3 common mistakes made by new entrepreneurs (and how you can avoid them)
It takes plenty of courage to start your own business. With so much uncertainty and the risks involved, entrepreneurship is definitely not for the faint hearted. But for those willing to venture out on their own, the rewards can be immensely satisfying.
If you've taken the first step towards starting your own business, then congratulations, you've done what many could only dream of. However, the journey has just begun and there are plenty of challenges in the way.
In the world of entrepreneurship, there are no fixed rules that guarantee success and you'll often find yourself learning as you go. The best you can do is to learn from those who've come before us.
Take the appropriate steps to protect yourself from falling into the same traps that have ensnared many potential entrepreneurs. Here are some of the most common mistakes made when starting a new business.
1. Underestimating the effects of burnout
It goes without saying that starting your own business is immensely stressful. You fret about acquiring new customers while at the same time worrying about fulfilling the demand of existing ones amongst other things.
Many new business owners are likely to be all too familiar with the creeping guilt and self-loathing that one feels when not working. This is perfectly understandable but at the same time unsustainable.
While some may be tempted to brush off chronic stress as just being part of the job, being exposed to high-levels of stress constantly can result in burnout. Defined as a state in which a person suffers from a combination of emotional, physical and mental exhaustion, burnout is a very real problem amongst young entrepreneurs.
On the long-term, chronic excessive stress can have a negative effect on your health which would subsequently affect limit your ability to work. Hence if you find yourself dragging your feet and questioning your decision to start a business, maybe then it's time to take a breather.
Log off from your laptop, turn off your phone and take it easy for a couple of days. Take a short vacation or treat yourself to a deep tissue massage. The time spent away from work will do wonders for your productivity and wellbeing.
2. Mismanaging your cash flows
A study has shown that a whopping 82 percent of businesses fail as a result of poor cash flow management. Besides keeping the lights on and ensuring that your employees have a salary, cash is used to purchase new goods and to pay for advertising.
Without cash, your business will likely grind to a halt and eventually collapse. This is why it is imperative that business owners pay close attention to their enterprise's cash flow. As a rule of thumb, always ensure that invoices are sent out in a timely manner and collections are kept consistent.
One common mistake made by new business owners is to offer customers overly generous credit terms. Some unscrupulous customers may take advantage of your generosity and ignore all requests for payment which could result in the majority of your cash being tied up in uncollected billings.
3. Allowing cost to dictate your decisions
Entrepreneurs often walk a fine line between stinginess and financial prudence. While micromanaging your expenses is a perfectly sound strategy, making decisions based on cost is not.
Some business owners for example are fond of being miserly with employee salaries and benefits. This situation severely limits their ability to attract and retain skilled and competent employees. As a result, the organization will never be able to field a core team of competent and motivated employees, which in turn, adversely affects performance.
Instead, recognize the importance of making your money work for you. Just like a basketball teams invest in the best players in the NBA draft, investing in quality staff improves productivity and performance, whilst a solid marketing campaign can really ramp up customer awareness.
Starting and running your own business is not a walk in the park and success is not guaranteed. However, taking steps to move in the right direction will help you get things off to a good start.