As the saying goes, it’s only those who do nothing that make no mistakes. And it’s true. There isn’t a single area—whether it is business or personal relationships—where one can gain experience without making mistakes. Mistakes are the real-life standard. Don’t beat yourself up for it: all you need to do is correct your mistake.
I entered the business world quite early. By trial and error, I learned its laws, rules, and principles. I’m grateful for this experience, which made me stronger and prompted me to grow. I’m now a successful entrepreneur. So, one of my tasks is to help novice entrepreneurs. After all, the knowledge that we gain from others helps make the path to success shorter and avoid situations that affect business.
Today, I’m talking about the top five most common mistakes novice entrepreneurs make. My business partners and I obviously faced some of them. That being said, if you consider your mistake and turn it into experience, it’ll make you stronger and more successful.
Mistake No. 1: Taking your partners at their word
Even if you partner up with your brother, best friend, or a person whom you trust blindly, it is still a good idea to enter into a formal agreement with them. Caught up in the euphoria of starting their own business, many newbies simply agree with a partner or investor, shake hands, and start their project. However, contradictions regarding roles and other critical business aspects may appear at the outset. Profit distribution is the biggest test. Each of the partners may see their contribution and share size differently. If everything had been formalized in the very beginning, this wouldn’t have happened.
Partners often see financial matters as one of the stumbling blocks. There may be other things. I lost my business at the age of 18 because I took my partner at his word, and we didn’t sign any agreements. I’m grateful that this happened with my first business back then as this is how I gained invaluable experience. Today, all our interactions get regulated by documents when we start building a business in partnership.
Mistake No. 2: Choosing a mistake-intolerant niche
What does it mean? Before starting any business, you should do a competitive analysis. If there’s too much competition in this niche, you’re unlikely to succeed here. Opt for the rapidly-growing niches because you can make more mistakes in this case.
Novice entrepreneurs make mistakes more often than those who have been in the market for a long time. And if you pick a low-competitive growing niche, it’ll be more loyal to your mistakes. Let’s say you unlock a local computer market where there is a huge demand and little supply.
In this market, you have the right to make more mistakes, as there’s a shortage of goods and a surplus of demand. If you’re entering a highly competitive niche with low margins, where the market is either flat or at its peak, you simply cannot make mistakes. In this case, business growth is more about fighting for your market share. Mergers, takeovers, and bankruptcies come into the picture.
Mistake No. 3: Not getting a feel for a niche
When you choose a niche to start your business, you must analyze it not only in terms of prospects. While being a hurry to launch a project, a lot of people simply don’t have time to stop and think: is this niche a good fit for me?
If you run a company that doesn’t resonate with your desires and motives, you’re unlikely to achieve the desired results. And if you do succeed in this sector, you’re unlikely to feel the anticipated joy of it. For that reason, you have to get a clear idea of whether this industry is the right one for you or matches your moral principles.
Mistake No. 4: No management skills
You have to understand how complex systems work. When you start your business, you’re the main doer. You need to recruit employees to keep your company up and running as your project grows. But if you have no idea how to manage your team and create value, you’re unlikely to enjoy the growing business, as you expect. The efficiency of your business operations depends on how effective the owner is as a manager.
At the start, you need to be effective as a performer, as an organizer, as a generator of ideas, etc.—all positions that you can take over yourself. Your task, as the business owner, is to delegate these to other people. Do it competently if you want to transfer not only authority but also responsibility for your tasks. Set out control functions, reporting procedures, communication processes, and so on.
Developing and scaling up your business depends on the efficiency of this system. For that reason, if you aim to build something really big, you must think about— first and foremost—how a specific function will be scaled up in the future.
Mistake No. 5: Treating the company’s revenue as your personal income (the most common one)
Novice entrepreneurs often don’t separate the company’s money from their own money. They started the project for profit and thereby see any profit as their personal income by default. It’s detrimental to business.
Entrepreneurs must understand that the company’s money will be their personal income only after dividends get distributed. These aren’t only dividends but also investing in modernization, etc. Using the company’s money as your personal money is a highway to bankruptcy. No matter how well the business does, it’ll fail if you use an approach like that.
Mistakes are a part of our experience. However, it’s important to strike a balance—avoid making “anchors” out of negative situations that fill you with fear and uncertainty and pull you down. Instead, treat mistakes and failures as a springboard. Don’t be afraid to make mistakes; be afraid to leave mistakes uncorrected.
