How Not to Succeed in Business
By Sonjui Kumar and Roy Banerjee
This is a topic that we are uniquely qualified to discuss. As business lawyers and advisors, we get a first-hand view of businesses big and small, and a chance to see why some succeed and others fail. We are also small business owners ourselves, facing many of the same issues that our clients face. We hope this list can help you avoid some of the common mistakes that we see with new entrepreneurs and existing businesses.
1. Lack of cash
As anyone who has to make a regular payroll knows, cash is king. Many businesses do not set aside enough money to meet the needs of their business operations. Even a profitable business can have cash flow problems. Working capital loans, lines of credit and personal savings may all be necessary during the life cycle of a business.
2. Not hiring enough help
Not every business owner has all the skills necessary to make a business run. A founder may be a brilliant inventor, but still needs a salesperson to sell his products. The consummate seller needs technical experts to implement and install the products. Too many owners wait too long before hiring staff. Business leaders should focus on closing sales, building their organizations and building alliances — in other words, focusing on the big picture. If small or no budgets are a problem, be creative. There are many cost effective ways to staff a business including using student interns, part-time workers and outsourcing specific tasks.
3. Not loving what you do
Being an entrepreneur is hard work and there are certainly easier ways to earn a living. If money is the only motivation for running a business, it will be hard to maintain your momentum. Start a business that you love and believe in and your customers will believe in it too.
4. Thinking too small or too big
If you think too small, you may lose potential projects. If you think too big, you may expand faster than necessary. Businesses should aim for achievable goals and expand to meet them accordingly.
5. Investing too much in one customer
Businesses should be diversified. Many businesses set themselves up around one large client; this can be a blessing and a curse. Clients don’t last forever and being too dependent on one puts your business at constant risk. Of course, there are many business alliances that have lasted for decades and grow together. Maintain and nurture the customers you depend on.
6. Not enough or ineffective marketing
Marketing a business is expensive and requires special skills. Business owners often advertise on an ad hoc basis and fail to measure their results. Marketing should be consistent and repeated for maximum effectiveness. It should also be reviewed regularly to make sure it is reaching the intended audience and achieving the intended results.
7. Not getting involved in the community
Networking within trade groups, donating time or money to community groups and being involved in local boards is a great way to promote your business. Many business owners give back to their communities by volunteering for local charities. Networking can help businesses build long-term relationships that support growing and established operations.
8. Giving up too soon
Too many business owners are not focused on the long term, and lose their focus or drive too early in the game. Most businesses need several years to build alliances and gain traction. Even a great product or service needs time to develop its customer base. A common mistake is for business owners to put too much into a business up front and not save enough for the long run. Opening a successful business should be viewed as a marathon, not a sprint.
9. Not seeking mentors
There are many people in your community, family or industry that are willing to share their own stories. If you seek them out, they can provide you with invaluable and often free guidance. Entrepreneurs should also consider creating a board of advisors to advise them whenever necessary.
Businesses generally fail by making avoidable mistakes. Entrepreneurs should trust their gut instincts, but also use the resources that are available to them.
Note: The authors would like to credit some of the ideas and concepts in this article to a blog posted in the Young Entrepreneurs Forum at http://www.youngentrepreneur.com/forum
Roy A. Banerjee is a partner at the law firm of Kumar Pathak, LLC. His practice is focused on litigation and trial work in the areas of Business Law, Real Property Law, Construction Law, and Catastrophic Personal Injury including Medical Malpractice and Wrongful Death.
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