The Seven Biggest Mistakes Entrepreneurs Make
- Del Chatterson
- 6 minutes ago
- 5 min read
And How to Avoid Them
This year I’m planning more frequent posts from your Uncle Ralph, including revision and updates of some of the most popular articles from the past decades. Last week’s post was on Exit Strategies, this week is on The Seven Biggest Mistakes and How to Avoid Them.
About twenty years ago, I came up with the theme for a breakfast seminar
presentation of The Seven Biggest Mistakes that Entrepreneurs Make. The presentation was well received and has since been used many times, eventually expanding into several chapters of my book of advice for entrepreneurs on success in business, “Don’t Do It the Hard Way,” published first in 2014 with an updated and revised edition in 2020.
This is a short version of the list of the seven biggest mistakes followed by my recommendations on how to avoid them by seeking balance between the conflicting challenges.
1. Too Entrepreneurial
Certain characteristics of entrepreneurs are necessary for them to be successful. But if over-indulged they can lead to big mistakes. These include the tendency to be too opportunistic and not sufficiently selective and focused; to be too optimistic and miss or ignore the warning signs; to be too impatient and expect too much too soon.
Entrepreneurs usually have great confidence in their instincts, but the mistake is to neglect or ignore market feedback and analysis of the facts. Being action-oriented, the tendency is to “just do it” without adequate analysis and preparation.
Entrepreneurs are expected to be decisive and demonstrate leadership, but both can be overdone – deciding too quickly and providing too much direction so that input, initiative and creativity from other team members are stifled.
All these mistakes arise from being “too entrepreneurial”.
2. Lack of Strategic Leadership
Another tendency of many entrepreneurs is to get lost in the daily details and completely forget their original strategic plan and objectives.
Operating decisions demand continuous attention and there is seldom time dedicated to stepping back and looking at the business from a strategic perspective. The common observation is that the owner is too busy working in his business to effectively work on his business.
Defaulting to continuous short-term decision-making can result in the business not having consistent strategic direction and straying far from the original plan.
Lack of strategic direction may be the single biggest mistake that entrepreneurs make and may result in the most severe and irreversible consequences.
3. That was Easy, Let’s Do It Again!”
Another common mistake that can have devastating consequences on the business is the over-confident entrepreneur who concludes, “That was easy, let’s do it again!” So he or she jumps into new markets, new product lines, or even a new business or investment opportunity without doing the homework first. Over-confidence generated by previous success.
It’s important to remember: Making money doesn’t make you smart. Look at every opportunity with the same thorough objective analysis as the first time you started a business. Many successful entrepreneurs have made the mistake of jumping into a new venture – merger or acquisition, a restaurant franchise or real estate investment, or something else unrelated to their prior experience – and blown away the equity value they generated in their original business.
Another big mistake to avoid.
4. Focused on Profit
Being focused on profit doesn’t seem like a mistake. After all, isn’t that the whole purpose of running a business? No, actually. The primary financial objective of any business is to enhance long-term shareholder value.
A focus on short-term profits will do exactly the opposite. It is easy to improve short-term profit by reducing essential maintenance and marketing expenses, neglecting product development, cutting employee wages and benefits, ignoring safety and environmental regulations, and avoiding taxes, but these short-term actions can all destroy long-term value. Paying attention to these requirements for sustainable profitable growth will help to build it.
Managers need to look at all their key performance variables and react quickly to avoid big mistakes.
5. Neglecting Key Relationships
The key relationship for any business to succeed is the one between management and staff. Good communications are essential to providing strategic leadership and ensuring that management and staff are working effectively as a team toward their common goals.
Sometimes we are distracted from our key relationships by the most annoying and challenging employee or customer. Often your biggest customers are not the squeakiest, just the most important. Do you need to squeak more yourself? Do your suppliers appreciate you enough?
Another important relationship is with your banker: Is your bank a welcome and willing partner in your business?
Building and protecting these key relationships are essential to keeping your business on track and meeting your strategic objectives.
6. Poor Marketing and Sales Management
There are usually obvious signs of poor marketing and sales management. Feedback from customers will highlight your failures in customer service. Opportunities for growth are being missed and current customers are fading away.
No business can survive without effective marketing and sales management supported by consistent and effective customer service. All three functions need to be done well to build loyal, long-term profitable customer relationships.
7. Distracted by Personal Issues
Personal issues can seriously affect business performance regardless of whether they come from the owner, management or staff. Family businesses introduce particular challenges to managing personalities and corporate culture. Can you include family members in the management team without excluding others?
Avoid conflict between personal goals and objectives with those of the organisation.
In summary, my list of the Seven Biggest Mistakes that Entrepreneurs Make:
Too Entrepreneurial
Lack of Strategic Direction
“Let’s do it again!”
Focus on Profit
Neglecting Key Relationships
Poor Marketing and Sales Management
Personal Distractions
And How to Avoid Them?
Each of these Big Mistakes is a result of the entrepreneur failing to achieve balance between opposing challenges.
The Answer is Balance!
Avoiding these mistakes requires the entrepreneur and business owner to:
Balance Energy and Drive with Planning and Analysis
Balance Strategic Vision with Operational Detail
Balance the Logical Head with the Intuitive Heart
Balance Short-term Profit with Long-term Value
Balance Personal Priorities with Strategic Objectives.
Balance these issues to grow and prosper in your business and avoid the Seven Biggest Mistakes that Entrepreneurs Make.
(This article is an excerpt from Don’t Do It the Hard Way – A wise man learns from the mistakes of others; only a fool insists on making his own, by your Uncle Ralph, Delvin R. Chatterson)
Be better. Do better.
Be an Enlightened Entrepreneur.
Your Uncle Ralph,
Del Chatterson
Learn more about Enlightened Entrepreneurship at: LearningEntrepreneurship.com
For more of Uncle Ralph's advice for Entrepreneurs read Don't Do It the Hard Way & The Complete Do-It-Yourself Guide to Business Plans.
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