Top Ten Mistakes By New Entrepreneurs
Back in 2011 I collaborated with Brian Lovejoy and Corey Comstock on this illuminating list for a presentation at Expo West. Brian is a brilliant product formulator and founder of Drinks That Work and Dr. Kiefer. Corey is a General Partner at Sherbrooke Capital, and former CEO of Oregon Chai. Both have had their share of success and failure. Here’s some of their hard won wisdom.
1. Unrealistic forecasting, especially cash flow projections. Your forecast WILL BE wrong. Know that your customers will pay late and pay short. Your suppliers will want to be paid now. Your costs will be higher than expected. Your sales might be lower than expected. If you plan with this in mind you may not run out of cash.
2. Lack of a 1-3-5 year “business / strategy plan” and the annual updating thereof. Many entrepreneurs become so enthusiastic about the business day to day they forget that a measured / methodical approach to the long term strategies increases the viability of the company and in turn creates a stable foundation
3. Not building the right team, internally: Unwillingness to hire expert team members that are smarter, more proficient, and higher skilled than the entrepreneur.
4. Not building the right team, externally: Unwillingness to hire expert external support advisors such as attorneys, accountants, tax advisors, IP council, marketing and PR professionals, etc.
5. Not knowing when to say no: There is a tendency to want to please every account, especially the big ones. If each account doesn’t make you money or if the sales and promotional costs “required” to maintain that account are too costly, be willing to walk away…for now.
6. Undercapitalization: Undercapitalizing the business and misjudging the amount of capital it will take to sustain a brand and company until consumer / customer adoption is achieved.
7. Falling in love with your own ideas: Know when your ideas on product, packaging or marketing are not working and be willing to move on.
8. Not knowing your market: Know your competition, the market and all of the differences between your product and other similar items. Never be surprised about what else is out there.
9. Being too opportunistic: When starting a new enterprise, entrepreneurs find opportunity everywhere – just because an opportunity may exist, if it doesn’t tie in to the business plan and mission – ignore it.
10. Trying to have your product sold everywhere – “boiling the ocean”. With any product or brand having ubiquity is hard to maintain without large capital budgets. With that said, most acquirers would rather see strong performance in specific markets with “white space” available for them than mediocre performance in a broader market.