As a young entrepreneur, I once happened to watch a talk by Jerry Kaplan where he explained some of the most common mistakes entrepreneurs make. His points resonated with my own experience and so I decided to present them in this article and blend them with some examples from my own entrepreneurial life.
Jerry is a serial entrepreneur and author of best seller “Startup: A Silicon Valley Adventure”. So, what are the most common pitfalls that young entrepreneurs face?
1. Having Unclear Goals and Unclear Mission.
The need to have crystal clear goals is something you probably hear all the time. Well, it’s because it works. What I really found very valuable when I started my own company Aktaio Publishing, LLC, was to literally sit down and write what my goals are, what I intend to do, and most important, what is my measure of success. What do I consider a successful company? At that time, I considered NetGuidesPublishing (my mentor’s company) a successful venture. I still look at my mentor’s organization and get the same degree of inspiration.
Setting clear goals does not always mean you will meet them. But the sure thing is you will accomplish much more when you have clarity of purpose than when your goals are unclear.
2. Thinking You Are Smart
The second common pitfall young entrepreneurs make is trying to prove they are smart. Believing in yourself and your own capabilities is a great attitude when you want to solve a problem, experience a breakthrough, and improve your business. But when you believe you are smart just because you want to satisfy your ego can undermine the progress of your business.
Entrepreneurs who use their business to prove they are smart, typically do not want to share the credit of their success with other people. Other people should always be credited under all circumstances. By not sharing the credit with your partners, you don’t get their help; you don’t get their support.
3. Doing it For Money
The third element is greed, and this leads to a number of key mistakes.
a. Not raising enough capital. “We will do on the cheap, we don’t really need that much capital” is a common false mentality among young entrepreneurs. The reason they have this type of thinking is because they are trying to keep their equity. “I am working so hard. I should have 100% of this pie”, they say. But, the question entrepreneurs should ask is this: Is my organization going to be worth more after I raise the money? Is my share going to worth more than it is worth before I raise the money?
A company is like a little engine. It takes in resources and it puts out value. If you can put in your company $1 million and have it convert it into $2 million in value, everybody wins regardless of how much of your company you had to “give up” in order to get that million dollars.
b. Not distributing the equity as widely as possible. Many entrepreneurs are afraid of distributing their organization’s equity. The truth is that if you are successful at all in your company, you will be just fine. An old joke says that equity is like sh*t. If you pile it up, it just smells bad. But if you spread it around, lots of wonderful things grow. So, holding the equity, being stingy about giving it out, is a big mistake. If you focus on success, money will come.
4. Hiring People You Like Rather Than People You Need
It is common to see companies being formed from people who studied together or graduated from the same school because they have the mentality: “Let’s create a company so that we will stay together. We had a great time the past years. Let’s continue to work together”. Well, they fail to understand that a company is not a social club.
The danger is that if you hire old people you like, you will probably not be hiring the critical skills needed to build your venture. You will tend to hire people who are like you, and therefore they will not bring to the table different skills and different points of view, which is critical for the venture to grow.
When I decided to expand my online venture of Nutrisystem diet coupons and Medifast discounts, I realized I needed to hire people who were experts in finding special deals for weight loss programs and diet plans. What I noticed is that some of them who I knew from previous projects and I personally liked did not perform as well as those with whom I did not have any particular friendship. This taught me that I should separate the feelings I have for certain people from what my business really needs.
If you ask successful entrepreneurs they will tell you that they often have worked with people they detest, and yet they have proceeded successfully and it’s been great for the growth of their business. This is because they know how to respect and work with people that they need, regardless of whether they like them or not.
5. Not Knowing When to Let Go
Building a company is very much like raising children, says Jerry Kaplan. Children change as they get older, and so does your relationship with them as well as the help and value you can offer them. The same is true about companies. The fact that you may be the perfect startup CEO, usually does not mean you are a good CEO for a $100 million company. The things you have to do and the skills you need are very different.
For this reason, one of the most important characteristics you need to have, is a realistic self-assessment so that you know when to step aside. Ask yourself, what am I good at and what am I not good at. Fill in the things you are not good at by bringing people who have those skills, whether you like them or not.
One of the finest comments that has been said is: “My ambition in life is to be the Vice President in my own company”. I think this is a noble goal. You want your company to grow big enough so that your skills be best applied in one particular goal and the other roles will get filled in by other people.
These are 5 of the biggest pitfalls entrepreneurs face.