The 3 Worst Mistakes You Can Make Starting A Business

Many nine-to-fivers who have dreams of becoming entrepreneurs often press their noses up against the glass of the entrepreneurial lifestyle and fall into a swoon imagining the paradise that awaits once they embrace it.

I certainly don’t want to discourage anyone with entrepreneurial dreams from setting down that path, but if you’re contemplating the leap, you have to be careful not to fall into the trap of romanticizing the lifestyle or of underestimating what it’s going to take to get your enterprise off the ground. Here are some thoughts on a few of the most common things I’ve seen entrepreneurs underestimate when they’re first starting out.

1. Underestimating the time and energy your business will take

Deciding to become an entrepreneur isn’t all that different from deciding to run a marathon. You can’t just plunge in. You have to be in shape, and you have to understand the level of commitment that running a marathon involves. Are you prepared to arise at four in the morning in sub-zero temperatures to put in your training miles? Are you ready to take sizable chunks of time away from your family so you can give your goal the often-obsessive focus and attention it requires? Are you prepared to take on a physically, mentally and emotionally draining task? I hope so, because if you’re not, you won’t last.

If you’re thinking of launching your own business, you may be imagining the exhilarating freedom of dictating your own hours and control and flexibility you’ll enjoy with respect to those hours. I hear that sort of thing from aspiring entrepreneurs a lot. But what if you wind up having no hours, no control and no flexibility? Building a business is a round-the-clock job. There’s always something to do. So if you have a picture in your mind of an idyllically well-balanced life or business that runs itself, you need a reality check.

2. Underestimating the finances you’ll require

Another big mistake I see entrepreneurs make when they’re first starting out is underestimating how much money they’ll need to launch their business. There are very few certainties for entrepreneurs, but one I’ve found that one you can pretty much count on is that a new venture always costs more than you think it will. Most entrepreneurs are ideas people; financial savvy isn’t typically their strong suit. Pie-in-the-sky thinking works beautifully for visionaries, but it doesn’t work so well on the financial side. Don’t forget to think through all the potential costs carefully before you start, and ask others whose expertise you trust to eyeball your projections in case you’ve omitted something. Then put your numbers through hypothetical stress tests to make sure they’ll hold up under pressure. That way at least when a crisis comes--and it will--you’ll be ready.

3. Underestimating the need to balance your skills

One mistake that many would-be entrepreneurs make when they’re first starting out is thinking they can do everything themselves. You can’t do it all. It’s essential to surround yourself with others whose skills are complementary to yours. The people you hire don’t have to be your best friends--you’re not running a social club--but they do have to be individuals you respect and they should believe in what you’re doing. You also need to accept that you’ll probably have to hire them before you can really afford to. If you wait until you’re one hundred per cent ready, you’ll never get your venture off the ground.

There’s a Chinese proverb I like to quote about how you can’t take two leaps to cross a chasm. You have to think through how you’re going to approach the jump, get in shape for it, and consult others with more knowledge of physics and variables like wind and weather to ensure you’ve considered all the variables. Before you leap, you want to make the unpredictable predictable to the greatest extent possible. Even when you do all that, though, you can never really be sure if you’re going to land. You need to sometimes just make that leap with the information you have at the time, along with your instincts. That, in a nutshell, is what being an entrepreneur is about. So, do you think you can handle that?

I’d love to know what you think was your worst mistake starting out? What would you do differently if you had the chance to start over?

Tags: arlene, failure, starting, startup, up

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Comment by T Carey on October 28, 2012 at 10:35am: Like you said, underestimating what it would cost. I really needed more $ for advertising. I also opened a shop in a tourist town and overestimated the amount of business during the off season. also, my assumption going in was that the town was very prosperous. I learned the hard way that retail business owners were only trying to keep up appearances.

I also agree wholeheartedly that having a business means you will have little time for anything else. But it's a good learning experience.

Comment by Norma Klassen on October 28, 2012 at 11:00am: In a former business, disaster restoration, the biggest challenge I had was expecting employees to measure up to my standards. Eventually I realized it was a rare person that could provide the demanded performance and wished I could re-hire people I had dismissed for less than perfect work. Some of them were as good as I would ever find in 12 years of operation.

Comment by Steve Megaffin on October 28, 2012 at 11:15am: For me, it was not taking into consideration the cost of shipping. You can have a great product and all the marketing to back it up, however if the cost to ship is as much as the product their buying, it can be a real deal breaker.

Comment by Dragan Cvijan on October 28, 2012 at 11:17am: Trust, trust, and trust. With preopinionated is waste of time and energy.

Comment by Diana Read-Miedema on October 28, 2012 at 12:56pm: As the only Sage University Contract Instructor/Sage Certified Trainer for Simply Accounting living in the Maritimes (NS, NB, PE) I have set-up hundreds of successful small businesses in past 23 years. I have done countless accounting tech support jobs and the #1 reason why businesses are in danger of bankruptcy is that they had not paid for professional bookkeeping training and software at the beginning and they had held on to CRA "trust funds" of G-HST and/or Payroll-WCB for cash flow purposes! The banks will not loan money to pay off CRA.

Comment by Diana Read-Miedema on October 28, 2012 at 1:02pm: I have a gift for small biz owners whether new or experienced, poor or wealthy. An online flip-book "Simply Financials-Tax Accounting Handbook 2012" at SimplyFinancials.com website. Click here - Free online: Simply Financials-Tax Accounting Handbook 2012

Comment by Christy Richardson on October 28, 2012 at 1:37pm: Similar to your point on finances, I didn't realize how long it would take to make a profit. The first year we didn't take home a paycheck...any money we made went right back into the business to pay for another expense. Thankfully we had a bit of savings and a line of credit!

Comment by Chris Jones on October 28, 2012 at 1:55pm: In my view, if it happened, I was meant to learn from it. Therefore I have a hard time thinking of anything as a mistake. But if I had to choose something, it would be not creating a clear outline for the role of my team members. This did cost us an original team member who was a great contributor. In turn, it has forced me to re-examine my expectations, put things in writing and make sure future members understand their role. In our case, team members are not paid employees but receive free promotion and advertising so we ass-u-me-d anyone involved would be grateful. I guess that would be my biggest mistake so far...more to come, I'm sure.

Comment by Carla Charles on October 28, 2012 at 2:38pm: Not being educated was my biggest mistake. I'm an idea person, with a lot of ADD running through my veins. I'm not organized nor am I financially savvy. It has taken me 3 years to acknowledge that I need to take control and not just act randomly. So, I'm taking business courses, and honestly feel more confident already.

Comment by Ron De Silva on October 28, 2012 at 2:56pm: ...if I was to add to this.... it would be...not willing to step out of your comfort zone to make things happen.