The most notorious minefield any entrepreneur will encounter presents itself when they first start up. The minefield is fraught with mistakes and pitfalls that can ruin your business.
When I decided to step into the entrepreneurial waters after a career in financial services I believed I would be the best thing after sliced bread. Why not? After all, I understood service, accounts, economics and what not. What could go wrong?
A lot! To my chagrin, I found out the hard way that there are many pitfalls awaiting SME irrespective of the background of the entrepreneur. Some of these pitfalls are obvious, most are not – unless someone points them out to you explicitly.
So, I want to highlight a few that you best watch out for to ensure that your SME succeeds.
Legendary Chinese Military Strategist Sun Tzu said… (one of my favorite quotes)
“the General who wins the battle makes many calculations in his temple before the battle is fought. The General who loses makes but few calculation beforehand”
The first mistake you could fall into with your start up isn’t so much not planning (that’s too obvious), it is not planning enough. Most of us have some plan or the other. We make plans to open bank accounts, we make plans to rent a ‘befitting’ office, to design and print stunning call cards and such. These are all very valid plans.
Like Sun Tzu said, we need to be making ‘many calculations’. Many entrepreneurs are not making enough tangible and well thought out plans; hence they choke. Some of these include doing proper market research. Understanding your customers, what they want, where to find them and how to serve them.
Some people start a business failing to make plans (contingency or pivot) for government regulations. The consequences could be dire.
Another mistake SME owners make is starting too big! You hear popular success gurus as ‘What’s your goal?’ Then they challenge you by saying ‘supersize it!’ We are told to make ‘big hairy audacious goals’.
When it comes to a start up, I will counsel differently. I say chunk your goals to bite size pieces, to allow yourself learn, scale and build momentum.
Forbes contributor Lewis Howes explains; ‘you need momentum, and nothing builds momentum like getting a few wins under your belt’.
Entrepreneurs could lose heart when one BIG prospect after another shuts the door in their face; and they could just give up and close shop! So, please start small and scale up!
Starting small has other benefits including ensuring that you start with manageable overheads, giving you time to learn the business terrain hands on etc. What’s not to love?
We all see this everywhere; a new business starts, and the CEO places his brother as the Chief Accountant, his sister as Head of sales, his wife’s brother is sent to Business development and his cousin sister is at reception. Sound familiar?
This is a third mistake SME make. Having an unhealthy family to stranger mix in your business.
I am not saying that you should not hire family; but let’s borrow from Pareto’s Principle.
If only 20% of your team are doing 80% of the work; don’t you think that you should even out the performance odds by hiring MORE outsiders who are driven by performance knowing they do not have the ‘family safety net’ to fall back on?
Sometimes we have no choice. But you need to cap it and have no more than 20% of your team with familial ties to you.
I want to also highlight a personal mistake. A pitfall I fell into myself. I unfortunately started my business undervaluing/underpricing product and services I offered.
Maybe it was a lack of confidence, or fear of not closing a deal; whatever it was I found myself pricing myself so low that people began to doubt the quality of my services. I got so frustrated and began to resent my clients.
The last mistake I want to highlight is not keeping business income separate from personal income. It is so easy in a pinch to ‘borrow’ money from business income with a view to paying back ‘soon’.
Maybe the first one or five times you actually do put the money back. Then you begin to assume you can keep track of the borrowed funds. You know what they say about assuming, right? They say when you ‘assume’ you make an ass out of you and me (ass – u – me)! And that is what happens eventually.
No business can survive without keeping discrete books of accounts for the business and that of the owner. I am reminded the first law cast I was taught in my Introduction to Business Law class. The case of Salomon v Salomon & Co (You should look it up).
Remember, you and your business are two separate legal entities, and your funds must reflect this separation.
Every SME must ensure that its processes (not having set processes and structure is a big mistake) clearly spell out how the organizations income and funds will be treated. This is non-negotiable.
Bad service will also destroy your start up before you leave the docking area. It doesn’t matter who you are selling to – other businesses or individuals. If you fail in your service delivery, your business is compromised and ripe for ruination.
Watch the following clip to help you highlight some service related pitfalls.
These are by no means all the mistakes you should look out for as an SME, but they are a good place to start. Getting this out of the way gives your business a fighting chance of survival in our knowledge age.
I’d like to hear about your own experience and the mistakes you have stepped into and how you corrected it.
Do you have specific questions about the subject feel free to send them in.
In the meantime, do you dream of standing out in your career as well? Do you aspire to climb to the top of your professional pinnacle? Do you really want a well rounded life that will set you apart?
Then you will need some inspiration. My book 45 Reasons not to be Ordinary is available as a download. Visit the Lizspire shop and grab your copy.
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