Entrepreneurs are not exempt from making mistakes. They probably make more good and bad decisions than the average person. By understanding some of the most common mistakes entrepreneurs make, we can navigate situations better when they arise.
When Scott Seamans first presented the idea of Crocs to his friends George Boedecker and Lyndon Hanson, he was dismissed in seconds.
They said they were ‘the ugliest pair of shoes’ they had ever come across. Even so, they admitted that they were ‘the most comfortable shoes they’d ever worn.’
And together, the three developed a very successful business!
In 2008, however, their success was tested. When the Great Recession hit, they just weren’t selling. They went from making a profit of 168 million dollars to losing 185 million dollars in a year.
But Crocs refused to die! The three guys went back to the drawing board. They improved their distribution network, changed strategies, and reduced overheads. Their main objective? To make Crocs stylish again.
What was their master plan? They simply targeted the people they believed mattered most—Gen Z, the people who grew up with Crocs as kids.
They understood clearly that the youth influence what’s relevant. And simply because of that, they rose again.
Today, a million variations of the ugliest but most comfortable shoes ever exist.
They have reclaimed a spot in the footwear world and have become a multigenerational staple for many.
A Lesson on the Mistakes Entrepreneurs Make
The entrepreneur world can test you. Even the most successful business owners have made entrepreneurial mistakes.
The statistics can back me up.
20% of new businesses fail within the first two years of opening, 45% within the first five years, and 65% within the first ten years.
Only 25% of new businesses make it to 15 years or more.
How can you make sure that you’re not part of this?
Get ahead of the game. Here are six common mistakes first-time entrepreneurs make and how to avoid them.
5 Common Mistakes Business Owners Make
1. The First Common Mistake Entrepreneurs Make – Target Audience
Entrepreneurs’ first common mistake is not being clear about their target audience. How can you market your product without knowing who you’re targeting?
How a product is produced and advertised depends significantly on who is expected to buy it.
- How old are they?
- What gender?
- What do they like to do for fun?
- How much money do they make?
These are questions that entrepreneurs must ask themselves.
Don’t try to capture everyone.
When you try to get a net to capture everything in the sea, animals cut through the net and break free. Ultimately, you end up catching nothing.
Fine-tune your message and let it speak to a specific group alone.
How do you know your target audience?
Assess Your Offerings
To know who you are targeting, you need to understand your product.
Ask yourself: Which features and benefits most likely attract new business?
Know which features you will place front and centre in your marketing and paid advertising. With this in mind, which current customers, images, and copywriting should shape my messaging?
Answering these questions will help you better understand your target audience.
Create Personas
Client avatar work is essential for knowing your target audience. It helps you break down their traits by age, gender, income level, and location.
Once you have this information, it can guide your messaging and communication in all of your marketing efforts.
Remember this: The people who are most likely to buy your products or services share certain characteristics.
Read our blog post – Know Your Idea Client Avatar.
Define Who Your Target Audience Isn’t
So, you don’t know who your target audience is. You’ve tried, but you can’t put a finger on it. The other way around this is to define who your target audience is not.
There will undoubtedly be consumers close to your target demographic who will not act on messaging. Try to be specific in determining who your audience is and who it isn’t.
Use Existing Data
If you’re still unsure who your target audience is, use existing data and research your competitors.
Who are they targeting, and how are they getting to their prospects?
Research the social media platforms that they are using. If it works for them, it’s also likely to work for you.
2. The Second Common Mistake Entrepreneurs Make – Money
Many entrepreneurs fall into the trap of either not spending enough cash or spending too much.
Financial literacy is a big issue in the entrepreneurial world.
If you’re new in the market, money will likely be a concern for you.
Most new entrepreneurs barely have any money to spend, and those who do can often get into the “you have to spend money to make money” mindset.
Both these two things are big mistakes.
There has to be a balance. Consider your expenses and finances and learn to spend enough but not too much.
How do you become better at money management as a business owner?
Take a Course
It’s a hundred times easier to learn new things in today’s world than before the internet era. You can take many courses to learn about money and business.
Check out this Money Management For Small Businesses course by Graham Cochrane.
Acquaint yourself with many of these online courses and learn how to manage your money.
Consult Finance Professionals
A small business owner rarely has all the skills necessary to run a small business. Unless you’re an accountant or acquainted with the finance sector, having all the knowledge at your fingertips may be difficult.
Do not shy away from consulting finance gurus on increasing profitability and scaling up your business. It may be an investment, but it will make you much more money.
For more business money management tips, check out our blog post – Six Money Management Tips for Business Owners.
3. The Third Common Mistake Entrepreneurs Make – Competition
Wouldn’t it be nice if you were the only one in your line of business?
It certainly would be…but it’s impossible.
Everyone has a competitor, and if you think your business doesn’t have competition, you’re probably wrong. That’s one of the biggest entrepreneur mistakes.
At all times, you have to remember that you’re not alone.
Analyse the market, determine who you’re up against, and plan and act accordingly.
Why do you need to monitor your competition?
Learn from their Mistakes and Successes
If you can learn from other people’s mistakes, you’re less likely to encounter the same. And even if you do, you’ll be better positioned to handle it.
That’s the reality.
And if you can learn from their successes, you can find a way to use them to succeed as well.
What keywords do they use to be at the top of an internet search? Use Google Alerts to stay on top of this. What content do they have that attracts a lot of internet traffic? What campaigns have been a game changer for them?
React Accordingly
Imagine you are two days away from launching a product, and then your competitor launches something similar.
It may not land well with your customers. They may take you for a copycat. Because of that, you need to know this information well in advance.
Maybe ignoring the competition was fine advice a decade ago. Still, with technology driving change at a pace never seen before in human history, entrepreneurs can’t afford to follow their competitors, at least to some extent.
4. The Fourth Common Mistake Entrepreneurs Make – Ego
It’s easy to get sucked in by our grand ideas. This is one of the most common entrepreneur mistakes.
In business, you may always think you’re the best and your ideas are the best.
This is not good for your business or your employees.
Don’t be deluded by how amazing your idea may seem.
Truthfully, no business is that amazing. No idea will “change the world.” Only hard work and strong execution will.
Remember, you’re not the most critical aspect of the company. The vision of where the company is going, along with company culture, is much more important than that of any of the founding partners.
Ego can kill your business in two ways:
It Stops You from Learning
“When you stop learning, you start dying?”
Ever heard that phrase? It applies to all aspects of life, including business. Your ego will lie to you that you have all the knowledge you need to succeed.
Accept opportunities to learn, even from those who are seemingly ‘below’ you.
You Micromanage
With a big ego, you feel like you need to control everything. You always consider your views to be correct.
Obviously, you want things to be done well. Still, you need to realise that you aren’t perfect.
By being overbearing, critical, and constantly watching your team, you’re creating a culture in which your team believes you don’t trust them.
5. The Fifth Common Mistake Entrepreneurs Make – Not Understanding or Testing the Market
The final mistake that most entrepreneurs make is not understanding the market.
After the Great Recession, the Crocs founders knew they needed to return to the drawing board. After being in business for a couple of years, they understood their market and went after that specific target market: Gen Z.
You have to not only understand the market but also test it.
Without testing the market to see if your product is viable for your potential customers, you can waste months, if not years, of time and money.
Here is how you can understand your market:
Conduct Market Research
Every business needs to do some market research of sorts. It helps you to make good decisions both for you and your business.
Market research gathers consumer feedback on your product or service and collects pertinent information on the marketplace. This information includes what your competitors are doing and how they’re pricing themselves.
Some of the factors that you need to get clear about are:
- Demand for your product
- Market size
- Economic indicators
- Location
- Market saturation
- Pricing
This information is really handy when making big decisions and determining whether a business is worth it.
Test Your Market!
Any time you introduce something new in your business, you must test the market.
Market testing involves taking a small-scale version of your business idea and getting customer feedback.
You can’t afford to be wrong on a large scale. This will cost you sums of money, which can take years to recover, if at all. Make sure to work on a small scale.
Read SBCC’s blog post Why and How to Market Test Your Product or Service.
Figure out the blemishes that need to be corrected, and then you can confidently ramp up production.
Our Summary – Five Mistakes Entrepreneurs Make
Being new in the business world is no mean feat.
You will be tested, and you will be tested, but in the grand scheme of things, you will be fulfilled.
If Farrah Gray’s quote is anything else to go by, “Build your own dreams, or someone else will hire you to build theirs.”
In summary, the five common mistakes entrepreneurs make are to do with;
- The Target Audience
- Money
- Competition
- Their Ego
- The Market
Outside ideas … is always up for a chat, so get in touch. We are on a mission to help people and businesses grow.
