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Start-up Advice

6 Common Mistakes First-Time Business Owners Should Avoid

Leave your ego at the door, plan precisely and shoot for alignment, not consensus.

Malcolm Friedberg

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The famous playwright Oscar Wilde summed up the essence of experience when he stated that, “Experience is simply the name we give our mistakes.” And it’s a given that anyone starting and running a business is going to make mistakes.

New businesses require skills in a wide variety of disciplines: From accounting and strategy, to marketing and legal; from human resources to product/service design. And as businesses grow in people and resources, company founders gain the ability to delegate some of these roles.

But, in the beginning, most CEOs are involved in virtually every aspect of their business.

If you’re one of them, and you have expertise in, say, one or two areas, the broad range of questions you must answer – with little or no prior experience to draw on – burdens those first few years of running a business with challenges. It’s no surprise, then, that 80 percent of all business fail in the first 18 months.

We-recommend-tickWe recommend: The 5 Mistakes Standing Between You and Your First Million

For any new entrepreneur competing against these odds, nothing is more critical than shortening the learning curve and getting your business on solid financial footing.

Here are six common mistakes first-time business owners should avoid to improve their chances of success:

1. Leave your ego at the door

Success in business is often nothing more than making a series of good decisions. The catch is that consistently selecting the best choice isn’t easy to do. And despite common perception, one of the biggest roadblocks to good results isn’t a lack of information or skill, it’s a leader’s inability to put aside his or her ego.

In short, outstanding leaders are willing to be wrong. They develop the ability to select the best idea, regardless of the source.

If you want to be successful in starting a business, invite input and keep an open mind. If you can do that, you’re much more likely to do what’s right for your business.

2. Don’t treat everyone the same

Learning to manage people is a skill that takes time to acquire; it’s not something you’re born with. One of the common misconceptions about management is that leaders should have a particular style and require others to conform to it. Nothing could be further from the truth.

Regardless of your business, your employees are your most important asset. As a leader, your job is to get the most out of them, and the best way to do that is to understand them as individuals. So, take time to identify how to motivate each one and become aware of how he or she responds to your input.

If you can adapt your style to align with what works best for each individual, you’ll dramatically impact his or her performance.

3. Don’t hire too quickly

Big companies have the luxury of significant resources, allowing them to invest in the hiring process. Typically, they put candidates through multiple hiring interviews, as many sometimes as eight or nine. Why spend so much time with a simple hire?

These companies understand that the cost of hiring the wrong person is a significant waste of money and time. Small companies, in contrast, commonly limit interviews to the candidate’s prospective manager, and maybe the CEO. Don’t fall into that trap.

When you’re small, every individual can have a disproportionate impact on your business.

How these people fit in with the team, the alignment between their skills and the job’s requirements and whether they buy into the company vision are all critical to creating a dynamic and powerful team. So, vet your candidates thoroughly, and if you can hire them as consultants for a few months to “try before you buy,” that’s even better.

We-recommend-tickWe recommend: Derek Thomas from Letsema Holdings on Learning from your Mistakes

4. Admit your weaknesses

male-entrepreneur-mistakes

Even the most talented people have strengths and weaknesses. One of the easiest mistakes a new CEO can make is to ignore those shortcomings.

Maybe you were good at math, so you figure you can handle your company’s accounting. Or, you took a business-law class while getting your MBA and you think you’re somehow qualified to review simple legal agreements.

The best executives know what they do well and what they don’t. And their key hires and valued consultants provide valuable input in areas in which they lack experience. Don’t try to be a superhero.

5. Spend time planning

Most new businesses start because the founder or team has strong expertise in a specific field. That’s a great advantage because it cuts your learning time dramatically. But making the leap from the role of practitioner or product engineer to running the entire company is significant. So, take time to plan.

In the immortal words of Benjamin Franklin, “If you fail to plan, you are planning to fail.”

6. Consider that alignment, not consensus, is the goal

Successful teams exhibit numerous behaviours: Shared vision, passion for the work and honest communication, to a name a few. But many small teams incorrectly assume that everyone’s being in agreement is always optimal. What’s more, those teams will compromise the best solutions in order to gain consensus.

We-recommend-tickWe recommend: Are You Making These 4 Leadership Mistakes?

That may be understandable; but it’s the wrong way to run a company. Encouraging robust debate and thoroughly vetting competing viewpoints is the process that usually yields the optimal result.

As long as detractors are on board and the team aligns around the plan or vision, differences of opinion, not consensus, should be the goal.

This article was originally posted here on Entrepreneur.com.

Malcolm Friedberg is the chief marketing officer at CleverTap. He brings nearly 20 years of industry experience to his position, overseeing marketing and customer acquisition operations for the venture-funded mobile messaging company. Before delving into the world of marketing, Friedberg held C-level positions at several prestigious companies including Lead Targets, Euphonix, No Red Tape Mortgage and eVox Productions.

Start-up Advice

(Infographic)The Do’s And Don’ts Of Naming Your Business

There’s a lot that goes into a company’s name.

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Finding the right name for your business can be crucial to its success. If you’ve got a boring, vague name, then you might repel potential customers.

When it comes down to it, there are some major do’s and don’ts that go along with naming your company. For starters, keep things simple and short – a long name can confuse potential customers and won’t make a lasting impression on them.

Your name should also tell your story. Not only will this help people recognise your company but you’ll build the brand’s character.

Something a lot of people don’t think about is how their company’s name will sound in another language. Even if you’re in the early stages of building your company, who knows what could happen in the future. So create a name that sounds good and has a positive translation in any country. Next, always test your ideas before setting them in stone.

Ask potential customers to take a survey and compare your name with other companies in the same industry. Of course, you also must ensure that the name you came up is even available.

To learn how you can create the best name for your business, check out Business Backer‘s infographic below.

do-donts-naming-business-infographic

Related: Your New Business Name Should Be Memorable, Spell-able And Available

This article was originally posted here on Entrepreneur.com.


Read next: How to Name (Or In Some Cases, Rename) Your Company

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Start-up Advice

Fuel Your Hustle

These two practical goal posts will keep your start-up on track, even when things get tough and you start to lose traction.

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Make sure you have a clear vision and a plan — something to chase and celebrate when targets are achieved.

When you start a new business, everything is exciting. You have a dream, something to work for. Once the business takes off, it’s easy to fall into a rat race of just going to work and reacting to challenges as they happen. Many established business owners get to a place where they wonder if it’s all worth the effort. Whenever I talk to entrepreneurs feeling this way, I always ask them what they are working towards.

Most times, they don’t have an answer.

No, I’m not going to give a motivational talk on how important goals are, but I do believe it’s important to work towards something. To chase something worthwhile. Is it a vision and mission statement? Maybe that fuels your energy, but there are two practical things that I can suggest to any entrepreneur to keep you on track, and keep you motivated with a reason to wake up in the morning.

1. A one-page business plan

The logic behind a business plan is great. It’s a plotted journey, with marked goals and targets. It gives you something to work on, and work towards. And you’ll definitely need one if you’re looking for financing. But very seldom does it actually become a real working document for the small business owner; business plans are too long-winded and rigid and don’t allow for the fast changes and flexibility you’re going to need when you’re running a business.

So, gut instinct is how most survive, and the plan goes into the middle drawer.

That doesn’t mean you don’t need a plan. It just means you need a different kind of plan — one that works for you at the stage you’re at. A one-pager plan that acts as a dynamic working document is where it’s at. The keyword here is dynamic.

Try to compile a one-pager of what you aim to achieve in the next year. Break it down per month and list the small steps that you will be taking to reach your bigger vision at the end of the year. This plan could include anything, but you should know that it will be your guide to what is important and what isn’t.

Work on it weekly, review it monthly and ensure that you are moving in the right direction. At the start of every month, review your plan and list your priorities for the month. If you hit a snag, stop, re-evaluate your plan, make changes and move on. It is not set in concrete. It is dynamic.

Too many entrepreneurs go to work each day and solve issues as they arise without planning proactively for what they want. Others view their business plan — all 100 pages of it — like it’s the Bible. Neither approach will get you very far.

The one-pager will be your plan, your guide. Keep it with you at all times so it can be as flexible as you need to be.

Related: Keep It Simple: How To Write A One Page Business Plan

2. Your break-even figure

For most entrepreneurs, numbers are one of those complicated matters best left to others, although it needn’t be that way. And when it comes to one particular number, it cannot be that way: That number is the break-even figure. It’s the one number every entrepreneur must know. If you don’t have a break-even figure, how will you know if you’re succeeding or failing?

A break-even figure is the amount of sales you need to make in a month to cover all expenses and to make a target profit. If you can calculate this, then you have a number that you can chase every day — something that is measurable and understandable for the entrepreneur.

The break-even figure is calculated by using three figures:

  1. Gross Profit Percentage: Your gross profit percentage is calculated by taking your gross profit (sales minus cost of sales) divided by your sales. Let’s say you sell a product for R200 and the cost of that product is R150, then your gross profit will be R50. Your gross profit percentage therefore is 25% (gross profit (R50) divided by sales (R200).
  2. Overheads: Overheads are the total of all your fixed expenses each month. Examples include rent, salaries, Internet, fuel and all other costs that you need to pay, e.g. R100 000.
  3. Profit Target: This is the profit you would like to achieve in a month, e.g. R20 000.

Related: Self-Made Millionaire At 24 Marnus Broodryk On How To Build A R1 Billion Business

Now that we have these three figures, we can calculate our break-even amount:

Break-even = (overheads + profit target) divided by gross profit percentage.

So, continuing the above example:

Break-even = (R100 000 + R20 000) / 25% = R480 000

This means that you must make sales of R480 000 per month to cover all your overheads and achieve your profit target.

If you have this figure you can now plan how to achieve this target and go out every day chasing a goal, rather than just crossing your fingers. One can take this number and divide it by the number of working days in a month to get to a daily target of sales. Also, make sure it’s on your one-page dynamic plan.

Sometimes, we just need basic things to give our journey meaning again. Something to chase and something to celebrate once we’ve achieved it (yes, make sure you celebrate). To have goals, a clear vision and a one-pager plan might sound like petty things when you run a business — but you might soon realise that you need these things to keep you going.

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Start-up Advice

Insurances To Consider If You Are Starting Your Own Business

Below are just some of the insurances you need to consider if you are starting your own business.

Amy Galbraith

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Starting your own business is a brave and bold step. You will be joining many others in the journey of becoming your own boss, and this can be a stressful time. You will need to have a sound business plan in place, as well as other aspects that will secure both your business and your financial future. These include certain insurances that are geared toward insuring your salary, your investments and yourself.

All small business owners should look into taking out funeral insurance so that their family is not burdened and can pay for their funeral, investment insurance so that their money is protected and commercial insurance to protect your business and your property.

Below are just some of the insurances you need to consider if you are starting your own business.

General liability insurance

General liability insurance is important because it will protect you and your business from any possible legal action taken by customers. This insurance protects you in case of any injury to or damage to a customer which happened on your property.

It is also important if you manufacture products, but this would fall under product liability insurance. If a product harms a consumer, then you are legally responsible for expenses which means that having liability insurance will help immensely with costs. If you sell homemade cakes, toys for children or even clothing, liability insurance should be at the top of your list.

Related: I would like to start an insurance business. What are the basic guidelines?

Funeral insurance

Now, you might not think that funeral plans are that important but, in fact, they are. Not only for you but for the employees you might have. Funeral cover pays your family a lump sum within 48 hours of your death so that they can pay for your funeral without having to worry about expenses.

As a small business owner, funeral plans make sense. You will likely be the sole breadwinner, which means that your family will be under considerable strain if you die. The same can be said of your employees. Their families will need to be able to pay for their funerals, and it will also ensure that employees stay loyal to your business.

Funeral cover is a benefit that many companies offer their employees to ensure they’re happy and satisfied in their roles.

Property insurance

If you own property or are leasing a building, property insurance is vital. This insurance covers your office equipment, the signage both inside and outside the building, all office furniture as well as your inventory. These will all be covered for disasters such as fire or a storm as well as in case of theft or damage.

However, it is important to note that if your business is based in your home, your homeowner’s insurance will not cover any business equipment. This means that you will have to take out additional insurance for your business equipment. You will also need to speak to your insurer about disaster coverage, especially if your business is based in an area that is prone to fires and floods. Property insurance is important because it will protect your business from incurring costs it cannot afford.

Commercial auto insurance

If you use a company car or have bought a car specifically for your business, you will need to take out commercial auto insurance. Just as homeowner’s insurance will not cover your business inventory, personal auto insurance will not cover a commercial or business vehicle. This is why commercial auto insurance is so important.

If your employees drive their own vehicles to and from work, you should try to ensure that they have personal auto insurance. And if they use their own vehicles for business reasons, you could ask your insurance provider about covering the risk as part of your general liability insurance. This will keep them safe in case of any accidents that might occur during their trip.

It is a good idea to purchase or hire a company car for your employees to use for any business trips so that your employees are safe and correctly insured.

Related: Insurance For Small Businesses: What Should Be Covered?

Look after your staff and business

Along with funeral insurance, workers compensation insurance is important for ensuring your staff is covered for any eventuality. And it will show them that you value them as employees, which will keep them happy and content in their roles.

This insurance will cover medical bills, death and disability benefits if an employee is injured on the job or on your property as well as salary protection. If you offer these as separate packages, you will not have to worry about worker’s compensation insurance but you will need to speak to an insurance broker about this. Protecting your employees is the mark of a true company leader, and happy workers are also more productive.

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