I believe telling entrepreneurs what to do is completely impractical. There is no single blueprint for success, as every business is different with its own unique experiences. Telling an entrepreneur what to do or how to run their business is an exercise in futility.
I have found that telling entrepreneurs what NOT to do, on the other hand, is extremely practical if done in the form of learning from the mistakes of others. If you study entrepreneurship, you will find common mistakes that have been made and continue to be made on a daily basis that could easily be avoided if entrepreneurs would simply do their homework and learn from the mistakes of others before the clock is ticking and the stakes are for real.
That being said, the following is what I consider to be the top 10 mistakes entrepreneurs make when starting (or running) a business. You can probably guess the first one…
Underestimating the importance of learning from others
Most entrepreneurs tend to focus on reading up on successes and overlook the importance of studying and learning from mistakes. I think that learning from the mistakes of others before venturing out on your own is one of the most valuable weapons we can have in our arsenal.
You can study from two types of failures. One way is to actually read the history of the successful companies and find the mistakes and failures they made and how they were able to learn from those mistakes and what changes they made to overcome those stumbling blocks and make them who they are today. The second way is to study the companies who did not make it and see what led to their demise. Jack Welch gives some great examples of this (like Arthur Anderson, & Enron) in his book, Winning.
Thinking they can sell an idea
Investors very rarely invest in ideas. At the very least, you need to have created a minimum viable product. That is at the very least. The best way to get an investment is to have built up some traction in your market and have not only some revenue to show, but some proof that the product and/or service was well received and re-ordered (or re-subscribed).
I have seen many people try to sell ideas and the responses from investors are almost always the same, it is too early for them. Investors want at the very least something they can see, feel and/or touch. It is extremely difficult to try to sell them an idea that doesn’t even exist.
Trying to be perfect
This point I can’t stress enough. Perfect is the enemy of the good. I have been the in the middle of this on many an occasion. Do not spend your life making your product and/or service perfect before it hits the market.
To perfectionists, everything is a failure, so they spend all their time trying to make the product and/or service perfect and the result normally is that the product and/or service never gets a chance to be anything to anyone because it never hits the market.
Make your product and/or service good, but don’t try to make it perfect. Get it to market and tweak and fine tune from there. The only way to give your product and/or service a chance to be great is for it to actually hit the market.
Starting a business to make money
Starting a business to make money is a recipe for disaster. Many entrepreneurs see what the hot trend is and try to create a product and/or service in that market.
My advice is you absolutely must be passionate about your product and the only way to do that is find your passion first and only then look to solve a problem in that area. There are two main reasons for this. The first is that when times get tough, it is the passion that carries you out of the valleys and makes quitting not an option. The second reason is that money does not produce happiness. I have met more miserable rich people than I care to know.
What makes you happy is doing what you love and having a purpose and passion for everything you do.
Designing a product or service that you want
In our first company, Gary (who was and still is my business partner) and I designed what we thought was a great product. Our Mid-Atlantic sales rep, who would later become our mentor, had us send the product to a retailer who had his customers judge the product. They hated it. We were pissed.
As it turns out, that was one of our greatest lessons. Work backwards from the perspective of what the market wants, as opposed to what you want.
To much focus on money: to little focus on resources
Everyone wants to raise cash when in fact what they need more than anything else are resources. When I licensed my first company to Samsung America, they didn’t give me any cash, but rather something infinitely greater. They had the factories to make my product, they had the warehousing, the distribution, the accounting department to send out invoices as well as the sales force for the customers I was looking to supply.
You simply can’t put a price tag on resources because they are the gift that keeps on giving.
Thinking failure is a bad thing
Failure is not a bad thing but a great thing - if you learn from it. The creator of the ‘Post-It’ was trying to create something that stuck to surfaces without peeling off, and failed miserably as the paper wouldn’t stick. Once he learned the value of that mistake and how he could learn from that mistake, he realized there was actually a huge market for the very thing he failed at.
All mistakes are either opportunities that are disguised as mistakes, or mistakes that can be learned from and used as the stepping-stones to later success.
Trying to create a disruptive product
Many entrepreneurs say they have created a ‘disruptive’ product when, in fact, disruption only exists very rarely and is a much harder model to achieve success.
The word most entrepreneurs need is actually ‘soft innovation’. The reason why it is important to understand that distinction is because it is much easier to take a product in an area that already has market viability and a proof of concept, as opposed to to creating a disruptive product where you have to invent, teach, and create a new market for a product and/or service that has never existed and has no competition.
When you say you have no competition, you may think that is good, when in fact, it is in most cases a death sentence. I believe it’s much better to work backwards, focus on what is out there, and figure out a way to create a product and/or service that offers a better value and tells a compelling enough story to give a good enough reason for the customers to switch teams.
No sweat equity, no skin in the game
Many entrepreneurs don’t understand the concept of having skin in the game or the value of sweat equity. Investors and/or strategic partners will want to know that you have taken your idea as far as humanly possible and rolled up your sleeves and gotten your hands dirty, as opposed to simply coming up with something and expecting the investor to do all the work. They also want to see you have taken risks before they will take a risk in you.
Investors in my opinion, tend to value the entrepreneur more than the product or service that the entrepreneur created. A good entrepreneur will be able to maneuver, adapt and modify to the changing trends of the market and keep pushing through walls and breaking down doors when needed. For that reason, the investors belief in the entrepreneurs they are investing in will give them the piece of mind that they have a warrior that will do whatever it takes to succeed.
Not doing due diligence
Many entrepreneurs take people and/or companies at their word without checking their track records. Entrepreneurs are only as good as their ability to make and deliver the product and/or service in the manner they promised to their customers. Too many entrepreneurs jump at a new supplier offering a cheaper price or a quicker delivery time without checking to make sure the promises of those suppliers are valid.
Make sure you do your due diligence on your suppliers, your customers, your investors and anyone and everyone who has the ability to put a wrench in your game plan or effect your company in any way.