It is good practice for you to establish a business around something you love to do.
The problem comes when your love for what you are doing overwhelms you and you forget that at the end of the day, you are running a business, not a hobby.
Many entrepreneurs do not have the requisite knowledge of common business practices to run a startup. As a result, they make monumentally terrible business decisions and try to take shortcuts thinking that this will hasten profit. Shortcuts will only hasten the death of your startup.
So, would you like to avoid these common pitfalls of business?
Here are some life-defying shortcuts to stay clear of if you want your startup to survive the harsh conditions of 21st century business climate:
1. Having a non-existent business plan
Relying only on a mental picture of where you want your business to be in a decade is terrible business practice.
If you run your startup without a clear and definite business and marketing plan in place, that business is doomed for failure. It is like running a marathon when you do not even know the route mapped out for the race.
This is not the place to compromise on due process because you think coming up with a detailed plan on paper will take time you feel you do not have. Your venture will definitely be worse off for it if you skip this part.
2. Killing yourself with bad margins
Many startups make the mistake of thinking that they can gain a foothold in the business by lowering prices and operating on very low profit margins. They figure that as long as their product/service price is lower than that of their competitors, everything will work out just fine.
Lowering prices does not always correspond with an increase in customer volume. Matter of fact some customers will begin to think that your product/service is of inferior quality and will avoid your business like the plague.
You have to be thinking of the sustainability of your business and customer satisfaction to come up with a profit margin that is good for both parties.
3. Not thoroughly verifying interested investors
Your business may come to a point where you feel it urgently needs a cash infusion.
This sense of urgency can often push entrepreneurs to desperation where they hurriedly make a deal with the first investor they get their hands on.
Investors are as different as can be and so is their interest in your business.
You have to be very careful and intentional in choosing investors for your startup. While fraud is an ever-looming problem, there is a more pertinent issue here.
Ensure that the investors you choose have a real interest in your business and seek to support you rather than control you. Remember, investors can kill your business without losing any money themselves.
Bootstrapping is one of the most efficient and cost effective ways to run a business. It teaches you to successfully stretch your resources - financial and otherwise - as far as is necessary.
Do not bring investors into your business until it is necessary; the myth that every startup needs an investor is just that - a myth.
Having too much money available from investors is not a good thing. The more money investors pump into your business the more they feel they own you.
You can end up ceding too much equity/ownership to them, hence, losing control over your business.
5. Revealing business idea before you own it
Ownership of a business idea does not naturally cede to you because you came up with it. Do not build a business around your idea before you file for a patent.
If you do not have the money you need to start the business yet, file for a provisional patent to protect your idea, which is your intellectual property. This saves your spot in line for a year while you get yourself ready to launch your startup.
Make sure you properly document and date your trade secrets, business plans and label them as confidential. Whenever you come up with a business idea, remind yourself that someone else has likely thought of it before.
So take action and patent immediately or watch painfully as someone else claims rights of ownership to your idea.
6. Thinking you are profitable when money starts to flow in
You set up a business and start seeing reasonable amount of daily sales, then your brain jumps into over drive and you declare your business profitable.
Your business is not profitable until the amount of money coming in exceeds total cost of running the business. This includes the monthly overhead costs, cost of inventory, taxes, insurance etc.
7. Not Being an Addicted Learner.
The ability to make continuous learning your core business habit is what will make you stand out in any field. Constant learning gives you an edge other startup entrepreneur don't have.
If you're dedicated enough to learning more every day, you'll discover astounding and mind-boggling insight that will instantly establish your competitor's advantage over your peers.
For me, my daily routine involves learning more than I do now. Daily, I read Huffington Post Home Page, Startups Section of Entrepreneur, and the Gadgets section of Gadget Advisor in order to get ahead of my peers in my niche.
Knowledge is how to run this thing.
If you aren't hungering for more knowledge, your startup may start crawling. Growth is synonymous to knowledge in business. When you know more, you climb more, when you know little, you fall little.