by Morgan Sims
There are many different challenges that face a person or group of people when diving into the world of entrepreneurialism. This could either be getting the loans or the money to get this project off the ground or even ironing out the final business plan.
Too Big Too Fast?
Readers of this sentence maybe thinking that getting big fast is a great thing. If you are talking about profits then you would be right but unfortunately making too much money isn’t a common mistake of many startups. Too big too fast can refer to a number of mistakes that businesses encounter when first beginning.
With a tight budget that many encounter, some entrepreneurs hire too many people too quickly. When beginning a business hiring people only when it is completely necessary should be your practice. Paying employees that you are not getting the most out of can kill the scarce profits in your first couple of fiscal quarters. This will mean long hours for few employees whom usually are the ones invested in the business. This is the price you pay if you want to get your company off of the ground.
Taking on too much business too quickly before you can sustain it is another way expanding too quickly can come back to bite you. Of course the business wants new customers, but keeping the customers you already have is just as important. The new business you sign should be on a low level so the customers and clients that you already have are happy with your service. There have been many businesses that have overextended themselves in the beginning of their venture which led to their demise. Customer service is the name of the game for startups because in most cases corporations can undersell the smaller businesses price wise but the customer comes for the personal touch that the startup gives.
Solution: As for the employees that are hired in the beginning of your business, bring on people only as you need them. If you need multiple people only certain times of the week, offer part time positions with the promise of full time jobs once things begin to grow. This is also a great time to offer internships to college students in your area, you not only give a college student something great to put on their resume but you benefit from reduced rate or free labor. The other great thing about interns is that after graduation, you can offer a former intern a job. The former intern won’t have to be trained as they will know the ropes of your business so production will come much more quickly. This is a cycle that can keep going and will keep a pipeline of well-educated and motivated people in your office as you expand.
The solution for expanding too quickly is having quarterly or monthly limits that you will not exceed. Know what your work capacity is and slowly accelerate your production without sacrificing quality. Your clients will see this and appreciate that you want to give them the best product/service possible.
Skimping on Equipment.
The name of the game in the beginning of a business is getting the most quality production possible from employees. This can mean spending more money upfront on your equipment. For example, if you are running a technology based company then you should have the latest software and a solid Internet service. This can even be as simple as having the operating system that your programmers or designers are comfortable with. With all of this being said, this by no means is saying to buy the most expensive equipment in all areas. Getting the most for your money is important at all stages of creating a business and especially at the start.
Solution: Getting employees or potential employees’ opinions on the types of things that they would like to work with has a variety of benefits. This makes the workers feel like they are personally invested in the company besides their job because you took their opinion into consideration. Another way to go about this is to hire people by what platforms and equipment that you have already purchased. This may leave out the opinion of the worker but everyone will be uniform in the equipment they have and it is possible that you can receive a bulk discount.
Location, Location, Location.
Many times entrepreneurs want to start their businesses in their hometowns which sometimes works and other times is disastrous. This could be for a variety of reasons that are mostly personal. The business could run into a plethora of problems when opened in the wrong location. The customer base may not be in this area which many times is a death sentence for a new business. Often, clients want to be able to meet face to face with a business and this becomes difficult and financially inefficient if started in the wrong area. Another problem that can be run into is that employees in your field are hard to find because you are not in the industry hotbed.
Solution: There has to be an overabundance of research or evidence that your industry is thriving in a town before opening a business there. If opening up a technology based company, think of a growing hotbed such as Austin, Texas for your business. There will be plenty of qualified employees in this area as well as a customer base for your product or service. Right outside of Austin is the headquarters of Dell (maybe you’ve heard of it) which makes the computer industry boom along with huge influxes of people moving to the area.
There are things that many times can doom a business before it ever really gets off of the ground. These are just three specific examples of things that commonly can cost a new company money and ultimately the existence of said company. With all of that being said, research and hard work can make a business money but it is the little things that make a business successful.
Morgan Sims is a writer and graduate of the University of South Florida who loves all things tech and social media. She has been involved with two startups that had their fair share of struggles, and taught her a lot about what not to do.