Entrepreneurs invest both financially and emotionally in their businesses whether overseeing a team of Two (2) or One Hundred (100). They are self-motivated and enjoy a challenge at meeting the specific needs of their customers. These businesses, often founded on the basic concepts of innovation, organization, and vision are not without risks, which could be internally, and externally generated ranging from financing to market fluctuations, and competition. These risks notwithstanding, the entrepreneurs can still operate effectively in a risk-filled environment, when they are armed with the right information. This article highlights the common mistakes entrepreneurs often make in their businesses, with a view to equipping these business owners with the information vital for business sustainability.
These are the ten common mistakes you often make as an entrepreneur:
- Choosing the Wrong Business Structure – Registering a business entity is the first step you take before starting a business. However, many entrepreneurs fail to do this, or sometimes when they do, they register the wrong entity. It is important to have the right structure in place.
- No Founders’ Agreement – Many entrepreneurs end up having issues with their co-founders because the terms of the relationship were not clearly defined. It is advisable to enter into a Founders’ Agreement clearly stating the terms, and vesting shares to the co-founders at a later time to protect the interest of your company.
- No Intellectual Property Protection – Many entrepreneurs fail to protect their ideas and inventions. They get carried away with the excitement of having created something novel and do away with registering at the applicable registry. It is important to register your intellectual property.
- No Business Plan – It is said that many entrepreneurs are sometimes not businessmen. They have innovative ideas but do not think of how to turn those ideas into scalable businesses. A business without a proper business plan has failed from the beginning. Thus, it is important to have a business plan highlighting all the business goals and the timeframe within which they should be fulfilled. In addition, it is important to have a business plan as this is the first thing an investor will look at to consider if the business is worth his investment.
- Neglecting Regulatory Compliance – Many entrepreneurs ignore strict compliance to the regulatory framework and this gets them into trouble. It is important to ensure that your taxes are properly filed; the required licenses (if any) are acquired, and the conditions required by law for a particular industry you operate in are met.
- No Employment Contracts – Entrepreneurs when starting a business fail to enter into employment contracts with their new hires. It is important to have a contract highlighting issues on salary, Intellectual Property ownership, and assignment, non-competition, vesting arrangement, stock options, and so on. Have an experienced lawyer prepare a standard employee contract for your company.
- Getting in Bed With the Wrong Investors – Many entrepreneurs raise funds desperately and do not carry out their due diligence on the investors. When you raise funds desperately, you tend to overlook some issues or give equity in your company away without properly considering the implications it would have on the company later on. It is advisable to raise funds only when you need it to simply build upon what you have.
- Not Having Standard Contracts – It is important to get all your standard legal documentation in place such as your Non-Disclosure Agreements (NDAs), terms and conditions, etc.
- Not Keeping Accounting Records – The majority of entrepreneurs fail to do this. It is important to keep records of every penny that goes in and out of the business. This will not only give your business integrity in the eyes of your investors but will also help you monitor how well your company is doing.
- Not Having Experienced Lawyers – Entrepreneurs have a mindset that it is only when they desperately need a lawyer that they get one. It is important to get a lawyer (not just any lawyer but one experienced with startups, the ecosystem, and your industry) to guide you from inception through the scaling.
Sustaining a business takes hard work and dedication embedded in a bespoke business model that has the potential to stand out in the marketplace. However, the very purpose of these businesses which is profit-making can be defeated in situations where the employers are not proactive enough to overcome some avoidable mistakes.
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