If you are just getting started or considering making the leap into business for yourself, it is important to realize the pitfalls you may face. Understanding these risks should not take away from your optimism. Just the opposite: understating these areas of failure should help you focus your plan and guide you to areas you need help on.
Trying to be a Jack-of-all-trades - I cannot tell you how often I see this as an issue of failure. Many of us, myself included, want to be the person who can figure anything out as we go. I love diving into projects and learning as I go; I hope to never lose that part of myself when it comes to my personal life. But when it comes to my companies, I leave a lot of things to the experts. There are too many avenues for failure. Accounting, personnel, human resources, operations, sales, marketing, technology, etc., are all areas where you can stumble along for a while trying to figure them out, but eventually you will fall. When you start a company it is most likely because you have a particular skill. Focus on that. Don't take time away from your gifts to work on areas you know nothing about. Hire outside people that are referred to you and are experts. It will cost you a little bit of money, but you will earn more by freeing up your time to perfect your craft. There is no shame in this.
Cashflow - This has been said too many times but always bears repeating: cashflow is impossible to predict in an new company. Despite your best efforts, clients will not pay on time, but vendors will demand you pay on time. This is inevitable and only a matter of time. More companies fail because of cashflow than will ever admit it. This can be embarrassing and many people never admit this when asked what happened. Build up reserves and make sure you can survive long droughts with no payments. More on cashflow later.
Getting the Website Wrong - Make no mistake about it, your website will be your top salesperson. This is the initial view most people have of your firm and more often than not, the last. When people go to your site they have to very quickly understand what you do and why they are there. If they don't you will lose them. The design should be pleasing as well as to the point. The site must also be mobile friendly. Don't waste a nickel on a site that isn't. Template sites like Squarespace and Wordpress are just fine to use; experts and designers have done terrific work creating a shell for you to use. The key to your site will be all in the content. The site needs to be informative, yet brief. Walk me through what you do and for goodness sakes, make it easy for me to hire you. A website that doesn't allow me to hire you on the spot is a waste of a site.
Web Marketing is More than Just a Website - Many people, large companies included, build a website and forget it. This is simply not enough. From an outsiders perspective you need to give us a reason to hire you. You saying that you are the best in the business with great service is not enough; everyone says that! You need to be cultivating the content of your site on a regular basis, creating content that people want to share. Your website company cannot do this for you, you are the expert. If you are not a natural writer, learn. Create BLOG posts, infographics, videos, and recommendations on other things. This is a start to having an SEO (Search Engine Optimization) strategy. In order for you to be found on the internet, you need to get people to link to you. You need to make yourself found. No one looks to page 6 on Google. The way to page 1 is by creating content that matters.
Failure to Understand Where Your Leads Come From - Getting a client to call or contact you is the ultimate validation for any business. That call should mean the world to you and is the life blood that keeps you alive in business. You need to have a clear understanding of how that person found your business. Did they do a web search, see an advertisement, see one of your vehicles, networking event, etc.? Keep a running list. This is the only way you will know where you are weak and where your efforts are working.
Beware the Initial Pop - Once you officially hang your shingle and open your doors to new business, it is quite possible you will have a slew of business coming in. This is a culmination of a number of things including referrals, marketing efforts, and word-of-mouth. This is great validation for why you should be in business. However, this will stop after a short while. The initial pop you experience will be followed by periods of drought and cash crunches. This is inevitable, and if you are not prepared, you can get taken out pretty quick. You need to make sure you are seeing systematic and repeatable business come in before you start to make unwise investments in hiring and operational expenses. Capital purchases are not as bad as long as you are not financing them, meaning you pay for them outright. Operating expenses are monthly expenses that will pile up quickly. Whereas, if you invest the initial sales into purchasing of equipment through a capital expense, you may actually survive longer by not having overhead. If you start to think that a pop in your business is normal and you are loaded with operating expenses, you are setting yourself up for failure. There are so many surprises in business you will have no way to prepare yourself for all of them.
Failure to Budget and Forecast - I have been running companies for going on seventeen years now. What my budget and forecast looks like today is vastly different than when I started. I am proud to say it is much more sophisticated but easy to understand than most, but this process has matured over years and become much more sophisticated. Last year, I launched another business and spent a good deal of time developing my budget, income forecast, and sales strategy. Despite having years of experience under my belt, I ended up making some calculation errors in what I could charge for the services and what the market would allow. This caused us to miss a lot of financial benefits we though we would have on the front end. We had to recalibrate and then keep going, causing a three month loss of time and money. The lesson was humbling and invaluable, I needed to be reminded that even an experienced entrepreneur can still struggle. You can avoid mistakes and cashflow issues by simply working a budget, sticking to it, and properly forecasting. Odds are you will get the budget and the forecast wrong for several months, which is why you have to stick with it and perfect it. Learn and adjust. As long as you realize nothing is static, you are going to be okay.
Guarantee of Future Sales - Regardless of how successful you are this month, there is no guarantee that another sale will ever come through your doors. You are not entitled to selling another client. That statement is brutal but true. Picture the person selling buggy whips: their business would have been booming at some point. Unless they opened up a dealership selling Fords, I am betting reality snuck up on them pretty quick. There is no guarantee of future sales. So treat every call you receive as a gift. Spend everyday perfecting your skills and your product. Get up every day and decide what you're going to do to earn a prospects business. Never take sales and clients for granted. You may have the perfect location today, but neighborhoods change. You may have the ideal product today, but that will be outdated tomorrow.
Hubris - Despite what you think about yourself and your products, someone else thinks that about their products and services. We all want to differentiate ourselves and believe that what we bring to the table is truly unique. Unless you have specific industry insights or hold specific patents, you have massive amounts of competition. And if you do have insights and patents, someone else wants to take you out. Starting a business means you have taken a huge first step into financial stability and control of your fate. You are already ahead of MOST people, but not all. You are simply on the road. It will take you years to perfect your business. You have to keep your ego in check otherwise you will look like a fool. Here is an example: I solved a major network security integration issue years ago. I solved a problem that I was told by the manufacturer could not be done. I felt like I was on top of the world, and I was for a while. I put it on LinkedIn, my BLOG, etc. Someone at church even came up to me because they read about what I did. But once the manufacturer figured out what I did they integrated it into their products by default, rendering my work pointless. The manufacturer didn't pay me for my work, they reverse-engineered it. I no longer tell people about that problem I solved because it is irrelevant now. I have to solve new issues, I have to make myself useful to people, and I have to continually work to be successful. Puffing my chest does nothing for my future success.
Sustaining Business - Believe it or not, it is easier to stay in business when you are smaller than when you are larger. With growth and longevity comes new issues and problems. Vendors will expect you to sell more next year than last. Cash will become a daily thought-process after you hit a few droughts, even in good times. Employees will never care about your company and your clients the way you do. When you get started you are doing anything you can to be helpful. All of your thoughts and efforts are around how you can be a success. But after you start to hire you will become frustrated that they don't care like you do. You will wonder why you can't find people who are as hard a worker as you are. You will vent to your spouse about how they don't take care of the clients as well as you do. You have to avoid this poison; no one will care as much as you do. It is impossible. This is your brain child and you have to sell them on your vision. You have to become a leader not a manager. Spend as much time creating this culture as anything else you do. Your business must be repeatable if you want to grow. Starting a business is easy, maintaining a business is hard. Even on your 25th anniversary.
Not Going Above and Beyond - This article said 10 reasons, I'm giving you 11. The reason is simple: doing what you say is not good enough. That is the minimum. I learned this lesson long ago. You have to always work harder to achieve your clients' respect. What you did yesterday is not good enough for today. You have competition and after years of experience, you are no longer a startup. You will inevitably settle into a routine and repeat clients will become normal. Then one day you will phone it in and skip a step, or not answer the phone with a smile on your face. You will take a short cut or not own up to a problem. Suddenly, repeat clients will be snatched up by your new upstart competitor. Congratulations, you are no longer a new business. Now you realize that you have to work just as hard as you did to stay in business.
I hope this list was helpful to you and if so I would appreciate you sharing it with someone looking to start a business. Business is one of the most rewarding experiences you will ever have. It is an opportunity to serve society in a positive way. It is about more than money and recognition. If you do it the right way, you will provide a positive impact on society and create the ultimate stability for your family. I started to write this by doing some research and then I stopped. I decided to write from experience. I have seen a lot in 17 years and I don't plan on staying still for the next seventeen years.