An equal partnership seems fair in theory and typically works well when a business in starting up. However, when there are disagreements, the company can be left in limbo because no partner has the final say. It is better to give a managing partner a majority ownership stake – say 51%. Another option is to grant a small ownership percentage to a third party advisor.
Optimism vs. realism
Being unrealistically optimistic can inflate sales projections, shorten product development timelines and minimize expected costs. A business should only proceed when capitalisation can support the worst-case scenario.
Companies should charge the highest prices their markets will allow. Too many entrepreneurs attempt to make up for low margins with high volume. This strategy rarely succeeds, especially for service-based companies.
One big customer
If companies depend upon a single customer for more than 50% of their company’s revenue, they may be headed for a meltdown. It may be easier to manage one or two big customers, but that makes companies vulnerable to business failure if they lose a major customer.
Some companies put all their efforts into an idea and then develop a product or service, only to find there is no viable market for it. It is a mistake to create a product or service offering that has to work on finding a market. It is crucial to perform market research in advance to determine whether anyone will buy what is being sold.
Speed vs. perfection
Many entrepreneurs spend too much time and money trying to achieve perfection with their product. Even if the company did finally make the perfect product, the market will change and the product will become obsolete. Instead, bringing a less-than-perfect product to market quicker can help a company establish itself and become profitable faster.
Small business owners often lose focus on the company’s core business aims. Concentrating efforts in a limited area almost always produces better results than diversifying.
Business owners sometimes let expenditure inflate more than revenue. Until profits can support the costs, companies should retain humble office space, furniture etc.
Failing to fail well
The biggest mistake an entrepreneur can make is to ignore failure. If success has not come to the venture, it’s best to wipe the slate clean and reassess the investment.
9 Common mistakes entrepreneurs make