Regretfully, we are inherently afraid of making mistakes, too sensitive to the slightest judgement, or we don’t heed the lessons each mistake teaches us. Personally, I was shit-scared of making mistakes when I first began as an entrepreneur. I thought that I had to do everything perfectly, calculate every risk to the last decimal and tiptoe my way around a boardroom without saying anything close to controversial. I thought that by making a mistake, people in my industry would view me as an amateur. I was naive. In fact, despite some of my mistakes costing me hundreds of thousands of dollars over the years, I would not be as successful as I am today without making them. And I would not have such a large network of contacts, which include multimillionaires across North America, if I hadn’t learned to own my mistakes.
So, word to the wise: you will fail and make plenty of mistakes as an entrepreneur. But, mistakes are crucial to growing, provided you own them, and learn from them.
With that in mind, some mistakes are completely avoidable, yet they seem to continually be made by new entrepreneurs. I want to share the Top 5 completely avoidable mistakes new entrepreneurs make so you can avoid them…
Mistake #5 Not allowing for Mistakes
One of the most grievous of errors we make, at least, I’ve made in the past, is to not allow for mistakes. This trait takes on two cloaks. The first is when we think that our plan is fool-proof and don’t make any allowances for things that could happen outside our scope of knowledge (always expect the unexpected with a startup). You can think of it in terms of Donald Rumsfeld’s known unknowns versus unknown unknowns. By not allowing for the possibility of unknown unknowns in our business planning, we do not give ourselves enough room to make mistakes; and when a mistake happens, we get stuck.
The second part about mistakes is thinking that for a business to succeed there can be no mistakes and that if one does occur, it’s the beginning of the end. That is wrong too. Business, as with life, is fraught with mistakes. If there was an intelligent design to this life, the concept of mistakes was surely part of it.
Mistakes are our greatest teacher. Mistakes allow us to ferret out the truth of the matter. Always be prepared to make mistakes and to learn from them.
Mistake #4 Borrowing Too Much Money to Get Started
Avoid borrowing money for your venture if you haven’t generated revenue. Borrowing is the harbinger of stress and trouble. It is okay to find an investor, and I encourage you to save money to start your business. It is even okay to sell your house and live in a rental to generate startup capital. No risk, no reward. But, borrowing substantial capital, right out of the gates, is a grievous mistake that many new entrepreneurs make.
Do not try to emulate large corporations and think of borrowing as leverage when you’re building a startup. Do not look at the expansion of debt as a way to leverage your earnings, instead of diluting them with an investor. Borrowing has a way of killing a business in its infancy because it dulls the urgency of cash flow and spending caps by creating a false sense of security. And if the business plan doesn’t pan out (refer to Mistake # 5) or there is a mistake in the cash flow projection, you are left without a way out. Get investors, use your savings, sell your house, or even your car, but avoid borrowing to start a business.
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Mistake #3 Not Paying Taxes
This one is absolutely absurd, yet it happens so often. For whatever reason, tax planning is something many new entrepreneurs overlook, yet the moment they become successful, it becomes one of the most important issues to address.
We all hate paying taxes, but there is no sense crying about it, or trying to avoid paying them. The moment you start a business, start planning to pay taxes. Businesses can be destroyed, particularly early-stage ones, because of tax ignorance or avoidance.
If you have to choose between paying your taxes or feeding yourself, the choice is clear – pay your taxes. Of course I am exaggerating and I hope you never get to that point, but always make sure you settle up with Uncle Sam. There is nothing worse than having to deal with the IRS for not paying your taxes. The one thing that the IRS can do that no other creditor can, is they can take away your freedom at the drop of a hat. Never put the IRS second. I view the tax man similar to the mafia. Either I pay them and live in peace, or I’m going to have to live a life on the run… pay your damn taxes from day one!
Mistake #2 Jump on the Bandwagon
You notice a new trend emerging and you see the potential for a windfall, so you jump in, head first. Mistake.
Being an entrepreneur is about being true to your passion. Passion is the only thing that gives you the resilience to put up with the unknown unknowns that crop up. Passion is the only thing that allows you to cope and not let you feel overwhelmed. If you jump on the bandwagon, have no passion for the project and are in it just for the quick cash, and if you do not bother to research it enough (another element of jumping on the bandwagon), you are setting yourself up for a major fall. Stay away from bandwagons – it’s not entrepreneurial.
Mistake #1 Taking on a Partner
Partners can be great, but if you are starting a business for the first time, it is important you prove to yourself that you can go at it alone. Never take on a partner for your first venture; always hire managers. If you need a task done, hire the best person to do it. By all means, give them options or shares in a company, but no voting rights. They are there to take part in the equity for their contribution, but the direction of the company and the important decisions should be yours and yours alone. There can only be one captain for your first venture.
While many mistakes are necessary in growing as an entrepreneur, these five are completely avoidable. Follow your passion, plan for taxes, don’t run away from risk in fear of making a mistake, avoid borrowing money early on and trust yourself to lead the ship alone.