Top 3 Bonehead Moves Entrepreneurs Make
No one said starting a new business would be easy--in fact it's pretty tough. But many entrepreneurs make it much harder than it needs to be with dumb mistakes that can quickly kill their businesses. So says Victor Green, author of How to Succeed in Business by Really Trying, and a serial entrepreneur who's launched several successful companies, and has spent the past 15 years consulting with other entrepreneurs.
Here are the biggest blunders:
1. Skimping on research.
"The most important mistake people make is they fail to research their ideas sufficiently. They talk to their mother, and their father, and their friends, and all these people say, 'You're so smart!' Unfortunately, these people won't be your customers."
The only way to find out if an idea will actually work is to test it in the actual marketplace, Green says. "And once you've researched it, get a much wider look at how the industry will progress. You may have something that's a good idea on day one, but will it continue to be a good idea over time?"
2. Focusing on revenues rather than profits.
If your main concern is revenues and how they're growing, you're missing the most important part of the picture, Green says. "So many people are driven by that sales figure. They'll say, 'I did ten million in sales last month.' I say, 'How much did you earn?' They say, 'We're sort of breaking even.' Then what are you running a business for? I call that vanity vs. sanity!"
Of course, Green concedes, most start-ups aren't profitable right away. "It may take you five years to make a profit. But the purpose of a business is to make a profit, and you have to be honest with yourself about whether you can do that."
3. Never giving up.
It's the moral of a thousand Hollywood movies: Never lose heart! Don't quit when the going gets tough! But this attitude leads to trouble in the business world, Green says.
"People drive themselves to keep up an appearance because their egos get so inflated," Green says. "Will you say, 'I've been killing myself for two years, I've got $2 million invested, and I'm going to carry on no matter what.' Or will you be sensible enough to say, 'I'm a grownup. I'm going to shut this business down, it won't affect me, and I'll start again."
Being willing to pull the plug on your own creation is the test of a true entrepreneur, he adds. "I always congratulate people who tell me, 'I'm going to pull the plug--it's not working.' Every person in business will have a failure during their life, and if they say they don't I can only think that they have a very poor memory. Do you do most things right? If you get things right 51% of the time, you're ahead of the game."