Entrepreneurship brings its challenges but also great rewards.
After co-founding an investment management technology firm, building my own $10 million software business, running a technology startup, and recently creating a boutique consulting practice — I’ve experienced firsthand the many mistakes in building an organization and the common mistakes others make.
However, it is experiences like these that build both character and the organization. These are the most common mistakes new entrepreneurs make while building their first businesses, and what they can learn from the experiences.
Mistake #1: Building the Wrong Team
Someone once said to me, “You can build a successful company with a stellar team and a mediocre idea. But even if you have a stellar idea, a mediocre team will crater the company.”
That being said, people are the key to building a successful organization.
- Make sure you vet your team well for skill set and compatibility with company culture and vision.
- Hire slowly and fire quickly.
- Be careful of those attitudes that bring everyone down.
The Five Dysfunctions of a Team is a great read and speaks to managing difficult team issues.
Mistake #2: Having Poor Cash Flow Management
As shared in my previous blog, Cash Is King, it is essential you have a thorough understanding of the state of cash in your business at all times.
- How much do you have in the bank?
- How much are you receiving from customers, weekly?
- How much are you spending weekly?
- If you are burning cash, how much longer do you have until you run out of your reserves?
- What options do you have for cutting the “burn rate” OR for obtaining outside capital (debt or equity) from various sources?
Many times, new entrepreneurs don’t understand their cash flows and are unable to analyze the impact of making an financial investment in product development, or a new hire, or sales before it’s too late.
Mistake #3: Failing to Focus
When you are first starting out and balancing the many facets of business, it is easy to lose focus.
There are times throughout my own career I lacked focus. While trying to grow my own firm, I “chased” revenues. In doing so, the team spent a considerable amount of time chasing opportunities that were not in our strategic roadmap or took significant management attention and were not scalable / repeatable to benefit.
Stay with what you know what you are good at and what fits with your vision. If you constantly chase the next shiny object, you will never get to the finish line.
I do one thing at a time, I do it very well, and then I move on.” Major Winchester from the television series, M*A*S*H
Mistake #4: Failing to Create Streamlined Processes
When you are starting a new company or trying to rapidly grow, you want to streamline your process.
With only 24 hours in a day, you want to maximize your productivity. Up front, it may mean a few extra hours but it serves you, your staff, your clients and even your investors, in the long run.
One of my clients, with a small video production business, is successfully in the midst of creating a “playbook” for all aspects of his business. These operational guides, not more than a few pages long each, enable him to quickly train new staff to provide quality and timely production services to his clients.
The earlier you can put some processes in place, the more quickly you will be able to scale your business and focus on the drivers of the business.
While coined “Common Mistakes” in entrepreneurship, the aforementioned are also valuable learning opportunities. While your vision may seem clear from the beginning, it’s the variables that help you to execute it, that require your attention and assessment along the way.
You will spend more time working on your business, than in it when you have:
- the team that will help you get there
- the resources to make it happen
- the attention and application to see it through
- the course of action to begin with
There’s so much more to be said for what you learn from the process than the product itself.
Are you a new or season entrepreneur who has learned a few hard lessons? I’d love to hear what business has taught you. Feel free to leave a story in the comments below.