I jumped into the world of entrepreneurship a few years back, and it's certainly been an interesting ride. Don't let anyone fool you -- business ownership requires a lot of hard work. No matter what you do, you're going to make mistakes in the beginning. However, once you get all the wrinkles ironed out, the benefits of self-employment are numerous.
In order to help you along your way, here are five typical mistakes entrepreneurs make, as well as some suggestions on how to avoid them:
- Not doing enough research. One of the worst mistakes you can make as a first-time entrepreneur is not researching the industry or niche you want to penetrate. With the Internet, you have a world of resources at your fingertips, so take advantage of it. Several pieces of information you should keep an eye out for include current demand, competition, average startup costs, and when you can expect to become profitable. I conducted thorough research, and therefore went into business with my eyes wide open.
- Not saving money. If saving money is not at the top of your list, sustaining your business over many years will be incredibly difficult. First, create a simple budget by recording all fixed and variable monthly expenses, as well as an estimate for monthly income. This can give you a rough idea of how much money you have to spend -- and if you realize you are spending more than you are earning, you'll know it's time to cut back. In order to cut costs or reduce expenses, consider purchasing used equipment to outfit your office. Turn down your office heat or air conditioning, and make sure you are not wasting any energy. And if you are spending a fortune on advertising, consider implementing free social media campaigns instead. Many business fail due to money woes, so doing whatever you can in advance to prevent these troubles is key.
- Over-reliance on outside financing. Instead of begging for money from angel investors or venture capitalists, look to your own checking account for financing your startup. You'll maintain more control over your company's direction and enjoy a bigger percentage of the profits. I financed my own business by bootstrapping, and I have no regrets. Of course, you don't want to overextend your personal finances and go into debt to start your business, so some outside business financing may be necessary.
- Not fully utilizing social media. The best way to gain the most exposure for your small business is via social media marketing, which offers the additional benefit of being free. Start accounts on Facebook and Twitter and post helpful content to your potential customers, making the experience as interactive as possible by personally replying to each person who responds. Once your popularity begins to grow, consider conducting weekly TweetChats on topics relevant to your business, and offer giveaways to boost your presence on Facebook.
- Expanding too soon. While my website enjoyed modest success early on, I ultimately decided against pursuing an aggressive growth strategy. Expanding a business too rapidly can negatively affect the level of customer service you provide and can also overwhelm your staff. Once you've got a good thing going, the last thing you want to do is cause damage to your brand by overwhelming your workforce. Expand conservatively, and you are more likely to enjoy success in the long run.
Through all of my trials and tribulations, I always relied on one key piece of advice a successful small business owner once gave me. He said, "Andrew, stay passionate about what you're doing, work hard, learn from your mistakes, and success will eventually come your way." Entrepreneurship isn't easy, but once you've obtained success, the benefits make it worth all of your hard work.
What other mistakes should entrepreneurs avoid when just starting out?
Andrew Schrage is co-owner of the MoneyCrashers.com Personal Finance website. The site strives to educate readers on a wide variety of topics, including how to budget for retirement, tips to increase your income, and the best small business credit cards. Schrage hopes to make a meaningful difference in people's lives as they work to gain and maintain financial freedom.
The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.