80% of businesses fail in the first 18 months according to Bloomberg. Fortune Magazine claim 90% of startups fail and the Office for National Statistics stated only 45% of startups survive after five years.
It’s hard to tell exactly how many businesses fail but we can deduce that starting a business is tough. There is a whole host of factors that can lead to business failure. Some mistakes are part of the learning curve but some are fundamental blunders that an entrepreneur cannot afford to make. In the years that I have built my company, I have learned 3 pitfalls that I find to be underrated.
Mistake #1: Underestimating determination
Winston Churchill once said, “Success consists of going from failure to failure without loss of enthusiasm.”
Without dogged perseverance, your business will fail. The foundation of an entrepreneur is built on the determination. You will never come across a successful business leader who gives up easy.
It’s common knowledge that entrepreneurs, particularly in the beginning stages, face countless setbacks however unless you’ve actually built a business it’s hard to grasp how difficult it really is. Hard work is interpreted differently. Some people consider a 10 hour work day as a grind. Successful entrepreneurs such as Gary Vaynerchuk work 18 hours a day. The video below of Gary Vaynerchuk gives you a taste of what exceptional work ethic really looks like.
Hard work is often seen as cliché. People normally have the opinion that it takes talent and skill to be successful after all most people think they already work hard. It is true that hard work doesn’t necessarily equal success, but once you’ve built a business you’ll realize how important it really is. Work ethic is often your only ally when you’re tackling problem after problem.
To completely grasp real determination, it’s necessary to learn from the people who have achieved success. Forget your own perception and understand how focused and hardworking these people really are. There are countless success stories on the internet. Speakers such as Eric Thomas are easier to learn from since they have so much content on YouTube and other media channels. Eric Thomas was once homeless, sleeping in abandoned buildings and eating out of rubbish bins, now he’s motivational speaker who gives talks around the world. The video below gives an insight into the determination that is needed to go from rock bottom to the top.
Mistake #2: Not thoroughly understanding the competition
Most of us know research is fundamental for any startup. The problem lies within the depth of research. Research is your golden opportunity to see if a business idea is likely to work before you plough in your hard earned cash.
There are many areas of research, for example, financial planning but what I find to be the most effective is competitor research. Firstly make sure your competitors are making a healthy profit by looking them up on companies house, see the link below. You can also look for other success indicators such as website traffic, product range, quality of the product, prices, etc. If you can determine your main competitors are making a worthwhile sum of money (which they should be) the task is simple. Be better than the competition.
This form of market research has always served me well. It’s simple and effective. You should analyze every aspect of their business in comparison to yours. Normally the competition will always have advantages over a startup. However, the battle is largely won through unique selling points (USPs). A USP could be that your product/service is quicker, cheaper, better quality, etc. A USP counts for a lot and if that USP can continue to exist over the long term e.g. through a patent or if it is hard to emulate, then that difference can result in success rather than failure.
If your research suggests that your business is better than the competition this will obviously increase your chances of success. However be very wary of confirmation bias. It’s often the case that the budding entrepreneur will interpret the research in a way that confirms their business is better than the competition. Don’t let your passion get in the way of the facts.
Mistake #3: Over-trusting the companies and freelancers you hire
Psychological egoism is the concept that everyone is governed by self-interest. Even if you’re helping someone you’re doing it so you can directly or indirectly benefit your own agenda. This concept is not set it stone but it does shed light on a very important topic.
As an entrepreneur, you are mainly a co-ordinator of resources. You are the conductor of the orchestra. You will not be an expert in all the fields you’re dealing with. The quickest way to complete a project is to trust the company you are dealing with. However, companies are governed by self-interest. They will lead you in a direction that has higher costs. Companies main function is to make a profit not to help people.
Therefore you will often be in a situation where you have limited knowledge and the people in-the-know will help but in a way that benefits them most. The holy grail is to build a network of people who you can trust. This can take years. In the meantime, you must thoroughly research all areas you are dealing with and seek impartial advice where possible.
I have dealt with many companies who ticked every box at the time of recruitment only for the relationship to turn sour shortly afterward. It is paramount to understand that you are the only person who truly knows the right direction for your business.
We all have the great opportunity to learn from others’ mistakes. Nearly all the mistakes you will make in the future are already documented either on the internet or in a book. Widen your knowledge so that you don’t make the same errors others have made. One of the mistakes above may well be a blunder you are inevitably going to make in the future. It is up to you and you only to prevent that from happening.