The 12 dumbest — and most common
Here is my Top 12 list of the dumbest entrepreneurial moves. All are easily avoidable with a little common sense and street smarts:
12. Not knowing your customers. Successful entrepreneurs are lifelong students of human nature. People often don’t buy things they ought to buy, things they say (in opinion surveys) they will buy or things that make the world a better place. People often prefer inferior things to superior ones. You must learn what really motivates your customers to part with their hard-earned cash and market to them as they really are, not as you want them to be, or as they should be.
11. Not marketing aggressively enough. Your business must be ubiquitous; your customers should see you everywhere they look. Never get so busy with day-to-day operations that you let your marketing slide. Each day, do one new thing to reach more customers, or remind your existing customers you’re still there.
10. Overestimating customer loyalty. “Yeah, a big-box retailer just moved into town, but my customers will be loyal to me because I provide better service” — the epitaph of many failed businesses. People want better service, but they won’t pay extra for it. If you’re not giving them the best deal in town, you will lose them.
9. Being too slow to adapt to changes. New technologies wipe out whole business models. Competitors change their strategies. People change their minds about what they will (and won’t) buy. You must be ahead of those changes, not frantically trying to catch up. If it seems your world isn’t changing, you’re not looking hard enough.
8. Underestimating or ignoring the competition. Sometimes, the toughest competitor is a “what” — a new way of doing things — rather than a “who.” If you don’t know why your business is better than your competitors’, or you are not getting that message across to your customers, you are losing the war.
7. Picking the wrong partner. Your partner is not your friend. He or she is someone who can perform the essential tasks of the business that you are unable to do. Do not pick partners who are like you. Pick partners who complement you. And make sure you can buy them off cheaply if things don’t work out.
6. Not hiring enough people. Employees are expensive, they have legal rights and they can be real pains. But when you cut staff too much, the quality of your products or services suffers and you will lose customers. Also, you end up doing grunt work when you should be building your business.
5. Underestimating startup costs. It’s going to cost you twice as much to get a business off the ground than your best projections. Have enough cash on hand — or lines of credit — to get through at least the first 12 to 18 months of operation.
4. Underpricing yourself. Undercut your competition but not by too much. If your competition is charging $100 an hour, $90 an hour will get you lots of business. At $50 an hour, customers will either think you’re desperate or that you don’t know what you’re doing. If you quote too high a price, you can always offer discounts. If you price too low, however, it’s tough to raise prices later on.
3. Not hiring necessary professionals. A lot of legal and tax information exists online and there are lots of places where you can get legal form contracts and other documents for a small, one-time fee. Much of this information is wrong and most of the forms are useless. Do not try to do this stuff yourself. Every small business needs a good lawyer and a good accountant. Yes, they charge fees — sometimes expensive ones — but they will get the job done right, and the fees are tax-deductible. If they don’t, it’s their fault, not yours, and you can sue them.
2. Playing games with taxes. Always keep enough cash on hand to pay your income, sales and payroll taxes when they become due. Report every penny of income you make. Take only the deductions you qualify for. File your returns on time.
1. Being too nice. Being ethical and having personal integrity is essential to success in the business world. Being nice can get you killed. Do not confuse the two. Learn the difference, and make sure nobody takes advantage of you because they think you’ll let them get away with it.