Ten mistakes what new entrepreneurs indulge into…..
On the other day, I was recollecting my past experiences and relating to some of the business principles; where I jotted down ten points which may be relevant to most of the practices in new entrepreneurship ventures. When you enter into new business you tend to do more; and ultimately you realize that it was a mistake in the long run. One thing, we have repeatedly reminded ourselves that business all about relationship and we always put relationship in front.
- Selling to the wrong customer:
Sales are very important to run a business but when you sell to a wrong customer your prospect of growing with your customer ceases. In this, I would like to share my experience when I was working for an Office Automation Company during my early days of my career. The story goes like this –
When I have completed my Masters in Business Administration and worked for couple of years in Marketing Research and joined a company which deals in Office automation. As I have worked in marketing research, my primary aim was to create awareness, convert those into their need, generate customer’s enquiry and than sell to them. For all these, I use to reach maximum number of potential customers and existing customers, and make myself available with all possible data and information. In this manner, I could close many sales orders and develop new customers.
One fine day, my director called me and asked me to accompany a sales executive to a customer which the sales executive had approached. When I reached the customer, the picture was very different!. There, what the sales executive had promoted was a wrong product for which the company may loose potential business. When I learned the mistake of the sales executive, I started finding out the exact requirements and in relation to that educated him with the possible running cost, technological pros and cons. Later, the customer realized that the requirement was not the exactly what he required and by sharing he had opted for his exact requirement and in that way we had ended up selling much more than what the sales executive initially wanted to sell. In that way, we had developed a relationship and earned vital leads.
So, selling a right product to a right customer is one of the vital key. Most relationships simply aren’t worth pursuing. Learn to say no to the weak opportunities so you have the capacity to say yes to the golden opportunities.
- Spending beyond your projection:
New entrepreneurs or the fresh executive has the tendency of spending more than what actually they are needed to spend. Until you have a steady cash flow coming in, don’t spend your precious start-up cash unless it’s absolutely necessary.
Scaling spending is very important in everything walk of life as well in profession. In business, you have to calculate every possible side before you spent. You spending have to be justified not only logically but also in practice.
Your overhead spending should not add up more than 2-5% of the total production cost per unit. If it shoots up more than that you will not be able to serve the customer with competitive rate.
You also have to cull down death investment on inventories by assessing the actual requirement of inventory.
- Spending too little:
It’s also a mistake to be too stingy with your cash. Don’t let frugality get in the way of efficiency. Take advantage of skilled contractors who can do certain tasks more efficiently than you can. Buy decent equipment when it’s clear you’ll get your money’s worth. You don’t have to overspend on fancy equipments, but get functional equipment that helps you be more productive. Don’t use antiquated equipment that slows you down if you can afford something better.
It takes time to develop the wisdom to know when you’re being too tight or too loose with your cash, so if you’re just starting out, get a second opinion. Often the very thought of getting a second opinion makes the correct choice clear. If you can’t justify the expenditure to someone you respect, it’s probably a mistake. On the other hand, there are situations where it’s hard to justify not spending the cash.
- Putting on a fake front:
If you’re a newly self-employed or fresh executives, don’t pretend you’re anything else. Price your products and services fairly for your level of skills and talents. Some newly self-employed people think they must become actors. The business they promote to the world is pure fantasy. Trying to fool your customers in this manner will only backfire. If you’re so desperate for business that you need to lie, you shouldn’t be starting your own business. If you can’t provide real value and charge fairly for it, don’t play the game of business. Develop your skills a bit more first.
- Assuming a signed contract will be honored:
A signed contract is just a piece of paper. What’s behind a signed contract is a relationship. If the relationship goes sour, the contract won’t save you. The purpose of a contract is to clearly define everyone’s roles and commitments. But it’s the relationship, not the paper, which ultimately enforces those commitments. We need to focus more on relationships and worried less about what was on paper. Business relationships are similar to other personal relationships — they twist and turn all over the place.
Written contracts are still necessary, especially when dealing with larger corporations where people come and go, but they’re secondary to relationships. Just don’t make the mistake of assuming that the contract is the deal. The contract is only the deal’s shadow. The real deal is the relationship. Keep your business relationships in good order and you won’t have to worry so much about what’s on paper.
Let’s assume that we have signed contracts with supposedly reputable corporations, and they weren’t worth squat when the CEO decided he wanted out of the deal, even for completely dishonorable reasons. Do we need to go to court to enforce it? No, rather continue doing meaningful work by building relationship.
- Going against your intuition:
You’d be amazed at how many gigantic corporate deals are green-lighted or red-lighted because of some CEO’s gut feeling. While you might think that logic is the language of business, that’s far from reality. If you base all your business deals on hard logic and ignore your intuition, most likely you’ll be in for a world of hurt.
We humans aren’t very logical to begin with. We simply don’t have enough data to make truly logical decisions because business deals depend on human beings, and we don’t have a logical system for accurately predicting human behavior. Not being able to predict how other humans will behave is a pretty big gap in our logic. And intuition has to fill that gap. The real performance of human beings is what makes or breaks business deals. But to assume everyone will perform as expected is unrealistic in the extreme. No deal ever goes perfectly.
Intuition is a critical part of the decision-making process in business. Since business deals depend on relationships, you need to get a read on the other people involved in any deal you consider. If you get a bad read, walk away. If you get a good read, proceed with caution.
- Being too formal:
Business is built on relationships. In some settings a certain degree of formality is appropriate, but in most business situations being too formal only get in the way. We need to balance our formal status with relationship. Business relationships work best when there’s a decent human-to-human connection behind them.
Formality is boring and tedious. People want to enjoy their work. If someone addresses me like a computer, I’ll respond in kind — by hitting delete. But if someone demonstrates they have a real personality and a good sense of humor; at the same time has the willingness to co-operate and educate, such connection is far more likely and fruitful.
- Sacrificing your personality quirks:
It’s perfectly OK to be your own weird self and to inject your own unique spirit into your business, especially if you’re young. Don’t pretend to be something you’re not. Limit or correct your quirks or odd habit of addressing with the reasonable trend. Ultimately you’ll enjoy your work much more if you attract the kinds of customers and partners that want to work with you for who you are.
In this context I would like share a situation in which one dynamic professional that walks in to promote his product to our organization. He insisted on meeting our Chairman to the receptionist. The receptionist when she saw his business card came to know that the person has to meet me instead. When this thing is been told to the person he insisted on meeting the chairman rather. When he was directed to the Chairman, he (Chairman) redirected him to me to look into the matter. In this, I found him arrogant and in-experienced.
In such kind of approach you are loosing your precious time and on the other hand the actual contact person with whom you will be dealing with won’t find you comfortable to work with; so you will loose your potential business.
- Failing to focus on value creation:
The real purpose of a business is to create value. When you know your business is just sucking value away from others without providing anything in return, it will erode your self-esteem, and the business won’t be much fun to run.
Too often business owners aren’t clear on what value they’re trying to provide. They just sell stuff and hope for the best. That’s a lousy business model. The world doesn’t need more selling or more stuff. But it always needs and wants genuine value creation, and that’s where you should direct your efforts.
Why does your business exist? It exists to provide some sort of value, both for you and your customers. The better you understand what value you’re trying to provide, the better you’ll be able to focus and top of that you will be satisfied more.
- Failing to optimize:
Although value creation is essential to a sustainable business, it’s equally naive to assume you can simply focus on creating value, and the rest will take care of itself. You may build a business that provides good value but loses money. As a business owner, you need to find a way to deliver your value in a cost effective manner.
Once you have a particular business process in place, pull it apart and re-optimize it from time to time. Look for ways to make it more efficient. Can you get it done in less time? At less cost? Can you do it less frequently? Can you outsource it? Can you dump the process altogether?
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