Top 4 Mistakes Entrepreneurs Make

Posted by Joni Holderman on Friday, August 14, 2009 at 6:39pm.

Around the globe, most small businesses fail within the first 3 years. All to often, it is because the entrepreneur made one of 4 very common mistakes. Any business owner, from a software giant in Kenya to a vintner in South Africa, should be wary of these common mistakes.

Mistake #1: Don’t research the market. Too many entrepreneurs lose touch with their customers. Listen to their comments, feedback and suggestions to find out what they really want and need. If one customer tells you he needs a product, there are probably 100 more who have the same need, but haven’t mentioned it.

Mistake #2: Focus on the product, not the customer. Simply because the business owner wants to make a product or deliver a service doesn’t mean that someone wants to buy it. That is why it is important to focus on the customer’s wants and needs, rather than focusing on the product that you would like to sell.

If one creates and market a product that customer’s need or want, it will be easy to sell. If one creates a product and then looks for customers, they may have a great deal of trouble selling it the product. It is easy to sell nets to fishermen. It is difficult or impossible to sell them gasoline for their outboard motor, if they don’t have an outboard motor.

A good conversation requires each person to listen, as well as talk. When one person does all the talking, eventually others lose interest in listening to him. In the same way, a business owner who focuses only on his or her needs or product will eventually lose the customer’s interest.

Mistake #3: Ignore the competition. Too many entrepreneurs lose out by ignoring the competition. It is natural to focus on the business - but it is foolish to lose sight of the competitors.

Some questions to ask when researching competitors:

• How many businesses are offering the same product?
• Is there room for one more in the marketplace, or is it saturated?
• Who are our ideal customers?
• What do we have to offer that is unique?
• How can we satisfy their needs better than any other company?

Mistake #4: Undercapitalize. The old saying “it takes money to make money” is as true in business, as in personal finances. Most small businesses fail within the first year, simply due to a lack of capital - the basic funds to operate.

Business owners need to ensure that they have enough capital on hand to see them through the first 18 months of operation - the leanest time for any business.

There are a variety of sources for business capital. Many small business owners invest their own funds in the enterprise, but there are other sources of funding. A business owner with a well-written business plan may be able to borrow money to start the business. A partner or small group of investors can bring much-needed capital to the business. Some of them will want an active role in the business in exchange for their investments.

Venture capital companies often offer free or low-cost funds to small businesses with great potential. Angel investors often provide grants or no-interest loans to promote a business. Finally, a start-up can go public, offering shares to a general audience.

The source of investment capital is not so important, but it is critical that the entrepreneur secure enough capital.