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Do You Know The Top 10 Entrepreneurial Pitfalls?

Lucere Legal helps entrepreneurs avoid business pitfalls

Is your business just getting off the ground? I bet you’ve seen your share of mistakes–being an entrepreneur isn’t easy. In my years of experience growing my own businesses and helping other small business owners seize the the initiative and build their companies from the ground up, I’ve seen it all and want to make sure you don’t fall prey to one of these all too common pitfalls.

The New York Times–often a good a resource for entrepreneurs — ran a post on the top-10 list of the most common mistakes small business owners make. Read on:

  1.  Keeping it in the family.  Is your friend a PhD credentialed electrical engineer? If not, better to keep him out of a job that very much requires that background. Wanting to benefit your friends and family is human nature, but don’t let it threaten your business. Too often, businesses are burdened by the dead weight of employees who won their position not by merit, but because of their relation to the owner. The danger is broader than you might imagine: they may damage relations with clients and customers, they lower morale among employees who earn their pay, they make mistakes that could cost you big bucks, and overall represent a net loss to the company.
  2. Letting low rent take priority over success.  You may be running your budget lean-and-mean, but that doesn’t excuse or make up for choosing a sub-optimal location for your business. You need a location that will provide you with the best opportunity to generate new customers. You may notice that Louis Vuitton doesn’t locate a store amidst dilapidated tenements.
  3.  Buying used.  Buying used can save you cash the moment you buy, but what about the long run? How much time and money will have to be put into fixing used equipment? What impact will a machine that’s down for the count have on your customers and employees? Make sure to run the numbers and do your research–make sure that the odds of equipment failure are low for the model you’re purchasing, verify that the equipment is fully functional before you finalize the transaction, and budget in repair costs before they need to happen.
  4. Practically giving things away.  Is everyone in your region selling Product X for $9.99? Don’t think that pricing the same item at a dollar cheaper will necessarily win you new customers and higher sales numbers. There’s a reason economics classes don’t stop at Econ 101: the market is far more complex than your sticker price. Work out your minimum acceptable revenue first and take care when undercutting competitors.
  5.  Not spending on professional advice.  If you think it’s expensive hiring a professional, just wait until you hire an amateur! Behind that lower rate of a cheap lawyer or CPA are hidden costs that could ravage your budget. Do your research and find someone who will provide the best possible legal and financial advice for a reasonable fee. Don’t think you’ll get the best out of someone you pay for a one-time gig–build an ongoing relationship and you’ll have someone to count on. Work out some time in your month to seek out their advice and input on legal and financial matters; they may well spot a hidden opportunity or lurking danger that you would have otherwise missed.
  6.  Using your personal bank for business banking.  All banks have their areas of expertise, so make sure that yours knows how to serve the small business customer. If you follow the above rule and have chosen a good accountant, he or she will be able to guide you to banks in your area that cater specifically to the needs of small business owners.
  7.  Borrowing blindly.  Borrowing money may be worth it to ensure that your operations run smoothly, but too many take out loans for “must-haves” that aren’t. Make sure you can tell the difference between items you need and items that you want.
  8.  Not measuring your success.  If your business isn’t result-based, you risk spending a great deal of money on expensive business practices for little return. Collect data on every aspect of your business and calculate whether the money you spend on it creates a corresponding return (be careful to avoid measuring exclusively in directly-linked dollar amounts–it’s difficult to put a price on your relationship with customers or an aesthetic that draws people in!) This is true across your business, and especially so for marketing. Always find a way to ask new customers where they heard about you; was it that multi-thousand dollar ad campaign or simple word of mouth? Track everything.
  9.  Treating employees as friends.  Obviously, you should get along with your employees–it’s good for morale and it’s good for you.  But when you realize that the job just isn’t a good fit for one of your hires, don’t lollygag through months of indecision. Your business and profits will suffer if you don’t take action as it becomes necessary. Remember that confronting the problem need not necessarily have a negative outcome–an underperforming employee may well reform his or her ways.
  10.  Falling in love with your product or service.  A wonderful product or service is no ward against nor fix for bad operational decisions.  Be sure to balance your focus between your product and your team, as neither can survive without the other.

We can help you discover if you have what it takes to start your own business and guide you through the steps to successful entrepreneurship.  Whether you are new to entrepreneurship or already operating a business, call us today at (612) 206-3701 or fill out our contact form to schedule a business consultation session.

Image courtesy of Jesadaphorn / freedigitalphotos.net

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