Entrepreneurs should think of themselves as learners. While stories of overnight success exist, they are rare, and often do not reflect the work that actually went into building the company. Making mistakes is an unavoidable and valuable part of the entrepreneurial process. Through mistakes, entrepreneurs learn what doesn’t work, so that they can focus on different strategies and avenues.
At the same, not all mistakes are equally productive or helpful. Some lessons need to be learned the hard way, but it’s better to avoid plenty of other mistakes, by looking to successful entrepreneurs and seeing where they initially erred. Some of the most common avoidable mistakes young entrepreneurs make include:
Hiring based on cost alone.
One of the biggest mistakes that entrepreneurs make early in their career is hiring based on cost, rather than skill. Naturally, when finances are tight, it makes sense to find labor that will cost as little as possible. However, entrepreneurs who go down this road can end up paying in the long run. In general, employees and consultants willing to accept less money are doing so for a reason. Often, they have a lack of experience or skill; others are simply unreliable or difficult to work with. In some circumstances, all of these problems can be present. Ultimately, one great employee can be worth more than several mediocre employees. For that reason, it is important to hire based on skill and experience rather than cost. Entrepreneurs often do better when they hire one talented, stand-out employee rather than several people with lackluster resumes and skills.
Trying to do everything oneself.
This mistake is closely related to the prior one. Young (and older) entrepreneurs sometimes think they can do everything alone, or that no one else can do the job as well as they can. This approach to entrepreneurship can quickly run people into the ground and lead them to give up entirely. While the entrepreneur is the only one who sees every facet of their vision, it’s also their job to inspire other people and bring a team together under a common goal—this motivation inspires people to do their best work. In the end, entrepreneurs are held back when they fail to bring on help, whether that means finding a mentor, getting in touch with a consultant, or hiring more employees. Sometimes, doing all three will jumpstart or reinvigorate the business.
Becoming paralyzed by fear.
Entrepreneurs put a lot on the line and accept a lot of risk to pursue their passions. Sometimes, young entrepreneurs begin thinking “what if?” which can become a slippery slope toward fear and anxiety. Considering different options and imagining alternative paths can be productive when problem solving, but when entrepreneurs start to second-guess themselves and dwell on fears, they can freeze up. Virtually every entrepreneur, young or experienced, is afraid of failure and rejection, and that’s understandable—and probably healthy. However, entrepreneurs must also have the self-awareness to recognize and control their emotions. Learning how to do this will help young entrepreneurs become the even-keeled leaders their companies need.
Obsessing over product development but forgetting sales.
A common pitfall for new entrepreneurs is focusing on developing a product or service while letting sales issues fall by the wayside. In reality, no product is perfect, and entrepreneurs frequently release products before they are completely finalized. (That’s essentially what a beta version is, after all.) Doing this allows startups to gather invaluable feedback from customers, troubleshoot problems, and make a better version in the future. Letting go of product perfection also provides time to focus on marketing. Even the best product in the world won’t sell without some sort of marketing. Ideally, entrepreneurs should split their time between development and marketing, so that they can continue to refine their offerings while figuring out the best way to sell them.
Paying too much attention to the competition.
Young entrepreneurs often go to the extreme when it comes to keeping tabs on the competition. Some will spend an incredible amount of time researching the competition and trying to figure out their next moves, in hopes of staying ahead. The problem is that any time spent focusing on the competition means time away from one’s own company. Self-evaluation and communication with customers can get tossed aside when entrepreneurs focus too much on the competition. Of course, it’s also a mistake to completely ignore competitors. Great entrepreneurs keep their fingers on the pulse of their industries without becoming overly obsessed. They know the other players and their products, but their main focus is on their own company and how it stands apart from the competition.
Keeping margins too small.
With a new business, it may seem wise to keep profit margins low. However, margins that are too low can limit growth. The problem with keeping margins low during the early stages of a company’s growth is that customers get used to a certain price. When the cost of the product increases in the future to increase those margins, customers may balk at the higher price. From the beginning, entrepreneurs should ensure that they have adequate margins to facilitate growth. It’s important to look closely at operating and production costs to determine where the flexibility is. If you can reduce those costs in the future, small margins may acceptable now, but they could still limit profits moving forward.