10 fatal mistakes entrepreneurs make
Striving to rent premises at the lowest price
Many aspiring entrepreneurs think that in order for a business to flourish, it is necessary to strive to reduce costs as much as possible. It’s a delusion. You need to be able to correctly prioritize and understand where you can save, and where such savings can be fatal.
If renting a more expensive premises (for an office or for placing equipment for production) will bring any advantages, then you should definitely do it.
Hiring your friends and relatives
When you are just starting your own business, especially if it is the first, it is always difficult to let strangers into your business and immediately start to trust them. In this regard, many make a big mistake – they hire their relatives, friends and acquaintances in their company, arguing that “I know these people well, I trust them, and they will not let them down”.
In some cases, this strategy may work for you. However, more often it happens otherwise, and after a while you begin to regret that the accountant in your company is your aunt, and the sales manager is a close friend. First, by choosing friends and family as your employees, you are depriving yourself of the opportunity to hire truly professional people who could bring more value to your business.
Second, working together with your loved ones is always a potential enemy for your relationship. And when you act as the boss for your relative or friend, then the danger begins to hang over your business. After all, people with whom you have family or friendly ties are not always professionals in your business. And it’s morally difficult to point out mistakes to them, and even more so to dismiss them.
Purchase of used equipment
Yes, in some areas of activity such a step would be reasonable and justified. However, it is worth considering carefully – would you spend a lot more money on repairing and maintaining used equipment than buying new one? The well-known English proverb comes in very handy here: “We are not rich enough to buy cheap things.” Apply this principle wisely in your business. And this applies not only to the purchase of used equipment, but also to the purchase of new, but cheap and low-quality equipment.
By investing a considerable amount in equipment at the start, you will subsequently save more than buying cheap or used equipment. Why? Because it will last you longer and will not require frequent repairs and replacement of individual parts.
Setting low prices for services or goods
Most often this is done in pursuit of a large number of customers and reasoning like this: “I will put a small price on my services or products, and clients will immediately come to me.” Clients may crash (although it is also far from a fact, since an unreasonably low price raises doubts about the quality of the goods), however, with such a strategy, your business risks becoming bankrupt.
When setting a pricing policy, keep in mind that you will need to pay salaries to employees, keep equipment working (repairs, replacements), pay rent, etc. Adequately estimate the cost of your product, and deliberately underestimating it is the lot of inexperienced and not very smart entrepreneurs.
Refusal of professional services and neglect of consultation
Don’t be happy if you managed to hire an accountant or lawyer who asked for low wages. As a rule, you will hardly wait for professional work from such an employee, and subsequently he will simply “sink” your business. The knowledge and skills possessed by true professionals in their field should be paid accordingly.
Also, if you need a one-time consultation on a business issue from an expert, it is better to use it if you feel that you are not able to solve the problem on your own. Yes, this kind of consultation can be expensive, but it can be critical to the success or failure of your business.
10 fatal mistakes entrepreneurs make
Denial of any loans
This issue is controversial enough. With regard to loans, a large number of both pros and cons can be cited. But imagine this situation: one businessman took out a loan for a certain amount of money for two years, and immediately invested it in the business. And another businessman decided to independently accumulate the same amount of money over the same two years. As a result, we get what? The first businessman has already started his own business and is actively developing it, winning customers, establishing relations with partners and suppliers, etc. And the second businessman will be able to do all this only in two years, and when he enters the market, he will immediately face a serious competitor who has been “in business” for two years already.
Of course, obtaining a loan is associated with certain risks, but no business can exist without risks. The main thing is to analyze them correctly and be smart about everything that can potentially cause any losses.