When I started my first business, I made a lot of mistakes (everyone does). While mistakes are unavoidable, you can use the lessons learned by others to prevent them from taking you down. Now with over a decade in business, I see entrepreneurs making the same rookie mistakes over and over again, and I recognize them because I made them too. Here are the top rookie business mistakes that entrepreneurs make and how to avoid them.
Note: The numbering doesn’t mean that one is more important than another.
1. Saving Money on Professional Advice
Speaking from experience, trust me when I say this: there is NOTHING more expensive than a cheap lawyer or accountant!
When starting out, often we try to cut corners to save cost. Which can be good in some cases, but not when it comes to professional advice.
Just because a lawyer is BAR certified or an accountant has a CPA, doesn’t mean that they’re experts in your field. Like anyone else who is good in a specialized niche, you should expect them to make a good living.
But this goes beyond just lawyers and accountants. I’m a big believer in learning from other people’s experience. Why?
Because I have learnt the value of time.
When entering a new field, I always reach out to folks I believe to be industry experts and pay them for their time. If me paying someone $400 per hour, helps me avoid making a $25,000 mistake or saves me 10 hours of work, then it was an investment worth making as I saved myself a lot of time and money.
Clarity is a great service where you can get a hold of a lot of industry experts like Mark Cuban, Eric Ries, and of course ME! (Syed Balkhi Clarity Profile)
2. Blindly Following Advice
Another common business mistake that new entrepreneurs make is blindly following advice (whether it’s professional or from a friend who runs a business in another field).
While you should always get professional advice, it’s important to be objective about it and put the advice in perspective of your business.
Just because you heard it from an expert, doesn’t mean you should follow every single word of it.
Try to get multiple opinions and do your best to make an informed decision.
3. Falling in love with your product
When you create a product, you obviously have a bias towards it. You probably think it’s the best in the market.
While that’s probably great for your ego, it’s important to not lose sight of all the work that could be done to improve the product.
At the same point, it’s crucial that you do not fall in the trap of perfection like I did.
Finding a healthy balance between knowing when perfection is not needed and good will do can go long ways in your career.
4. Underestimating or ignoring the competition
While there is a lot of advice floating around about not being obsessed with your competition, which I agree with to a good extent, you should also not ignore the competition either.
Every business has competition, and not just from other businesses – sometimes the toughest competitor is you.
If you don’t know why your business is better than your competitors’, or you are not conveying that message properly to your customers, then you are going to lose the war.
5. Not setting the right goals
A common business mistake that I see in even folks who’ve had businesses for years is not setting the right goals.
First step is to have two sets of goals – short term and long term.
Second and more important step is to make sure that your short term goals lead up to your long term goal(s).
When you get the second part wrong, you spend more time thinking and less time doing.
6. Being cheap about marketing
When I talk with new entrepreneurs, it always surprises me how marketing is always a low priority in the list.
THAT’S HOW YOU GET MORE ($$$) SALES!
You should always have a budget for marketing, specially when you’re a new business.
I think the reason why new entrepreneurs do not have a marketing budget is because they can’t figure out the ROI.
This starts with proper tracking and reporting. If you know your audience and numbers, then it becomes easy to acquire new customers.
And in my book, acquiring customers is always a TOP priority.
7. Paying yourself a low salary
A very common business mistake that new entrepreneurs make is getting their salary wrong!
Often we tend to pay ourselves very low because we believe that it will give us more capital for growth.
The downside of that is when you pay yourself low, you are hoping on cashing the profits as distribution. This hurts the much needed separation between your savings and funds in your business account.
You still have to live and life is full of surprises. It’s better to pay yourself industry standard salary and keep a separate savings account, so you don’t have to tap into business funds for your “personal emergencies”.
8. Doing Everything Yourself
This is a common business mistake that many struggle with (both new and veterans) – trust me, I still struggle with it, but I’m getting better.
While it’s tempting to design your own logo, do your own bookkeeping, run your own payroll, it’s usually a bad idea.
Just because you can do it, doesn’t mean you’re good at it. And that’s not an insult.
Even if you’re good at it, you have to determine whether that’s the best use of your time.
I’m a big believer of outsourcing, and a big challenge there is to find the right contractor overseas. Recently while talking with an entrepreneur, she told me that she hired a person on elance who go through all the bids on her elance projects and present her with the best options.
9. Choosing the wrong business partner
Choosing the wrong business partner is probably one of the worst business mistakes you can make. Trust me, I know.
At the same time, having a good business partnership can be very lucrative.
I have written a detailed article on how to choose the right business partner where I share 7 tips that I learned overtime.
The most important tip I want you to know is let the lawyers do their job. Just like you don’t perform your own open-heart surgery, you shouldn’t craft your own partnership agreement.
It’s a huge business decision, and you want to make sure that you do it the right way.
10. Overspending on flashy things
Overspending is a very common business mistake that a lot of small business owners make.
In my experience, it pays to be conservative in your spending until your business has a consistent track record of profits.
Some common items that I see entrepreneurs go crazy on – business travel expenses from hotels to meals to drinks. You can easily reduce them. Same goes for fancy equipment, office space, etc.
You should be wary of taking on debt – as a new business owner you’ll most certainly have to sign a personal guarantee on the amount you borrow from the bank. At all costs avoid business credit card debt.
These are just some of the top business mistakes I see new entrepreneurs make. Have you made any of these business mistakes? Got a mistake that you see others making that I didn’t list? Share them in the comments below.