7 Deadly Sins of Newbie Entrepreneurs

We’ve all heard the horrendous statistics about the failure rates of new businesses, and many of us have shrieked at the possibility of becoming yet….another statistic. Don’t become one! In this engaging presentation Dana Brownlee – successful entrepreneur and small business advocate – shares her list of the 7 Deadly Sins of Newbie Entrepreneurs. Learn how to avoid these all too common pitfalls and position your small business for success!

This topic can be presented as a full-day training or a 1-2 hour speaking engagement.

Content for this talk is typically customized from Dana’s popular Entrepreneur.com article

The Seven Deadly Sins of Newbie Entrepreneurs

Most entrepreneurs are familiar with the ridiculously high percentage of small businesses that will fail in the first couple years.  The business owners who survived the odds will tell you that they didn’t achieve success on sheer passion alone.  It took hard work, and in most situations, it didn’t happen overnight.  After spending the last decade running my own business consulting for companies and corporations, here’s seven of the most common mistakes I’ve seen newbie entrepreneurs make with alarming consistency.

Sin #1 – Not setting aside enough cash reserves to support yourself during start up

I firmly believe that one of the reasons why so many small businesses fail within the first few years is NOT because the business model isn’t viable or the entrepreneur isn’t “good enough” to make the business work, but it’s the fact that the financial ramp up time is a firm reality and most entrepreneurs simply run out of money to support the business and/or themselves before the business is profitable enough to sustain itself.

Sin #2 – Using assumptions that are overly optimistic during planning

I see so many newbie entrepreneurs fall into this trap.  They have a great idea.  They’re mulled it over in their mind, convinced their friends and family that it’s a no brainer, and they jump into the fray only to realize that there were a few not so little details that they failed to consider or a few areas where their assumptions were overly optimistic and before they know it, that “no brainer” business is hanging by a thread! Be honest with yourself, are you underestimating the time required to get the first client? Are you overestimating the demand for the product? Are you assuming zero risk by not allowing for what could go wrong?

 Sin #3 – Not properly evaluating your business model

Not everyone incorporates a business model into their planning.  It’s so easy to get really lathered up around the concept of your business, but it’s quite another thing to put pen to paper to help you objectively evaluate your overall business model and its profit potential.  The simple truth is that having a great idea is just a start – it doesn’t necessarily translate into a profitable business model.

Sin #4 – Trying to do everything yourself to save money

Your time is money. Think about where you must personally invest your energies. Should you be developing/refining your content, products and services, cultivating relationships with key clients/stakeholders, developing credibility within your industry?  No one can do this for you.  Others can develop your website, handle your public relations, develop templates for your newsletters, make trips to printers/copiers and perform random administrative functions, etc.  The key is identifying what to outsource and what to keep.  A good rule of thumb is this… if it’s not part of the core competency of your specific business, you have little expertise in the area, it’s time consuming, and there are many suppliers who can provide the service at a reasonable cost, consider outsourcing.  If you try to do EVERYTHING yourself, you’ll not only run yourself into the ground, your business will suffer because you don’t bring sufficient expertise in every area.

Sin #5 – Not being willing to work like a dog during start up

I’m amazed how often I run into people who’ve recently launched their businesses, but they seem shocked that they’re not making six figures while working a 25 hour work week.  They seem to have this glamorous view of entrepreneurship where they get to start at the top and skip all the hard work.  The simple truth is that if you want to make it, most start-up businesses have to hustle early on.  This might mean working another job while you’re starting your business, volunteering/doing some work for free to gain experience and exposure, working nights/weekend, etc.

Sin #6 – Pricing your product/services too low or too high

This is such a classic mistake.  In my business I often respond to RFPs (Request for Proposals).  Years ago, I’d been submitting proposal responses annually to a large governmental agency.  After about 4 years of consistent rejections, I got a tip from a colleague that my pricing was too low to be considered seriously.   That year I doubled my pricing on the same classes and was selected for the first time!  On the other end of the spectrum, you don’t want to charge $20,000 a day and expect to get the job.    Do your research to see what others are charging. It’s much smarter to offer value pricing initially, prove your value, and then raise prices over time.  In many cases asking clients for their budget will not only give you an idea of what to charge, but it could minimize the risk of severely underpricing or over pricing your product/services.  You may also consider offering different pricing options to increase the likelihood that you’re offering something within your client’s price range.

Sin #7 – Not having a growth strategy

Most small businesses think that the goal is to win as much business as you can and that’s not necessarily true.  Sometimes, you can attract too much business and then you have a completely different challenge that could threaten the longer term viability of the business completely.  We all know of a restaurant that was great when it first opened, then they grew and expanded and the food/service declined, they then developed a bad reputation and eventually closed.  Don’t be that business.  Think about how you want to grow and develop a high level growth strategy fairly early on (even if it changes as time progresses).