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Why entrepreneurs and small businesses fail has become a hot topic in the media. One article claims this, another claims that, and a third claims something in between. All articles talk about valid reasons, but most site high level causes—like the lack of startup capital, but few talk about far deeper issues—managerial incompetence. For decades good research was, and still is hard to find, unless you’re willing to dig deeper. This is what the folks at StatisticBrain decided to do—to dig deeper. They found studies that also included the managerial side—the owners, and listed the top 12 management mistakes of entrepreneurs and small business owners.
Let’s look at each in more detail. .
Top 12 Management Mistakes of Entrepreneurs…
Some of the mistakes may surprise you.
1. Going into business for the wrong reasons
If you’re after wealth, fame and freedom—and to safe the world—think again.
Or, you want to go into business for other reasons, including
- You’re running away from your job, your boss, and the 9 to 5 grind.
- You think you have a great idea, but no feedback if it works.
- You want control of when, how, and where to do things.,
- You’re brother/sister wants to go into business with you.
- You want to spend more time with family.
Some entrepreneurs and small business owners started out with one of the aforementioned reasons, but very few became an overnight success.
Actually, most failed not only once, but multiple times before they got things right.
So ditch all the tabloids about the “wunderkind” entrepreneurs and run a reality check on “Why you want to become an entrepreneur or small business owner,” before you quit your job.
2. Advice from family and friends
Advice comes in many forms—there is good advice and bad advice; there is free advice, unsolicited advice and, of course, paid advice.
But, what about the advice from family and friends? People who are eager to give us advice because they have your best interest at heart. And, sometimes they do, but other times…(more often than not), advice that is subjective. Further, if the advice is even closely linked to finances it is often “emotionally” loaded—jealousy, envy, anger and the entire range of difficult emotions will play a role in the equation.
As an entrepreneur or small business owner you want unbiased and objective advice. There are many ways to do so. You can join an association in your field and network with fellow members. You could also join a mastermind group— online and offline— and get help from group members. Alternately, you could seek out a professional and pay for advice.
Here, I want to leave you with a few things to consider.
- Who are you listening to. (From whom do they get their information)
- What does the person know about…(your business, industry, competition, market etc..)
- Does it make sense. (Listen to your gut. What does it tell you)
- Does it get you closer to a viable solution?
Remember, in the end, it is you who has to make the final decision.
3. Being in the wrong place at the wrong time
You heard the mantra of one of the 4Ps, “Location, location, location…” And even so the 4Ps of marketing—Product, Price, Promotion and Place—could use an overhaul (due to the internet, each element has changed), they still hold much wisdom on what we do, and need to do everyday if we want to stay in business.
In the past, if you wanted to sell a product, you had to concern yourself with the channel by which a product or service is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. This is also called the environment in which the product is sold i.e., location.
Today, due to the internet, you need to know a whole gamut of other things like your customers interests and preferences, and how to effectively reach them i.e., social media. This is why researching your target market is sooooo important.
You can have the best product and message in the world, but if you’re in the wrong place it falls on deaf ears.
We live in a time of instant gratification. Because of this, the right time has become a constant “now.”
Because of this, you need to have the right tools and strategies in place so you can reach prospective customers when they’re becoming aware and thinking about how to satisfying their need. In other words, reaching them as they’re going through their new buyer’s journey–from awareness to consideration to decision.
Ok, I know, this doesn’t describe the “AIDA” model: Attention, Interest, Desire, Action. The reason for this is twofold.
1. The journey is problem specific, instead of product specific
2. The journey is buyer-driven, instead of sales-man driven.
You can learn more in the infographic provided by HubSpot Here.
4. Entrepreneur gets worn-out and/or underestimated the time requirements
We all can relate to a time when we burned the candle at both ends, but after a few days, or even a few weeks, life returns to normal until the next…project needs to get finished, term papers need to get written, or anything else that has a set start and finish. Then things return to normal.
Unfortunately, for many entrepreneurs and small business owners things don’t return to normal. Before one “thing” is finished, the next one (or two) is already screaming for your attention. And so the cycle continues. You’re always busy. So busy, in fact, that your forget to eat…
And, if you could, you would be willing to sacrifice the little sleep you get. All in the name of getting things done.
Until you hit rock bottom. A point in time when you feel like there is nothing left to give in you. You feel stressed, depressed, tired, exhausted and worn-out—like a wash rag that has seen better days.
And you wonder…
Here I could easily tell you the fix to this problem is time management, but it is so much more. It includes
- A healthy diet: your body needs fuel to give you the energy you need to get through the day. Start with a good breakfast — like whole grain cereal, fruit, and low-fat milk
- Plenty of sleep: your body needs sleep so both the brain and the body rejuvenates; sleep also provides you with energy.
- Exercise: exercise gets your body moving. Exercise helps you decompress—when stressed; helps your brain—increases the production of serotonin (mood booster), helps you sleep—you wakeup refreshed and, hence, more productive.
- Delegate: decide on what you and only you can do; delegate the rest to employees. (don’t have employees? Farm out.)
- Farm out what you can: Identify the things you’re not good at and are not important, but do anyway. Find someone who can do it on one of the networks like Fiverr or Upwork (previously Elance)
Let’s talk about time requirements.
As a new entrepreneur or small business owner, chances are you have to do a bunch of things you haven’t done before. Acquiring new skills takes time—there is a learning curve involved. Some things are easier than others; and some are influenced by external sources you have no control over—securing funds/capital etc.
So how do you get things right?
For tasks that are an integral part of your business, start a time journal. I know this doesn’t sound sexy, but this is exactly what big companies do. HR develops a job description, assigns tasks, and then sets out to find out how long it takes employees to do a new task. The formal term is time study.
And, you guessed in, in the old days, employees got a time journal/diary (today, this is computerized).
When you are working on something that requires you to learn/apply a new skill, enter it in the time journal. Enter the length of time you estimated for the task and also the actual time it took you to complete the task. How did you do? Was the actual time much more, same, or less.
Repeat this process until you feel a level of proficiency (usually three to four times). Now you have your time for this task.
As for things were external factors are involved, always give yourself a cushion. It is better to over-estimate than under-estimate the time. Further, communication with the other parties involved is crucial. Get a time-frame from each as to when you can expect an answer, the service, or the product. Then hold them accountable to their promise.
5. Family pressure on time and money commitments
Here, I have to get personal. Something I don’t do lightly. Something I’m working on—to share more of me.
I grew up in a family business. And while I did not realize it as a child, my dad was under tremendous pressure on both accounts. As far back as I remember, he was always under pressure from his parents (the founders of the business) and from my mom who felt like a fifth wheel in the equation. As for us kids, well, dad was there but always absent minded. But the real pressure came after both my paternal grandparents passed away.
While my grandfather was alive, Sundays were special—it was reserved for family and friends. After his passing on, Sundays became just another workday. To add to this, or maybe because of it, my mom wanted things more and more her way—a different house to live in, vacations on foreign shores etc.—in short, the attention from a husband and the lifestyle befit her status.
Dad is Busy
As for us kids, well, we had everything except quality time with our dad. He was present at the dinner table, but the conversations were seldom of a personal nature like—always with a business focus. Raising kids was left to my mom. When I reflect back on things, we all paid a huge price. As we grew older we drifted even further apart. Today, even so we all have good relationships with our dad, there is something missing—a connection that wasn’t nurtured in our early years. This saddens me.
I guess, this is why health and lifestyle coaching is part of my small business coaching offer. The rest comes from my own mistakes and the mistakes I saw my clients make in my family business coaching praxis.
“All men make mistakes, but a good man yields when he knows his course is wrong, and repairs the evil. The only crime is pride.”
― Sophocles, Antigone
This quote can be easily translated into
“All entrepreneurs make mistakes, but a smart one yields when he knows his course is of track, and gets back on it. The only crime is pride—not asking for advice, help and support.” ― Margit Willems
You don’t have to be an entrepreneur or small business owner to know that pride can stand in your way. Chances are, you encountered at least one situation in your life, when in hindsight you told yourself, “If I only would have…sooner. Things could/would be different today.”
Don’t let pride stand in your way to accomplish great things.
7. Lack of market awareness
So, you have a product or service you want to offer on the market. Great!
But, before you proceed, you want to make sure you understand your audience and the market you serve.
This requires more than going by what friends and family tell you. This requires more than to have a nice logo and creatives or buying ads in local papers, radio, television, and social media.
It requires you, for example, to gather information, like
- What business you are in.
- How your business impacts others.
- Who your customers are.
- Who your competitors are. Learn from what they do right and also what they could do better.
- What quantitative metrics are available. Do they support your qualitative research i.e., observation and insights.
Once you understand the market, your competitors, and your target audience you will have a picture if there is enough demand for your product or service.
The points mentioned are just a short, high level summary. The full scope of what is involved is beyond this list.
8. The entrepreneure falls in love with the product/business
Yes, this happens more often than you think.
To illustrate this point, I have included two articles that describe the problem. The first article is titled Edifice Complex. The second is called What Happens When Entrepreneurs Fall In Love With Their Creations.
The moral of the two stories, “Don’t fall in love with your product/business.”
9. Lack of financial responsibility and awareness
You’re in the business to make money!
As an entrepreneur and/or small business owner you now not only have to manage your personal finances, but also the ones of the business. This principle applies whether you are a sole proprietor or incorporated. It also means having two budgets and keeping two sets of books—a personal and a business budget.
Good so far.
Now, let’s look at a few potential pit-falls.
Meet Nancy, who bought the successful business from her previous owner/boss. It was a near perfect start. She was able to acquire the business owner financed with only a small amount down. She and her husband had saved up enough to cover the initial down payment and to off-set Nancy’s portion of the household income for a year. In addition, her husband would remain employed at his current job until retirement.
But, as the story goes…
- Neither Nancy nor her husband had the knowledge and skills to run a business.
- Some of their savings went toward the down payment of a new house and car befitting a business owner.
- Money was almost daily taken out of the cash register for personal things like lunches, gas, and other small purchases.
- Funds were spend on services and other things the business did not need, yet. (If you ever started a new business you know what I mean—the phone rings off the hook and everybody wants to sell you something).
- Within a few months, expenses exceeded income—and the savings were gone.
To add to an already dire situation, Nancy’s husband received orders for an overseas assignment. He would go and she would stay at home to run the business. Instead of supporting one household, now there were two.
The rational of the story—you have to be financially responsible, you need to live within your means. And to live within your means, you must be aware were your money goes and spend it on the things that will help you make money before you spend it on other things!
Name has been changed to protect client’s identity.
10. Lack of a clear focus
Hmmm, lack of a clear focus on what! We all know that focus is important if we want to succeed in both business and life, but what does it mean to have a clear focus.
As entrepreneur or small business owner we juggle multiple competing things that require our attention. All are equally important—so we think. To attend to all, what do you do?
First, before you can get focused, you have to admit that you can focus on only one thing at a time. I know this one is a tough one, because you still think you are invincible and superhuman. Well, you’re not. So be humble and accept this fact.
Second, start and focus on one—and only one— business at a time. Starting several business ventures will not only leave you unfocused and scattered, but also stressed and overwhelmed. Not only will you have several balls in the air, you will also have to make sure all stay in the air. We all know what happens when one falls out—the rest will follow.
Third, make a list of what you need to focus on i.e., marketing, research and planning.
Fourth, assign activities you must do under each of the focus areas.
Fifth, prioritize each activity in order of importance.
For more information, read my forthcoming article about entrepreneurial focus.
11. Too much money
For a startup, too little money can be a challenge, but too much can be a curse.
The first pushes you to get creative. You brainstorm and come up with viable solutions to “make things happen.” You innovate—and, by doing so, develop your “out of the box thinking” muscle.
The later can have a whole sleuth of negative effects on your business.
First, too much money can cause you to lose focus—you spend energy on many things, but not on building your business.
Second, you overspend on things that don’t add to the bottom line. Some examples include, leasing prime space and buying expensive furniture/fixtures too soon, spending money on the wrong marketing and PR efforts, and the list goes on.
Third, expanding to quickly can be hazardous to your life, family, business and finances. Plus, there is a real risk of losing control of things.
Further, if you’re money comes from angel investors and VCs, remember they gave you the money in hope to make a profit. The good news: you have the capital to build the business faster than you could without their cash. The bad news: the money comes with obligations—you live under their microscope. Meeting the investor’s demands can lead to stress, overwhelm, and even burnout.
12. Optimistic /Realistic /Pessimistic
While a healthy dose of optimism is necessary if you want to become a successful entrepreneur or small business owner, seeing every thing through a rose colored lens can be just as detriment to the health of your business as being a total pessimist.
As an entrepreneur or small business owner you need to see things through the whole spectrum between black and white.
In my research, I cam across an article on Entrepreneur.com, written by Steven Kaufmann, who captures things nicely.
The Seven Points
- You can’t make everyone happy. While we want to please as many people as possible, focus on your target market.
- You can’t do it all yourself. There will be days when you feel like superman or superwoman, but the reality is you’re human. Know when to ask for help and support from others. And learn how to delegate.
- There is no such thing as “work/life balance.” While I’m a strong advocate for “work/life Balance,” the key element is more about quality over quantity of time. (Learn more sign up to get notified about upcoming webinars)
- You will have setbacks. Accept that the things you have control over. The sooner you learn this lesson the better you will be prepared when a setback comes your way.
- Know when to walk away. Not everything will work out as planned. The secret is to know when to walk away.
- Business success is not personal success. You only have a limited time to spend on planet earth, so make the best of it. Be your best!
- Maintain a healthy dose of fear. Fear makes you look at things through a different lens. Just because an opportunity looks good, or sounds good, make sure it is good. Your fear-o-meter will tell you if you should think things through before you say “I DO.”
This concludes the “Top 12 Management Mistakes of Entrepreneurs and Small Business Owners.” The text under each “mistake” is based on my personal perspective and experience and does not reflect the opinion of the authors of the original studies. In the event I should have access to the full studies, I will the appropriate updates.
If you have some further insights, or would like to share with others, about your personal experience to any of the 12 causes mentioned, please leave a comment below or send me a message.
I’d love to hear from you!