Here are the top 5 mistakes entrepreneurs make. This list is based on real entrepreneurs with experience. We interview entrepreneurs for our spotlight articles weekly to get these insights. This is not a theoretical textbook approach, but practical advice from people who have walked the path.
As I wrote this article, I was reminded of one of my favourite quotes by Eleanor Roosevelt:
Learn from the mistakes of others. You can’t live long enough to make them yourself.
This is a powerful statement, suggesting there is a shortcut to the learning journey. So here are the top 5 mistakes entrepreneurs make – based on real interviews from real entrepreneurs.
Under-estimate how long it takes to build a business
This is a grave mistake, and has led to the demise of many great startups. Planning for a start-up is similar to preparing a project feasibility study. It is normal to assume perfect conditions, and budget for predictable activities and requirements. But a good project manager would tell you – it is the unknowns and human element that contribute to project delays.
If this is an expected behaviour in project management, why do entrepreneurs get caught off-guard when they run out of resources before making their business profitable?
Project managers generally have years of experience doing the same thing. Entrepreneurs are by definition not experienced – most of the time, excluding serial entrepreneurs. In most cases entrepreneurs do not know, what they don’t know. They sort of discover as they go along, what they need to do.
This point is similar to the first one, because under-estimating the amount of money you will require to start a business will lead to not planning adequately financially. It is a different point in that – Entrepreneurs almost always assume they will be able to go to the bank, government or investors and raise capital. They assume, because their idea is so innovative and amazing – surely investors will flock.
Or perhaps – they are young, black and female. They assume there must be a budget somewhere for them. Government does not help by claiming in the media their commitment to helping young, black, female business.
In reality – being young, black or female works against you in business. People judge your abilities and experience, which means they are judging your ability to deliver. It is logical – because they are fewer succesful females, blacks or young people in business ….. the odds that you will be succesful are lower.
Investors work with risk management, startups are risky investments in general.
Spending Money 🤑🤑
All the optimism and financial mis-planning inevitably leads to overspending too early in the business. Entreperneurs often will go for the best marketing agencies who charge an arm and a leg, get a new office, business cards etc.
All of this usually ends up being a waste. What entrepreneurs should do instead is focus on getting money in – not money out. The excuse that “this is an investment in the business” is the most dangerous thing for an entrepreneur. When you build a business, you should spend as little as possible – even if you work from home, just to get the first clients in and let the business rather grow organically.
Organic growth is more sustainable than big marketing campaigns that bring a wave of people who all disappear as soon as the campaign is over.
Getting the right business partners is crucial to the success of any business. Entrepreneurs usually get no partners, or the wrong partners. This one is a tricky one, as I believe one should not bring in a business partner, for the sake of getting a partner. Partners should be complimentary and pull balanced weight to push the business forward.
The famous Africa proverb says:
If you want to go fast, go alone. If you want to go far, go together.
Risk Work and sharing too much information
This is a sneaky one, as it is usually presented as “opportunity”. There is an article that speaks more about this: Risk Work, a disguise for free labour.
As an entrepreneur you are faced with many opportunist who are usually also trying to build their own business or professional careers. They will present an “opportunity” for potential future work, if you just helped them on that “feasibility study” or “design”. This can be great to gain experience – but usually you end up just working for free.
In some cases people who pose as investors or potential business partners will approach you for a Joint Venture or Investment opportunity. They will request all your documentation, bank statements, plans etc. Many people would hesitate before sending such detailed life documents, but in entrepreneurship – we see it as “opportunity”. There are two reasons why you should never do this:
- They can submit your documents for a tender and still proceed without you, while appearing on paper to have a BEE partner.
- They will steal your business idea and do it without you. If you handover all your business plans, projections, hard-work you have done – it is no longer private, you have no control on what the other party does with the documents.
This is a pitfall for many entrepreneurs because we are so naive. Many opportunists troll “angel investor” and “business pairing” websites looking for naive entrepreneurs. As soon as they make contact – they will ask for all your documents, so they can “do a due diligence”.
Submitting your company documents to an unknown online potential investor is like visiting a dating website and sending a stranger private images of yourself in hopes that they will marry you.
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