Anton Roelofse, regional general manager at Business Partners Limited (BUSINESS/PARTNERS), points out ten common pitfalls of starting and growing a business, and what young entrepreneurs can do to avoid them.
1. Over-thinking your idea
The renowned South African entrepreneur Anton Rupert famously said it was fortunate that he did not know all the risks that he would face in building his empire, otherwise he would never have started. Planning is crucial in business, but over-planning is paralysing. The many risks involved in any venture cannot be planned away. At some point, entrepreneurs have to confront risks directly by implementing their plans. Every business needs a bit of luck. If you don’t roll the dice, you won’t get lucky.
2. Getting stuck behind your desk
This problem is related to the one about over-planning. Once you have launched your business, you will have to return to your desk regularly to plan, think and re-evaluate; it is key to your survival in business. But be careful not to get stuck there. The best business thinking is done on the job, informed by the practical experience of managing your growing business’s operations, marketing and administration. Start-up entrepreneurs have to stay visible on the shop floor and in the market.
3. Over-thinking the timing
Timing is important and has to be carefully considered, but it is never as simple as waiting for the economy to improve. Starting a business in a difficult economic environment has the advantage that your start-up costs can be cheaper, for example by buying second-hand equipment at auctions from businesses that have gone under. Rent and labour costs may also be cheaper in bad times. When the economy is booming you have the advantage of a more eager market, but probably more crowded by competition.
4. Same old, same old
If the business you want to start is an exact copy of the one across the road, you have already stagnated even before your launch. Entrepreneurship is about doing things better, sometimes through a radical new idea, or sometimes by providing subtle differences in the customer’s experience. The key is to differentiate yourself from your competition and also, over time, from the way you were doing things before. A business that does not constantly improve has stagnated and will not last.
5. Neglecting your tech-savvy edge
Being young probably means you are more in tune with technology than many of the older business owners that you are going to compete with. There are so many different ways in which technology is making business quicker, easier and more efficient that it provides a definite advantage. Even where established businesses are aware of new technology, their entrenched systems usually make it difficult for them to change. Be aware of your edge and exploit it as much as possible.
6. Being an island
You may be the sole owner of your business, but you cannot grow your business on your own. Of course you will need workers, but just as important is having a support network of experts, professionals, mentors, advisors and friends upon whose shoulders you will cry from time to time. Professional expertise such as legal, labour and accounting services are expensive, and in the beginning you might have to rely on informal advice. The important thing is to spend time and effort to seek it out by networking in the business world.
7. Neglecting training
Very few young businesses can afford to employ highly qualified individuals. In the beginning, most businesses employ people off the street, just out of school or college, and train them up on the job. The monetary value of their pay package might be low, but an implicit part of the deal with such workers is that they will gain skills. Neglect this delicate understanding at your peril. Training your staff is a crucial ingredient of your success. Also, don’t neglect developing your own skills.
8. Trying to do everything yourself
At the start of your business you are probably going to have to do everything from watering the pot plant to doing deliveries yourself. Besides the fact that it saves you scarce start-up capital, it also gives you a good sense of what the work entails before you appoint a worker to do it or outsource it. But it is very important that you move away from operational tasks by delegating or outsourcing the work as soon as you can. It frees you up to market, network and think strategically about your business.
9. Living out of the till
Entrepreneurs who fail to separate their business finances from their personal finances rarely last the distance. Budgeting and cost control is crucial for business survival, and an important part of the discipline is to pay yourself a fixed salary and to stick to that, even if it is low in the beginning.
10. Underestimating the value of a few years’ work experience
Young entrepreneurs might be so eager to get started in business that they forego work experience. There are some famous examples of entrepreneurs who have never worked for anyone else, but they are the exceptions. Besides, you can be sure that they have paid the price for their lack of work experience by making some serious mistakes in their early years. By far the majority of successful entrepreneurs start off by working for someone else, and using the opportunity to learn how an organisation works from the inside, before they set out to build their own businesses.