Starting your own business is a high risk and high reward move. In fact, statistics show that the chances of failure for startups within the first 5 years are almost 50 percent. Based on those numbers, there is a pretty significant chance that your enterprise will not do well in its maiden years.
Of course, I’ve written before that you should accept the possibility of failure so that you can take the best course of action to reverse it, or if the business is not salvageable, so that you know when to give up and start on your new endeavor.
Accepting the possibility of failure, however, is different from succumbing to defeat. While you do accept that your business may not succeed, it does not mean you cannot avoid it.
To help you avoid failure, here are some of the most common traps that you should avoid as a business owner:
No Written Agreement
Family members, friends and colleagues decide that they want to start a business. All were excited at first, but then the business was not doing well, some bail out. Because there are no written agreements, the division of profit and debt is not clear. The responsibilities of each business partner are not clearly defined either. The business, instead of finding ways to make itself profitable, will implode because of internal issues that could have been resolved if there was a written agreement between business partners about the roles in the startup company.
The problem with a lot of wannabe entrepreneurs is that they jumped into the pool without an idea if they can swim or not. It doesn’t take long for them to lose all optimism and drown as they realize that the pool is deep and full of challenges. They say half the battle is won through preparations. So even before you charge in with guns blazing, do a feasibility research. Know your market, and your competition. Don’t just wing it.
Some startup entrepreneurs have such strong belief in their product that they believe it will sell itself automatically. Soon they discover that even if they have the best product in the market, it is not exactly flying off the shelves. The problem? Lack of marketing campaigns to support it. People do not exactly buy something because it is the best; if they did, the iPhone 5 will not be such a hit. There are other factors that affect purchasing decisions like loyalty to a brand, aesthetic preferences, and others. By launching an effective marketing campaign, you can put out your argument as to why people should buy your product instead of some other random product they see every day in the market.
It is understandable that you have no experience in starting your own business. After all, you have to start somewhere. The problem occurs when you surround yourself with equally inexperienced people. Hiring your friends is fun and all, but if they are not remotely qualified to handle the position you gave them then you might as well give up now. If you have no experience, surround yourself with people who know what they are doing. You do not need “yes” men who think you’re the greatest and submit to all your commands. What you want are people who can give you sound advice and can get the job done.
Knowing when to give up is good business virtue, but giving up at the first sign of trouble is not. Challenges and failures are normal when running your own business. It is how you handle these failures and challenges that will determine how far you will go as an entrepreneur.