Many people have a dream of starting their own business and quite a few do take the plunge to put that dream into action. A few succeed and do well to get off the ground and be profitable and grow. The majority, however, has a hard time making the business work or, at least, not very well. I want to look at why many fail and some succeed at starting their own business and enjoy the self-employed life.
Biggest mistakes when starting your own business
In no particular order, here are 5 reasons why many fail at being self-employed and running their own company.
- Taking out loans (borrowing) from a bank
When you start your own business you do not want to borrow starting capital from a bank. The reason for this is two-fold:
1) When you fail, you will have to re-pay the loan and the last thing you want is this extra pressure to succeed
2) If it isn't your own money, you will tend to spend it unwisely. Hard earned money has more value and you won't squander it on unnecessary things at the beginning of your start-up.
1) When you fail, you will have to re-pay the loan and the last thing you want is this extra pressure to succeed
2) If it isn't your own money, you will tend to spend it unwisely. Hard earned money has more value and you won't squander it on unnecessary things at the beginning of your start-up.
- Wanting to grow too fast and taking on too much
I see this all the time. People think they have to make $50,000 profit in the first year. Big mistake. It is a little bit like gambling: You want to make a nice living right away and are then willing to invest a lot of money in machinery or employees right away. The business model has to be tested first for 1 year at least before you make bold investment choices. So, start slow and aim for $500-1,000 profit a month in the first year at most. You can always scale up later.
- Hiring employees too early - and getting the wrong ones
Similar to the last point but many people make this mistake in the 2nd and 3rd years usually. Things might be going fairly well after the first year and you say to yourself: I should hire someone, so I can do less or the more important things. Stop right there. Just think of how much a full-time employee is going to cost you - $32,000 in Canada and that's best case scenario. Now you have to make $32,000 more profit that year just to break even. And now you are also a people manager with the emotional issues attached to that. Wait with employees until you have a track record of making $100,000 profit a year for 2 years in a row at least.
- Not being frugal
This is my biggest issue with so many start-ups. Nobody wants to be frugal. Everybody wants their business to look super-professional right from the start. Why? Be humble and buy your supplies (office supplies, etc) in second-hand stores. Use your own used car instead of a business car. Shop around for quotes to make sure you get the lowest one. In the beginning all of that frugalness is super-important. You have no income coming in, yet but many people spend their capital like it grows on trees. Then, after the first year they wonder why it is so tough to be profitable. I personally don't trust any new business that throws money around.
- Not using the internet the right way
Yes, everybody knows that the internet is useful for business in general. But I think most self-employed wannabes are not seeing the full potential. Through the internet you now have access to the whole world and their supplies/products. You got endless advice and tips from people who have started their own business and made mistakes. Your have websites that can be designed and search engine optimized in such a way that your products (if your business sells any) sell themselves if you rank high enough. And the best thing about the internet is that it is cheap to work with if you learn how to do websites and marketing yourself.
- In Summary
Start small, be flexible, be frugal, learn from others and don't go to fast. That way you will have a much better rate of success.
RSS Feed
