Sadder still are those businesses that failed due to the new business owner falling into traps that they could have been predicted and avoided. The following are the most common of those traps that I have seen:
- Opening a business in an industry that you know little about. Even experienced business owner make this mistake. At least every other year I have a client who is successful in one industry decide to open up a bar or a restaurant. I usually try to tell them it would be cheaper and less stressful if they just went to Las Vegas and bet $100,000 on the roulette wheel. The truth is being successful in any business requires a strong understanding of how the industry works and how to make money at it. This is something you learn on the job—not in the classroom or by reading books.
- Not having enough working capital. Every new business or product takes twice as long or three times as much as you expect. Of course, sometimes it’s the other way around. Be sure to have at least twice what you think you will need available to launch the business.
- Make sure you are opening your business in an area that is profitable. You may love the business, but it is easier to pick a niche in a hot industry with customers eager to buy. Dan Kennedy said it best when he said, “…the most important ingredient for a successful restaurant is hungry customers.”
- Make sure you have a reason for your customers to buy from you. Why, out of all the choices out there should the customer buy from you? If you can’t answer this before you start why does the customer need to start buying from your new business?
- Poor management skills by the owner. There are very few born entrepreneurs and there is no job that really prepares you to be the boss. You will have to learn on the job. In today’s information age, there is no excuse for not learning management skills.
- Don’t confuse an idea with a plan. Sure we have all heard about the multi-millionaire who put their initial business idea on the back of a cocktail napkin. What they seldom bother to tell you is the ton of hours that went into planning how to turn that idea into a profitable product delivered to the customer when they want it at a price they are willing to pay.
- Failing to have a well thought out sales and marketing plan. Build and they will come is not a plan! What if they don’t?