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Everybody makes mistakes. We’re human, it happens. We forget about meetings, we miss deadlines and we make the wrong decisions. For most of us, mistakes tend to work themselves out. Entrepreneurs, on the other hand, don’t share the same fate. When you’re an entrepreneur and the success of your business is on the line, every mistake you make comes with a price tag.
If you're a 1st-time entrepreneur and you're thinking about creating a business, there are many things you need to know before you start a business. First-time entrepreneurs who are most at risk, often overlook business resources and make irrational decisions that align with their expectations instead of with reality. Every wrong decision an entrepreneur makes early in their career puts them a step back from reaching success. Meanwhile, their competitors who have taken care to do things right the first time, take a step forward. Once you fall behind, it’s nearly impossible to catch up.
To avoid being an adult who’s broke and living in their parent's basement, first-time entrepreneurs need to take these warning signs for failure seriously.
WARNING #1: Building It and Believing They Will Come
First-time entrepreneurs expect sales will flock to their product once the “FOR SALE” sign is up, when in reality, nobody cares. Months spent prototyping and building the perfect product doesn’t make it any more appealing to customers. Even if your product has more features than your competitor and is retailed at a cheaper price, customers will buy whichever product is marketed better. It’s as simple as that.
Instead of building hype around a product reveal, bring customers with you through the creative process. Choose these customers wisely because they will become your product advocates. You’re looking for customers who are early adopters and are willing to be partners with you in the development process of your product.
The right customers will follow your product journey because they believe in the vision you create for them. Build a product they’ve been waiting for, instead of the one you expect them to buy. It will make all of the difference. There are many reasons startups or entrepreneurs fail and building something nobody wants is one of the main reasons. Don't make that mistake!
WARNING #2: Underestimating Resources
Entrepreneurs are naturally optimistic. If we didn’t have an abundance of optimistic individuals who believed in the value of their business, capitalism would collapse. Optimism is key to becoming a successful entrepreneur. Unfortunately, all good things come with a trade off and being overly optimistic causes entrepreneurs to underestimate the challenges that come with building a successful business.
Entrepreneurs need to check their enthusiasm at the door, especially when they’re just getting started. Entrepreneurs should be confident, of course but not too much if they want to stop sabotaging their business growth. First-time entrepreneurs need to be rigorous about identifying everything that could go wrong, because everything they expect to go wrong, will go wrong. Still, that isn’t enough.
Building a 20% buffer above every expected failure gives entrepreneurs an extra cushion to over their losses. First-time entrepreneurs can never have too much protection.
WARNING #3: Deciding Too Many Things Too Early
Sometimes as an entrepreneur, you should take a step back: you can get ahead by moving backwards. We are taught to make a decision and go with it. Quick decisions are appreciated but are not practical when you’re building a business. Before making a decision, entrepreneurs need to know exactly what they’re deciding on and the risks associated with that decision. By asking yourself, “What decision am I making?” and “What’s the decision I need today?” entrepreneurs can ensure they are making a decision that is relevant in that moment.
The next step is using the decision-tree model to categorize each decision as either a leaf, branch, trunk and root-level decision. Take the most amount of time when you’re making root-level decisions and progressively less time when you’re making leaf-level decisions. Imagine you’re building a software product and you need to make a decision about how the user logs in.
The decision you have to make is on user experience, and because it involves the technical architecture of your website, it makes sense to make the decision slowly. This means it’s a root-level decision. You are a first-time entrepreneur, you are building a startup from scratch or you have more experience; it doesn't matter, this applies to any entrepreneurs: you need to make decisions but don't rush them all the time. On the other hand, deciding the colour of the buttons is a leaf-level decision because the decision can be made quickly.
Only decide on the things you absolutely need to decide and leave the rest undecided. Although decision-making alleviates pressure, pressure also forces entrepreneurs to explore alternatives. In an environment where every decision has a price tag, it’s best to make the right decision the first time around.
WARNING #4: Holding On to Bad Business
All businesses start with an idea, but not all ideas are worth executing on. Some ideas should just stay an idea, either because they’re not a good idea, or because they’re just a bad idea for you. First-time entrepreneurs are guilty of executing on an idea they simply don’t have time for.
To avoid making a huge time-bound mistake, first-time entrepreneurs need to religiously ask themselves, “Is this an idea whose time has come?” Even so, answering yes to your own question isn’t enough. You may have a theory, but the only way to tell if people will pay for your idea is to ask your target audience if your product is a “nice to have” or a “must have” product. To avoid wasting time, only build businesses that are “must haves.”
WARNING #5: Going into Business Alone
Entrepreneurship is a team sport and is almost impossible to do alone. At the same time, picking a partner is really hard. A big part of your job as a first-time entrepreneur is finding a partner you can work well with, preferably for the long-term. We call it bringing back the band together.
You work together building a startup to the point of an exit, take a break and then bring the band back together to do it again because you love working together.
The best method to test if someone would make a good co-founder is to work on a project together for ninety days without money on the table. If you work well together, and both deliver to each other's expectations, then you can talk about share agreements. If you have someone who is unwilling to make this investment they are probably not an entrepreneur in the first place.
They are probably an employee who is infatuated with the idea of entrepreneurship but are unwilling to make the sacrifices that come with the job. Focus on people who talk like entrepreneurs and are willing to put everything on the line to make the idea successful. These are the people who’d make great business partners.
The Bottom Line
No matter whether you have the anatomy of an entrepreneur or entrepreneurial DNA, first-time entrepreneurs need to recognize that entrepreneurship is way harder than getting a job. If you’re willing to step out of your comfort zone to do your part in making the world a better place, the rewards that come with building a business are phenomenal. There are two choices you can make in life, a life of security or freedom.
Jobs are a form of security, but you sacrifice freedom in exchange. When you’re an entrepreneur, you have complete freedom but you have no security. Security in entrepreneurship comes when you are successful at freedom. First-time entrepreneurs who are reading this, understand this doesn’t happen in a day, a month or even years.
What we can promise you is that it will happen a hell of a lot faster if you make yourself aware of these warning signs for failure.
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