The idea of the self-made man or woman has been associated with the United States since its founding. Entrepreneurship is a huge part of American culture and the American Dream, so not surprising that it also plays an enormous role in the American economy today, even if it does come with its fair share of pitfalls.
Studies have shown that in 2019, a total of 27 million Americans were either starting a business or already running one. The United States has one of the highest rates of entrepreneurship globally, making the United States the true home of the self-starter.
Unfortunately, a large proportion of those budding business owners will fail on their first try. Below are five mistakes that are often the cause for failure.
5 Most Common Mistakes First-Time Entrepreneurs Make
1. Not Doing Their Research
One of the surest things to kill your entrepreneurial dreams is failing to conduct sufficient market research before launching your business. This research involves having a deep understanding of the market you’re about to enter, knowing how your products or services compare to those of your competitors, understanding how your competitors are marketing their businesses, and much more. It helps if you remember that your customers or clients compare you to every other business in your niche market. So without understanding where you stand in comparison to them, you can’t effectively stand out from them and, ultimately, generate sales.
Entrepreneurs tend to be passionate people eager to get started, so it’s not surprising that they often skip this vital step before launching their businesses. But, taking the time to conduct market research, you’ll see increasing benefits in the months and years to come.
2. Not Thinking About Scale
Swedish businessman and mogul Mats Lederhausen once said, “think big, start small, then scale or fail fast.” And he wasn’t wrong. Scaling is a business’s ability to support growth. Many businesses don’t have the potential to bring in significant revenue until they start to scale; some will fail because they don’t have a scaling plan in place. Unfortunately, many first-time entrepreneurs don’t consider scaling when starting their own business.
Scaling a business creates additional income without adding substantial new costs. The business grows significantly, and often, this growth comes with lower costs and higher profits. But to scale, additional funding is usually needed for staff, technology, and other systems, and a plan for scaling should be in place. Scaling can be the single most significant factor in whether or not a business succeeds.
3. Underestimating Mindset
Mindset is the established set of attitudes held by someone, and underestimating that your mindset will change can be a significant mistake when starting a new business. We assume that we will remain highly motivated, driven, and 100% focused. This seldom happens. Entrepreneurs can, like employees, lose motivation, drive, and focus at times. This is especially true when you take imposter syndrome, fear of failure, and self-sabotage into account. For that reason, managing your mindset is essential to a thriving business.
Many entrepreneurs use business coaches or networks like The Female Entrepreneur Association for this very reason. They provide support and accountability that can be invaluable – especially for entrepreneurs working alone.
Thinking about your mindset before you launch your business is a great way to avoid dips in motivation, drive and focus and promote a consistent work ethic that will lead to success!
4. Lack Of Marketing
The unfortunate truth is – it doesn’t matter if you have the best product on the planet if you don’t know how to market it effectively. Most entrepreneurs aren’t marketers. Marketing is often where first-time entrepreneurs fall short and can seriously hamper the potential success of the business.
Today, social media marketing plays a huge part in any comprehensive marketing strategy. But to market well on social media, you also need to have a content creation plan that may involve photography, videography, or graphic design. You may also need an email marketing plan using a platform like Mailchimp or Convertkit. If you plan to use Google Ads, you’ll need to consider this part of your marketing strategy. Entrepreneurs should consider all these details before launching a business on their own so that they are prepared to manage run their businesses successfully.
5. Not Having A Financial Cushion
According to an article on Fundera by Georgia McIntyre, 20 percent of new businesses fail in their first year, and 29 percent of those that do, fail because of a lack of funds. It’s easy to start your first business and convince yourself that it will be an overnight success and that you’ll hit all of your revenue targets on the first try. However, the reality for many entrepreneurs is business growth will build slowly and steadily over time. Without enough of a financial cushion to cover expenses during this period, you will struggle to stay afloat.
It is a good idea to save as much money as you can before leaving your employment to start your own business. Knowing you have enough money to cover overhead can help you focus on other aspects of your business. You can rest assured knowing that you’re covered if things take a little longer to pick up than you were anticipating.
Since leaving my full-time job and starting my own business almost one year ago, I’ve made all of the mistakes listed above and more. And yet, my business is still going strong. Making a few mistakes here and there doesn’t necessarily mean your business will fail. I think you’d be hard-pressed to find any seasoned business owner who claims to have never made a mistake. By getting ahead of some of these most common mistakes from the get-go, you can avoid many problems and get off to a strong start.