesale trade, cafe. They are preparing to publish a book on opening a law firm and an online store.

Typical mistakes in business planning include:

lack of clear goals in the form of specific figures for sales and profit volumes and deadlines for achieving them;
unclear distribution of areas of responsibility between partners or employees;
underestimation of estimated business expenses;
overly optimistic expected income figures;
choosing just one option for business development strategy;
lack of plan “B” if the original plan “A” for some reason cannot be implemented;
underestimation of business risks and competitors' activities.

The other extreme is the desire to work out the plan to the smallest detail, in order to protect yourself from all possible difficulties. Unfortunately or fortunately, in business no one can guarantee you anything. You should become accustomed to working in an unpredictable environment, but your competitors also have to work in the same conditions. In addition, unpredictability is not always a bad thing; believe me, life can present pleasant surprises to an entrepreneur.

Insufficient effort

Insufficient effort. This is probably the main mistake of starting businesses, which we didn’t even know about, because the two guys who came up with them were preparing the project after a hard day’s work and eventually abandoned the endeavor.

If you want to avoid failure, the main thing you must do is refuse another job. If you don't pay enough attention to preparing a new project and continue to work elsewhere, then you probably have deep down doubts about the success of the project.

Most new projects that could become successful will never be implemented simply because the founders did not put enough effort into their implementation. It is in the maximum intensity of effort that the main secret of success lies.

Translation and comments:

Tatiana Nikitina

, Founder of the portal openbusiness.ru. Entrepreneur. Business trainer. (c) www.openbusiness.ru - portal of business plans and guides for starting a small business

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Mistake three: not understanding your target audience

Another mistake novice entrepreneurs make is not understanding their target audience. There is a category of businessmen who want to do only what they like. For example, you are passionate about slalom, so you want to open a mountain equipment store. But think about it: are there enough solvent buyers in your locality who are interested in such goods? Maybe it’s worth opening a sporting goods store, whose audience is much wider, and selling mountain equipment, since you really like it so much, only on order?

Ask yourself these questions:

Who are your customers and clients?
What are their needs and income levels?
How many customers and clients can you serve?
What is the average check your customer is willing to leave?
How often does a consumer need such a product or service?
What is the saturation threshold in your niche?

Focus not on what you can sell or offer, but on what your consumer needs and what he is willing to pay for.

First business in a new field

I, a marketer by education, have worked in marketing, branding and project management since 2006, but for some reason I decided to start my own business in tourism. Romantic, but not rational. The idea captured the mind so much that logic turned off. As a result, I spent the most valuable thing - time - trying to understand a new topic, but I appreciated the scale of the disaster and still switched to an area in which I understand better. My designer friend and I started a design studio. And I decided to return to the topic of tourism later, when I got used to the world of business in the first, more understandable case.

If you are already a good and well-known specialist in the market, maybe you shouldn’t cross out all your experience and established connections? Try to “look for yourself near the place where you lost,” as Elena Rezanova writes in the book “Never. How to get out of a dead end and find yourself." Start doing what you already do, but in a different format.

Mistake four: inability to sell

Any business is about sales. You will make a profit only after you are able to satisfy the needs of your clients or customers. But the benefits of your service or product still need to be conveyed to the consumer. Think about what advertising channels you will use and what marketing techniques you will use. If you have opened a store in a popular shopping center or provide in-demand services, then advertising costs may be minimal. However, it is imperative to think about how you will promote yourself in the market.

Lack of knowledge of the legal aspects of starting your own business.

A successful business is impossible without competent legal and accounting support. It is important to initially choose the right taxation system, the form of organization of the enterprise (LLC or individual entrepreneur), find out the need for licensing activities, resolve the issue of accounting (keep records yourself or seek help from a professional).

Don't forget to decide in advance which bank to open an account with. You are required to notify the tax authorities of the opening of an account within a strictly specified period. Violation of deadlines entails penalties from the tax office.

Study all legal aspects in advance. On your own, or by seeking advice from specialists. Remember about points 3 and 6. Don't delay and delegate. Save your time. Sometimes it is better to pay a small amount of money for a consultation than to waste weeks of your invaluable time. Any successful businessman will confirm this.

Read about how you can open a business without any problems: What is a franchise in simple words.

Mistake five: inability to manage money

Experience shows that the easiest thing to do when starting a business is not to waste your own money, but to waste someone else’s investments or loans. If you have a solid starting capital in your hands, then the temptation immediately arises to spend it “for the benefit of the cause.” Some novice entrepreneurs (although there are fewer and fewer of them every year) are too carried away by the attributes of business: an office in a prestigious location, an expensive company car, a corporate website with an individual design, etc. The justification given is the fact that such expenses are for the formation of image and reputation, without which there is nothing to do in serious business. In fact, start-up capital should be spent on organizing first sales, forming a customer base, improving the quality of a product or service, and establishing business connections.

Experienced businessmen advise beginners to start with minimal capital or no capital at all. You shouldn’t immediately aim at some grandiose projects. First, try to get at least modest amounts from the provision of services or join the wholesale and retail sales chain as an agent. Your own experience in generating income yourself cannot be replaced by anything.

Mistakes that aspiring entrepreneurs make when managing finances are not limited to inept spending of start-up capital. As soon as the first money from business appears, there is a desire to spend it on personal needs. Of course - after all, this is honestly and independently earned income, why not buy a new car with it? It is especially easy for individual entrepreneurs to succumb to this temptation, because for them there are no restrictions established by law on the disposal of money received from the business. As a result, working capital is spent on personal purposes, and further business development plans are not fulfilled due to lack of finance.

Lack of financial cushion

Realizing that starting a business takes time, I gave myself two months: that’s exactly how long I had a reserve of money. When it was exhausted and orders had not yet arrived, I had to use my credit card, and this became a difficult decision. I sold everything I didn’t need, switched to a monotonous diet, because of stress and uncertainty I didn’t get enough sleep for the usual 7–8 hours, and once a week I found a gray hair.

Going into your own business is an effective way to lose weight in a short time, but not a very healthy one. It took me a total of six months to set up the system and get into the black. My ideas for taking over the world had to be divided into three and a corresponding financial reserve had to be prepared. Later, I learned to be realistic in planning both income and expenses.

An entrepreneur or self-employed person who does not have a stable income is simply obliged to plan future expenses and see where he will get the resources for them, and also know his cost of living.

A financial cushion in the amount of a personal subsistence minimum should be enough for at least six months, or better yet, for a year. The larger it is, the more time we “buy” for experiments - also an idea from the above-mentioned book. On the other hand, the smaller the pillow, the faster life will make you spin. Some may sit on stocks for a year and only move closer to the end.

Mistake six: ignoring competitors

If you have chosen a profitable line of business, then you will definitely have competitors. And, of course, part of the market will be occupied by those who started before you, invested their money and effort and expect a certain profit. The presence of competitors should not immediately stop you from starting a business, but you also cannot ignore them. To understand how competitive your chosen niche is and how you can stand out, you can order marketing research or conduct a quick analysis yourself. You can find an example of such an analysis when opening a beauty salon in our book, it is available in the user’s personal account.

Incorrect delegation of authority

It's not enough to launch a startup; you need to learn to be the main one in it. The role of a manager involves managing processes, rather than performing routine duties for everyone who cannot cope. It’s good if a businessman delves into all the nuances of his business and takes on the roles of a client, courier, administrator, and commercial partner. But constantly doing the entire amount of work is wrong. All minor, standard operations are transferred to the hands of hired personnel.

Mistake seven: lack of special legal knowledge

An entrepreneur must have a good knowledge of not only his product or service and methods of promoting it, but also have at least a general understanding of the laws governing business activities in Russia. To help you understand the basics of this knowledge, we have prepared a series of articles for you, which we highly recommend reading:

Individual entrepreneur or LLC - what to register;
Labor relations - how to register personnel;
How to sort out relationships with counterparties;
What every businessman needs to know about the contract.

As you work, you will gradually begin to understand these issues, but at the start of a business, mistakes of novice entrepreneurs when choosing an organizational and legal form, tax regime, registration of employees and relations with partners can lead to serious financial losses and even become fatal.

Every visitor to our website can receive free advice from professionals on business registration, taxation and accounting issues. We recommend taking advantage of this offer!

Mistake eight: failure to delegate authority

“If you want everything done well, do it yourself!” - this phrase has ruined more than one startup. What happens if an entrepreneur believes that no one can do anything better than him? He has to look for and serve clients and customers himself, negotiate with suppliers, accept goods, do accounting, documents and other routine work. The workers are all random, slow, irresponsible and clueless.

Perhaps this is so, but hiring unsuitable employees is a mistake of the businessman himself. Remember Steve Jobs: “We hire smart people to tell us what to do.” It is impossible to build a business without a well-coordinated team of professionals, so finding and attracting such people is one of the main tasks of a beginning entrepreneur.

Determine areas of responsibility and assign them to employees. Some functions, for example, accounting, can be outsourced. Where possible, introduce a flexible remuneration system - a small fixed salary and percentages for achieving indicators (sales volume, provision of services, production volume). And moderate your perfectionism a little - even if something is not done as perfectly as you imagine, but the business is developing, then everything is fine.

Mistakes of experienced entrepreneurs

Love to argue with every sentence

You may be afraid of everything new and solve every problem in the old proven way, because three years ago it worked. Of course, market conditions have changed a little over three years, but what difference does it make? In any case, this is better than listening to employee suggestions that do not bring any benefit and have only one way to go - to the toilet. We are about proposals, not about employees.

What to do? Remember that people are unlikely to want to fool you and destroy the company from the inside. After all, you still hired experienced specialists, and they have been working here for several years. Try to listen to a couple of suggestions and still give the go-ahead. Perhaps the result will be better than you expect.

Fear of leaving the company unattended

How many years have you not been on vacation? Why, when you are away on family business, do you constantly look into the cloud or into the company chat? Some people compare entrepreneurship and motherhood: you have given birth to your own company, and the business is no longer developing only in you. A small business grows on its own and, sooner or later, will leave the supervision and take on a life of its own.

What to do? Don’t repeat this stupid mistake of businessmen with annoying mother syndrome - and still go on vacation for a week. If something goes wrong, you will be the first to know.

Hiding information from employees and partners

The marketing manager does not need to know what is going on in the technical department. And your partners shouldn’t stick their nose where they don’t ask and ask about negotiations with a potential investor. Only one person should have a complete picture of everything, you think. And you are wrong: centralization is bad even in a small company.

What to do? Try devoting 10 minutes to company business during your weekly meetings. This will avoid a situation where some work was not completed completely or was done twice, and will also allow department heads to clearly plan a work strategy and calculate risks.

Nepotism

This is when a manager brings his beloved relatives, friends and old acquaintances to his office. And if there are more than three of them, then this is a reason to think about it. Of course, you always expect support from your loved ones and, it seems, there should be fewer disputes in the company. But the result more often than not is simply an office full of illiterate parasites who get paid for blind nodding.

What to do? Count all relatives, wife's friends and childhood friends in the office and divide by the number of all employees. Ask them about the company's turnover, how it is growing and how people work in their department. Draw conclusions.

Frequent use of the pronoun “mine”

Well, first of all, it's not very polite. And secondly, it means that you have a bad sense of team. Hence the problems with delegation and a bunch of other problems. Not every wife likes to feel like someone's property. Losing a promising startup is terrible, but losing it due to possessiveness and failure to listen to competent people is doubly worse.

What to do? Give a share of the company to your best employees. Joke! It’s better to go on vacation again for a week and make sure that everything works fine without you.

Mistake nine: reluctance to enter into a business partnership

About 70% of LLCs in Russia are registered by a single founder, i.e. The partnership business model is not taking root well in our country. Moreover, partnerships are avoided even where they would be justified. Why? First of all, novice entrepreneurs do not want to share the expected profit, although at the start of a business this is tantamount to sharing the skin of an unkilled bear. Another good reason is possible disagreements in joint business management and personal communication problems. To a certain extent, it can be recognized that the specificity of the Russian mentality is to mix personal and business relationships, and this is not always good for business. But many successful projects, especially in the West, develop precisely according to the partnership model.

Let's see what a good business partner can offer you:

resources and investments;
business experience;
business connections;
skills you don't have, for example in sales;
a unique business idea, invention, patent;
emotional support.

Yes, it may not be so easy to choose your business partner, but refusing profitable cooperation just because you are afraid of possible problems is wrong. Of course, all the conditions of a joint business must be carefully discussed before the start of activity, and be sure to record them in writing. Please also keep in mind that an equal partnership, when shares in the company are distributed equally, can lead to a stalemate if disagreements arise. It is advisable that one of the partners be the main one and bear the main responsibility for business development.

Unjustified expenses

There is a cliché in the head of a novice businessman: the more money you invest in your business, the higher the profitability. In theory, this is true, but an inexperienced entrepreneur should not waste money, especially if the funds are on credit. You can impress a client with an office in the city center and a cool laptop, but 90% of visitors will turn around and leave if the quality of services is low.

Mistake ten: giving up prematurely

If you've read inspiring success stories of famous entrepreneurs, you know that almost every one of them had to go through a series of failures, big and small. But only the one who gets up one more time than he falls wins. You don’t have to look far for examples - the business portal you are on now also developed through crises. Find out the history of Regberry's development first-hand - from team leader Alexander Raptovsky.

We will be glad to hear from you stories of overcoming difficulties and successes, and perhaps you will someday tell aspiring entrepreneurs about the mistakes that should be avoided when starting a business.

Copying someone else's business

Is it acceptable to copy someone else's success? Experts disagree. Teachers at the Stockholm School of Economics K. Nordström and J. Ridderstral in their bestseller “Funky Business” say that in a competitive environment it is not those who repeat who survive, but those who are able to find a creative approach to routine processes. But there is another point of view: copying helps to understand the process and improve commerce. Alf Rehn in the book “Funky Ideas. Innovating Outside Your Comfort Zone argues that creative copying is the foundation of entrepreneurship.