By Adam and Matthew Toren

What are the common mistakes that new entrepreneurs make, and how can you avoid making them yourself? Here is our top-ten list of mistakes people make when starting a business.

1. Not enough money

The most common reason new businesses shut down is that the owner runs out of money. Cash flow is critical to a start-up business. Even as you make a profit, your doors could still close if your customers take too long to pay you. One preventative option is to make sure you have enough start-up capital from your own or outside investments. A second is to ease into the business—start it on a part-time basis until you know it will make enough money to support you.

2. Not thinking “survival”

How do you stay around one more day, learn more about your market, and secure new customers? At the beginning stages of a business, this may mean doing work that falls outside your interests but helps pay the bills. You need to do whatever it takes to get through until the business can fully support you.

3. Losing momentum

Many new ambitious entrepreneurs create a Web site, try to make a few sales, go all out for a few months, and then stop completely. If you have twenty-four hours to spend on a business, they would be put to far better use if you spread them out to one hour a day than working at it twenty-four hours straight. It takes time to develop a new company and for people to react to what you have to offer. Even if your business is at first a part-time initiative, make sure that every day you are making some progress to move your company forward.

4. Doing it all alone

Nobody is perfect or has the skills to do everything himself or herself. You need to understand what it is that you bring to the table and what you need to someone else to handle. If, for example, you are very strong at inventing but don’t like selling, then you need to find a salesperson. By surrounding yourself with people who complement your skills, you will be able to achieve your goals and have a lot more fun along the way!

5. Not hiring right away

You should begin looking for help from the beginning. There will be tasks in any business that you, as the owner, should not be focusing on if you hope to build any sizable organization. Why are you doing admin work when you should be out closing customers, talking to the media, and landing new partnerships?

“But I’m broke! How can I hire someone?” Even if you have a $0 budget, you can find people to work for you through high school and foreign student internship programs. Once you have a budget, you can bring people on board for as little as one hour a day (what I first did) and then increase their hours when you can afford it. You need to be spending your time working on the business and not in the business.

6. Doing it just for the money

If you don’t truly love your business, then you won’t be successful. If you read the stories of famous entrepreneurs and how they built their organizations, you will find that it all comes down to loving what you are doing.

Money is, of course, important, but it may take a long time to come. If you don’t truly enjoy your work, then in the long run, you won’t be able to convince yourself to keep going.

7. Getting to year one, stopping at year two

Many entrepreneurs have a hard time getting to the end of year one. Typically, it’s because they started the business on a whim and got excited about an opportunity but didn’t do the proper research. These entrepreneurs usually run out of money and close down after a few months.

A second challenge is getting through year two. It usually takes three years of hard work to make a business. Year one is all about the excitement of getting started. You’re high on energy and ready to take on the world. In year two, entrepreneurs often find themselves still not making much money and the startup excitement has faded. You’ll need to work your way through the downturn and know that the money is coming if you keep at it.

8. Not building around a customer

The best way to make a lot of money quickly is to find a customer who has a problem and is willing to pay you to solve it—and then you go out and build the solution. Most entrepreneurs take the opposite mentality of “if I build it, they will come,” only to realize that they’ve built it and nobody is coming. Soon they find out that they’ve invested years of work and nobody is interested in buying from them.

The companies with the highest failure rates are restaurants, because they are usually built around an owner’s personal tastes. Meanwhile, the entrepreneurs with the lowest failure rates are lawyers and accountants because they are based around a service that we all need (whether we like it or not!). Talk to potential customers, see what they are interested in, identify who has money and what their pains are, and then create your product/service around them.

9. Not seeking mentors

A great way to get a business going is to find out what other people have done to achieve success, and implement those strategies into your own company. Find mentors who have knowledge of your industry and will give you time out of their day to help you.

You could set up a formal board of advisers and compensate people for their time, but if you’re a start-up, you can play on the fact that most entrepreneurs are willing to help out a fellow business owner as a way to give back. If you show genuine appreciation and approach the right people, the advice you get will help make or break your company.

10. Not getting involved in the community

Tied in with not seeking mentors is not getting involved in the small business community. Countless opportunities are generated by connecting with other entrepreneurs and finding out what they are up to and how you can help. You will get new business opportunities, partners, investments, media attention, ideas for productive tools to use, advice for your company, and many other resources that otherwise would take you years of trial and error to figure out (if you ever do at all).

If you have a business question, you can e-mail us directly at info@northvalleymagazine.com. Your question and its answer may appear here in an upcoming issue.