Many business owners and new entrepreneurs make a few specific errors time and time again – these errors cost them money, time, and makes for a longer learning curve than necessary. The following will review these 5 errors and tell you how you can avoid them.
Error 1) Thinking it’s “not time” to build a business plan
Many owners think the business plan comes after they secure a location…after they build a website…after they identify their team or partner. This is a painful mistake. First, it’s never too soon to start creating your business plan, and the earlier you do, the better. What you don’t want is to get to Grand Open planning only to realize you need more capital, you didn’t research your competitors enough to understand your own value add, or you come across 10 permits that you didn’t realize you would need in order to open your doors.
A business plan helps you map out all of these seemingly trivial points – and if you don’t have the time or expertise to do it yourself, hire a reputable consultant or agency to work with you. If you have shallow pockets and can do most of the work yourself, consider an independent writer to offer editing and aesthetic feedback for a few hundred dollars. If you can afford the price tag, larger firms can be very helpful, but often cost upwards of $10,000 to $15,000 for their services. If you’re somewhere between, consider an affordable company that offers experienced consultants, like Written Success – such firms guarantee that you get a great partner for writing your business plan, but with low overhead, you’ll only pay a couple thousand for entrepreneurial guidance, custom research, and full financials.
Error 2) Not securing enough capital
Scaling a business or starting a new business almost always requires more capital than anticipated – often 20-40% more. The best bet you can make as a savvy business owner is to use your business plan to understand how much capital you need, then pad it by at least 20%.
A word of advice: put this into a “Misc” bucket in your financial sheet. It can be easier to track unforeseen expenses later by pulling from this bucket as opposed to trying to pull funds from other line items in your budget.
Error 3) Assuming cheap labor will save money
There are scenarios where low-cost labor is a great way to secure generous margins. However, be careful where you leverage this tactic. Brick-and-mortar businesses need to track and understand their cost for training, turnover rates, and the price they have to pay for gaining and on-boarding new employees. Oftentimes, low pay means you will see lower loyalty than you would if you hire at or above competitive wages for your industry, and low loyalty translates into high turnover.
For online companies, it can be appealing to leverage content mills like Elance or Fiverr as an alternative to hiring marketing teams. This can be ideal for one-off instances – but if you find you are constantly having work re-done by these mills, or that you are seeking services more than once a quarter, you may be wasting your own time. These mills are hit-or-miss when it comes to quality, so gambling on getting a decent writer among pools of people in efforts to save money may not be the best way for a company to approach their needs. Oftentimes, one or two versatile team members or semi-permanent contractors are worth their weight and their salary to bring into your company for quality and consistency.
Error 4) Keeping the idea under wraps
There is this phenomenon that occurs for some entrepreneurs when they decide to move forward with starting their business. For some reason, many of these bold souls tend to keep their plans to themselves, not sharing their journey or their ideas with others. Some keep quiet because it’s a very personal experience – your heart and soul is in the business you are creating, and this makes the business feel like an intimate topic for you. Others keep quiet because they want to wait until things are successful before they share what they are doing. Even still, others are simply afraid of criticism and negative feedback about their endeavor, so they don’t broadcast what they’re working.
We once heard an entrepreneur say he wanted to keep his idea to open a daycare a secret because he didn’t want the idea stolen by someone else. (Hey, no one said entrepreneurs are always rational, brilliant though they may be!)
One of the worst things you can do is keep your new business mission to yourself (unless you are doing something that will be proprietary, in which case you should definitely tread lightly and strategically). Sharing your ideas can open doors for your business; doors where partners want to endorse you, investors want to support you, and other business owners want to mentor you. While these occurrences won’t be a guarantee, you can bet you won’t see any positive feedback if you aren’t willing to network and share your goals.
Error 5) Miscalculating risk
No business endeavor is free of risk. Many great businesses fail out of fear to take any risk at all, and this stifles growth and kills opportunity to thrive. Sometimes business fail for the opposite reason, and taking too much risk can be terribly detrimental on many levels.
The way to combat this is through careful planning and taking calculated risk. This needs to be more than a pros and cons T-chart – consider using a matrix showing probability, impact, and cost or implications of various scenarios. Sometimes, high risk / high reward scenarios are not as appealing on paper next to other options that may have lower risk and comparable reward.
Alright entrepreneurs, now that you know better, you’ll do better, right?