Taking the leap and deciding to start your own business can be an exciting adventure. But despite the many benefits of being an entrepreneur—independence, the ability to follow your dreams, the possibility of making money—there are also a number of risks involved. While you are the one who gets to experience the joys of success, you will also be the one who has to endure the consequences of poor decision-making.
Fortunately, the many trials and tribulations of entrepreneurs over time have given the newest generation of business creators a lot to learn from. Though there are obviously many entrepreneurial risks that will be specific to your industry, there are still many specific hazards that seemingly all entrepreneurs should actively try to avoid.
Insisting that you maintain complete control
If you are the independent creator of anything, then you will likely be reluctant to let other people make changes to what you have created. However, though it might be important that you have a continuous say with how your company is run, creating artificial barriers to adaptation usually causes more harm than good.
If you insist on doing everything yourself, then you will ultimately find yourself in a situation where your business is no longer able to grow. Expanding your team—even if you are only using freelancer or one-time consultants—can help you create products of a similar quality in a much more efficient way. Once you have brought others onto your team, it is important that you avoid micromanaging. Trusting in others to help you advance your mission can often lead to the greatest results.
Failing to separate your personal and your business finances
Your business is a major part of your life and it can sometimes be quite difficult to keep your personal and business finances separated. However, even if your business was jump-started with a significant amount of your personal equity, it is still very important to view yourself and your business as two independent entities.
Though it is good to be confident in the entity you have created, it is also important for you to be realistic. Many new businesses fail—or are unable to turn a profit—within the first few years of operating, and it is generally unwise to risk everything you own in order to get it off the ground and running. Doing things such as creating a limited liability company (LLC), creating separate bank accounts, and funding your business through organizations such as the Small Business Administration (SBA) are all actions that can help keep things effectively separated.
Relying entirely on your family and friends for business
After making the decision to start your own business, you may very logically begin by contacting your family and friends. While your family and friends may be a reliable source for your first few sales (and possibly getting some positive reviews), it is important to recognize that these sales are an artificial “bump” in most of your business’ numbers.
Enjoying the benefits of your family’s interest can help you get off the ground, but depending on them to be perpetual clients is simply an unsustainable business model. Every new business should be looking to increase its revenues in the most organic way possible. Doing things such as going to trade shows, expanding your marketing efforts, and establishing independent networks can help you build a business that will actually last.
Depending on a “big secret” for success
Many creative individuals assume that if they brainstorm for long enough, they will eventually come up with a revolutionary new idea that can effectively change the world. Though there have certainly been many new ideas that have helped a business get started, having an original idea is not nearly as valuable in the world of business as being able to apply that idea.
Contrary to popular belief, Henry Ford did not invent the automobile and did not invent the assembly line. Instead, he took some ideas that had already been well-developed and applied them in a way that was exceptionally effective. In general, if your business “idea” can be summed up in a single sentence—something such as “it’s like x, but instead, y.”—then it is likely not yet ready to be taken to market. By taking the time to fuse together multiple existing ideas, modify them in a way that you believe is original, and write out a detailed business plan that shows why your business can offer investors (even if that’s just you) a reliable source of return, you will be in a much better position to succeed.
Refusing to listen to outside feedback
One of the most admirable traits that an entrepreneur can have is humility. While it is certainly great for you to be confident in your business model and ready to share it with the outside world, it is important to accept that—like all things made by human beings—your business is something that is imperfect and could certainly be improved. The last thing that you would want to happen to your business is that it begins developing in a positive direction, but the owners are too stubborn to make the changes that are needed.
Creating a successful business will require you to continually provide a good or service that the market is demanding. Considering that the market is something that is constantly changing, it would be foolish to assume that something that is being demanded today will always be demanded exactly as it is. Fortunately, there are many different ways that business owners can get feedback to orient them in a positive direction. Doing things such as surveying past clients, running various focus groups, and asking for help from already established professional can help you recognize your clearest path forward.
Many successful business owners will admit that their business in the status quo is absolutely nothing like they envisioned it would be when they were first beginning. Changing over time is something that, despite your ego’s natural resistance, can be incredibly beneficial. By trying to create a business plan that is simultaneously flexible and well thought-out, you will be in a much better position to experience authentic success.
Andrew is an experienced writer with degrees in Finance and Political Science from the University of Colorado. He also has experience in the real estate and life insurance industries. His other primary interests include economics, entrepreneurship, political philosophy, and nature.