Top 5 Mistakes New Entrepreneurs Make

Every second employee thinks about starting their own business, but a little more than 20% decide on real actions. Moreover, half of those who nevertheless started in business lose interest in their own business as soon as they encounter the first difficulties. Here is a list of five typical mistakes of new entrepreneurs that prevent your dreams and ambitions from being realized.

1. Unjustified expectations of easy and quick success

It seems to many aspiring entrepreneurs that as soon as they start their business, everything should go like clockwork: sales will begin, suppliers will line up with tempting offers, all problems with government agencies will be resolved by an accountant or lawyer, and competitors will disappear from the market.

For some reason, people are ready to make much more effort to build a successful career in someone else's business than to develop their business. Remember how much effort and time it took you to get your current position? Years of study at a university and additional courses, internships, learning the rules of working in a team and communicating with superiors, continuous development of professional skills, etc. Why does owning a business seem easier?

But instead of one boss, an entrepreneur will have buyers, government agencies, suppliers, landlords, etc. You will need to be able to interact with all these people and structures, understand their goals and needs, and fulfill your obligations.

2. A lack of a plan

Business is like a car, by itself it only rolls downhill. If you have no idea what exactly you should do and what the client or buyer will pay you for, then it’s too early to start real actions. Study all available information related to your business: business plans, books, articles, franchisor offers, real cases, etc. If you have the opportunity to at least temporarily work in a company operating in the direction you have chosen or adjacent to it, then be sure to use it.

Common mistakes in the business plan include:

- lack of clear goals

- unclear distribution of areas of responsibility between partners or employees

- understatement of estimated business expenses

- too optimistic figures of expected incomes

- choosing only one option for a business development strategy

- the absence of a plan "B"

- underestimation of entrepreneurial risks and activities of competitors

3. Misunderstanding your target audience

Another mistake of new entrepreneurs is misunderstanding their target audience. There is a category of businessmen who want to do only what they like. For example, you are into slalom and want to open a mountain equipment shop. But think about it - are there enough solvent buyers in your locality who are interested in such goods? Maybe you should open a sporting goods store with a much wider audience? Focus not on what you can sell or offer, but on what your consumer needs and is willing to pay for.

4. Inability to manage money

The easiest way to start a business is not to waste your own money, but to use someone else's investments or loans. If you have a solid start-up capital on hand, then there is a temptation to spend it "for the benefit of the cause." Some start-up entrepreneurs are too fond of business attributes: an office in a prestigious location, an expensive company car, a corporate website with an individual design, etc.

As an excuse, such expenses are the formation of an image and reputation, without which there is nothing to do in a serious business. In fact, start-up capital should be spent on organizing the first sales, building a customer base, improving the quality of a product or service, and establishing business relationships.

Experienced businessmen advise beginners to start with minimal or no capital. Don’t aim at some grandiose projects. Try to get at least modest amounts from the provision of services to start with, or integrate into the chain of wholesale and retail sales as an agent. Nothing can replace your own experience in earning income on your own.

The mistakes of novice entrepreneurs in the management of finances are not limited to the inept spending of start-up capital. As soon as the first money from the business appears, there is a desire to spend it on personal needs. Still - after all, this is honestly and independently earned income, so why not buy a new car on them?

It is especially easy to succumb to such a temptation for individual entrepreneurs because for them there are no legal restrictions on the use of money received from the business. As a result, working capital is spent on personal purposes, and further business development plans are not implemented due to a lack of finance.

5. Ignoring your competitors

If you have chosen a profitable line of business, then you will definitely have competitors. And a part of the market will be occupied by those who started before you, invested their money and efforts, and are counting on a certain profit. The presence of competitors should not immediately stop you from starting a business, but you can’t ignore them either.

To understand how competitive your chosen niche is and how you can stand out, you can order market research or conduct a quick analysis yourself. An example of such an analysis when opening a beauty salon can be found in our book, it is available in the user's personal account.