I absolutely love seeing new entrepreneurs bring in their products or services to the market! It’s just like inducting someone to a private club and they made the choice to be part of it. But I hate seeing our newly joined brothers and sisters fall into the trap that many new entrepreneurs and small business owners make. I’m going to share the 6 deadly pitfalls that new entrepreneurs fall into and how to avoid them.
1.Taking Out a Debt Too Early
This is the #1 deadly pitfall in my list because of how many of you, the entrepreneurs, take out big loans to finance their business or even just to launch. This is a deadly mistake that can potentially destroy their personal finances. Before taking out any loans, entrepreneurs and small business owners must have a working business system in place. Here’s what I mean. If you’re just starting and you’re figuring out the things that work and don’t work for your new business, you’re at the start-up phase. In this phase, no loans should ever be taken out to make the business work. You don’t have a business just yet. So how do you know if you have a working business system? If you’re generating revenue by working a step by step process, you’re one step closer to having a successful system. If you can effectively create a manual on how to run your business and train others on how to do it, you got yourself a business. At that point, you’re encouraged to either take out a loan or raise capital by selling some of your equity. But I would discourage anyone taking out a loan the moment they decide they want to start their own business. Bad idea! Don’t let anyone push you to getting a loan long before you even make a dollar. Make some money, see how your business does for the first 6 months and THEN consider financing the business with debt.
Not working with an attorney is the next deadly move that any entrepreneur can make. If you’re not protected from the beginning and you’re trying to run a business without the help of an attorney, you have no place in the market. You’re not hurting yourself by not working with an attorney, you’re actually hurting your customers and potential stakeholders who rely on your service or product. When you get sued (not if), you want to be a position where you can defend your business. I literally talk to new entrepreneurs everyday that have never considered working with an attorney. This is a serious mistake. Would you consider the possibility of one day you will get sued and you have no legal entity to protect your personal asset? It has happened to so many entrepreneurs and small business owners so don’t count yourself out of this one! Hire a good business attorney who can help you find the right legal entity for you and to see if your business requires any special licenses or permits. I would also encourage you to get familiar with Mark Kohler, who just happens to be my CPA and an attorney. Mark is a celebrity among the attorney and CPA world. He trains other CPAs and attorneys with strategies and tactics to protect businesses. He’s got books, radio shows and even YouTube Videos that will give you a leg up against the other small business owners.
I know this may sound absurd and silly to some of you but it’s true. Businesses that grow too quick also die quick and same goes for the other way. Businesses that grow too slow lose momentum and it crashes. Entrepreneurs have to realize that growth takes a certain healthy pace. Growing fast is good but I want you to consider the possibility of not being prepared to fill in the gap as you grow. As your business grows, there are certain infrastructure that you must have in place in order for you to support the volume of customers and the production requirement of your business. This applies differently to different industry. For example, let’s say you have a small bakery business that can produce 100 cakes in one month. If one day, you receive a 1000 order of cake that needs to be fulfilled in one week, you’ll be in serious trouble! While this is a good problem to have, you’re growing too quick for the production capability of your business. Now here’s the thin line that I want you to know. Grow quick and move fast. But be prepared for situations that require you to flex. If you’re going to grow, make sure your foundations are strong enough to support it. I’ve seen businesses that grew 300% in one month but failed to have the right customer tracking system and enough products to service the customers. This also goes to saying, know when to turn your customer away. If you’re not prepared to take on a big client, know that it’s not the right timing. If you do end up servicing that big client and fail to deliver, it will damage your reputation and also lost the respect of that big client. So know your speed of growth for your industry. Is it moving too fast or too slow?
Not failing enough has to do with numerous things. First, business owners can get complacent. They start seeing massive success and all of the sudden, they’re no longer willing to take risks. What happened to their entrepreneurial spirits? What happened to taking risk for a bigger reward? If the business stops expanding by trying new things, what’s the point? You SHOULD be expanding. Everyday should feel like a start-up phase to you. That’s the exciting part! Tap into a new market, try a new advertising method, come up with a fresh line of product. Do Something! And I totally get it. Some entrepreneurs don’t want to risk their success and put their business on the table. Here’s the thing, your competitors and other fresh business is 100% committed to putting their business on the line just so that they can take your customers away. You are on a full fledged war against your own complacency and laziness to not wanting to change. Try something new. Second, not failing enough also has to do with pride. Sometimes, you got to admit that you’re wrong and own up to your failures. Let me say this right now. If you’re not up to taking responsibility for your own failures, then shame on you for trying to take responsibility in your successes. Thomas Edison failed over 10,000 times and he owned every single moment of it.
When I say technology, I’m not talking about the next generation of the iPhone or the new computer processing capability. Technology has lot to do with the methods and the leverage that you have in your business that makes the day-to-day operations easier to do. One time, I walked into a suit tailor shop that didn’t even have a credit card terminal. They only accepted cash or check. In my head, I’m thinking, ‘Is this for real, right now? It’s 2016! Holy smokes!’ There are literally thousands of suit tailor shops that accept credit or debit cards who are dominating that business. Yet this shop is missing out on the opportunities and the customers that they could be serving if all they had to do was to use a credit or debit card terminal. If this is you, get yourself up to speed and actively live in 2016. McDonalds and Panera bread are now beginning to use automated Kiosk to receive orders. Do you know how much money it’s saving them? Millions of dollars! If you’re reading this right now and you run a restaurant, you better be going 1000 mph to get ahead of them. Seriously! Adopt technologies that will enhance your business operations. Purchase and learn to use CRM (Customer Relationship Management) software so that you can better track your customers and their buying behaviors. Infusionsoft and Bitrix24 are two of the best ones that I’ve seen being used. Learn to use automated marketing systems. Learn to use Social Media to get your story out there! All it takes is to go online and Google the new trends and information. That’s it!
I left the best one for last… If you’re not willing to learn how to sell. Please do yourself a favor by leaving the entrepreneurship world, RIGHT NOW! Every entrepreneur is a salesperson first. It’s just like how to Marines do it. Every Marine is a rifleman first. Likewise, all business owners are sales people first. I don’t care what you do. You can call yourself a baker, cook, credit repair specialist, investor, public speaker or mechanic. But you will always be a sales person as long as you have a business. And if you can’t sell and persuade a person to do business with you, you’re going to have a hard time running your business. Selling is a skill that can be learned. Believe me! I had shy teenagers that later became millionaires because the skills that were taught to how to sell. Selling is a particular skill that will allow you to have success in any areas in your life. Whether it’s business or personal, it’s the ability to communicate your ideas and thoughts clearly to another human being. It’s not to trick people or to manipulate someone into buying something that they shouldn’t. It’s all about conveying value to your potential customer in an elegant way. Some how, the new entrepreneurs and small business owners are the first ones to shy away from this topic when it’s the single subject that can change their business into a mega-corporation.