Three Mistakes Entrepreneurs Make At The Outset
Many entrepreneurs make three crucial mistakes at the outset. They do not pay sufficient attention to customers’ preferences; they ignore their competition because their product thrill them, and third, they neglect to follow their business strategy. Indeed, some have no strategy. Typically, they make these three errors because they succumb to the pressure to make a quick return on borrowed funds.
In the January 2014 issue of Harvard Business Review (HBR) Roger Martin identifies rules to prevent common mistakes when developing a strategy. He states in this article, The Big Lie of Strategic Planning, that the first rule is “keep the strategy statement simple.” Instead of a long, often vague document, the company or entrepreneur’s strategy should summarize the chosen target customers and the value proposition in one page.
Crafting the strategy needs time and thought, so the owner must be patient and learn to filter the many unsolicited voices telling her how she can make money quickly. I cannot state enough how crucial it is to develop a simple strategy for the startup. This simple strategy will be the guide to carrying out the owner’s mission or purpose for doing business.
Harvard professor and author Michael Porter, says strategy must be unique. He goes on to mention that strategy:
by consensus is bad strategy
is not compromise; it’s clarity
is about choices
needs a set of uniqueness to help to differentiate you from the competition
Porter then adds that less than 25% of companies have a clear strategy.
Strategy doesn’t have to be embedded in many pages, it can and should be plain and simple.
In his 1985 book, Innovation and Entrepreneurship, the late management guru Peter Drucker (1909-2005) said entrepreneurs create something new, something different and have unique characteristics. He said McDonald’s exemplified entrepreneurship; “they didn’t invent anything any decent American restaurant hadn’t produced hamburgers for years.” Drucker continued, McDonald’s asked:
What is value to the customer?” Then they standardized the product, designed processes, and tools, drastically upgraded yields, and created a new market and a new customer.
Drucker said McDonald’s carried out entrepreneurship. Whether the entrepreneur is an existing large institution, or an individual starting her business single-handedly, the same entrepreneurship’s principles apply. “The rules are pretty much the same, the things that work and those that don’t are pretty much the same, and so are the kinds of innovation and where to look for them.”
The start-up owner often does not spend enough time finding out the value to the customer of her product or service. Neither does she spend adequate time developing and testing her strategy. Instead, she focuses on making a fast buck. That’s why it’s crucial the owner does the following:
Spends time understanding who are the customers
Identifies needs and wants, real and perceived, and target markets
Decides how to fulfill those needs consistently and at a high standard
Be patient and focus on the long-term. Research shows that family owned businesses are more successful than non family owned businesses because the former take a long view when making decisions.
Other things owners are doing wrong include:
Listening to too many people with divergent views about the business
Trying to “save” money by not getting needed resources to produce consistently high-quality goods and services
Not taking enough time to raise adequate funds in the “proper” form. Often, they take loans from family and friends without stating clearly risks involved and repayment terms.
Starting a business is risky but rewarding, and needs patience and courage. However, heeding the above advice will increase the probability of success significantly.