What mistakes entrepreneurs usually make
The history of business goes back to 3000 BC when humans found the need to exchange entities. The need for trade rose when people saw an opportunity to satisfy their necessity with resources others had. So, the idea of business took shape with organized trading a few thousand years ago. Since then, the business world has evolved in ways that cannot be explained briefly.
The business world is constantly growing in the form of organizations, entrepreneurs, start-ups, individual owners, etc. The workings in these organizations have changed over time and are constantly changing. Though people have now formulated procedures to succeed in business, these so-called formulas keep on changing according to the market. Two major factors that drive any business is market needs and market acceptance. Even though people are aware of these, they often make mistakes interpreting or executing these.
The mistakes which we must learn even from the brands like NOKIA, KODAK, COMPAQ, GENERAL MOTORS or the success story of PepsiCo which got bankrupt and COCA-COLA has been refused to buy the brand PEPSI TWICE in 1920 at first world war and then in 1931 again but then PEPSI has become world conglomerate of 180$ billion and famous failure of Mr. AMITABH BACHHAN in ABCL and again rise of BIG B.
Let us understand what mistakes entrepreneurs usually make
- Defining Market and Customers – The basic mistake an organization can do is to not recognize their products& services in the market or target audience. No matter how good the plan is or how efficient the employees are, it only works if it is in the right direction i.e. targeting the particular customers. Just knowing the customers is not enough, understanding their needs is equally important to develop and present your product/service. Often new companies and start-ups overlook on proper marketing of their product. This is usually done to cut down on the cost. Companies relying on only free marketing sources lose their chance to make their product reach out to the appropriate audience.
- Considering Monopoly – Usually, when someone comes up with an idea of a business, they tend to think that their idea is one of a kind or think they have no direct competitors which can lead them to overconfidence and hence increases their possibility to commit any mistake.
- Goals Beyond Capacity – Understanding the potential and setting realistic goals for the company is necessary to build a solid work plan. Failing to do so can result in moral downhill for the employees as well as financial loss to the company.
- Not Spending on Proportions – Businessmen spend too much or too little on their business, often leading to financial instability. Even to spend more in the same business is the risk too after reasonable size.
- Hiring Blunder – New companies look forward to hiring employees on low salaries. This may seem profitable for the short term but companies end up paying more in the longer run. Employees settling in low salaries are not skilled up to the mark. Most of the time right mix of high & low salaries is missing.
- Adaptive Plan Change – Chalking out yearly plans for the company or business should be adaptive and not entirely based on last year’s plan. The parameters and market condition changes rapidly, so the plan should have a new approach every year.
- Detailed Planning – Not knowing how the strategy will be delivered results in a blunder. In the excitement of an effective new plan, the planning team could overlook the details and hence end up in a mess at the time of execution. Similarly, not knowing the exact numbers related to the company is also very unprofessional and misleading.
All the above-mentioned issues should be looked upon with seriousness for a successful business. However, even established organizations commit mistakes that affect either their reputation or finance. A few of them are –
- Big companies often miss the opportunity to collaborate or buy a potential upcoming company, especially when their value is at an early stage.
- Some of the companies come up with ideas, concepts, or products that are way ahead of their time. They come up with products that are not currently needed by the market or for which the market is not ready. For example – Kodak invented digital cameras in 1977 but it did not work out as the market was not ready for it.
- Companies that work on numbers and algorithms need to be extra careful about details to avoid blunders later. For example – NASA once incurred a loss of $125 million due to a small error in the unit of measurement.
- Some firms also try a risky marketing stunt and end up in a situation where they have to explain themselves.
- Saving habits of the small & mid entrepreneurs are the big issue and most of the time these organizations are in a cash crunch.
The better part for these companies is that they are established and have steady finance which helps them recover from the loss smoothly. But for small companies and start-ups, it is very difficult to recover from the loss. In this case, financial discipline comes into the picture.
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No matter how well you strategize your plan; there is always a risk in the business world. This risk could not be avoided but we could be prepared for it. Investment is one of the best options to be financially stable in case of a downhill business. Work Hard; Work Smart!https://www.imperialfin.com/