A lot of people really do have the desire to succeed when they first launched out, motivated by the lifestyle of notable entrepreneurs, they sure hoped to be the next big thing.
Of course, you are not going to start a business with the mind of failing. Are you? Unfortunately, a lot of folks invest their money and time only to see their investments run down the drain.
Data from CB Insights suggests that almost half of business startups fail for several reasons, and it is even more shocking that about 65 percent of African startups don’t make it to the 10th year. Why is this happening? or maybe the real question should be, why should it not happen? Since we can not separate the influence of the Entrepreneur from his/her work, business owners should never assume they are immune to errors and thankfully, they can be avoided. Business owners make a lot of errors, but here are 7 mistakes Entrepreneurs make and how to avoid them;
Desire to Start Big
A lot of people are tempted to start big, get a suitable location in a Central Business District where the lights are on and city life bubbles. The allure of the big shop, the aesthetics, the psychological appeal to a new arrival places business owners at risk of losing it all. Big businesses are appealing to people, but it undermines the essential law of progress and growth.
Little or No Background Research
African entrepreneurs are often victims of their own capacity to underscore the importance of research before embarking on a business. The general assumption is that of a guesswork or head knowledge of the location of the business and all that the market entails. It is very unfortunate.
There’s really no foundation to build on. No data relating to demographics and lack of understanding of existing competitions. As Mike Lieberman succinctly puts it, one great mistake entrepreneurs make is that they do not know of “any threats or weaknesses that may arise as the business grows or know the target audience…”
Lack of flexibility or change as business demands.
Traditional forms of business often require a sit-in and expecting the customers to say “hi”. Today, it is more about a go-to business strategy. To avoid failure, and a colossal one for that matter, businesses must have the capacity to innovate. Leveraging on the internet, software and of course, social media can help entrepreneurs overcome the sluggish method of doing things. If you’re willing for instance to venture into the sales of kitchen utensils or baby products, digital marketing platforms with the aid of courier services can be of great value.
The Big Picture
Inability to Diversify Businesses that don’t have the capacity to diversify tend to lose relevance in the process of time. Entrepreneurs who are stuck into one line of business soon lose big when new markets emerge especially complementary products. In 2013, the total household usage of gas in Nigeria was around 250,000 tonnes, as Kerosine was mostly used.
That figure rose sharply to 1 million tonnes in 2020. Those who have had to supply Kerosine all their lives now have to move over to a new “gold” – gas supply for cooking. Business owners must be fluid, looking out for new disrupts, tools, complementary products and must be willing to learn.
A restaurant owner in Johannesburg who makes the ‘Chakalaka’ and pap or Bunny Chow can add Biltong and Droewors or Braai/Shisa nyama, especially for the evening groovers. You just have to see ahead to stay relevant as trends and new patterns emerge, especially as it also relates to consumer behaviours and new technology disrupts.
Too Much Overhead Cost
Too much money spent on overhead costs can wreck a business. If you’re setting up a business that requires spending a huge deal of your income on maintaining the business rather than saving and expanding, it’s a bad omen. In some African countries, where a sizeable number of businesses rely on alternative power sources due to epileptic power supply, an entrepreneur must consider this very important factor before starting at all.
To avoid business collapse, you’ll most certainly have to cut costs until the business grows enough to add more to the variable cost and potentially, more staff. Pareto’s 80/20 principle can be a good guide in ensuring that not all your income is consumed by the cost of running the business. If you’re unable to remove 20 percent for savings and future investments in your business, you’re making a big mistake.
Setting Unrealistic or Goals Unrealistic goals are an entrepreneur’s wild fantasies.
The ‘big idea’ soon becomes a utopia when certain unexpected events begin to take place. Selling 250,000 wares spread across the African continent within 2 months of starting a clothing line is a good vibe, but when it lacks a path or strategy based on research, it falls short of expectation. This is where many entrepreneurs lose their steam.
They do not have a go-to-market strategy, neither have they fully endeared themselves and their businesses to people who would have to recommend them, yet they jump the bus. This mistake can be avoided by being diligent and patient enough to allow goals that are realistic and practicable within a reasonable time frame.
Chasing the Money Before the People
Putting the product first before the people is an unpardonable error any business owner can make. Yes, you need to make money and that’s understandable, but ensuring that customers are fully satisfied should be the main priority. If people do not see the need for your product and you keep getting negative reviews, you aren’t going to stay long in the business.
A lot of folks would have set up an office or shop, stock it with goods and place a big signboard nearby to make people aware of what they do until they discovered that what they sell or provide isn’t the need of the people. Oftentimes, placing a product before the people reflects in the quality of service.
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Business owners must endeavour to maintain high product standards and deep connection to customers’ wants through social interactions and market research. The customer-first mentality must be present so as to avoid the mistakes entrepreneurs make and not allow the quest for profit to take away the most important factor – humans.