Three Common Mistakes First Time Entrepreneurs Make

I’ve had the opportunity to work with many companies and entrepreneurs. I’ve observed them making some of the same mistakes. The most common three are industry agnostic, of which I mean that I’ve seen them happen in everything from restaurants to retail to tech. I’ve even made these mistakes myself. If anyone tells you they didn’t make any of these, run away.

These are especially important to avoid if you are an entrepreneur or CEO looking for outside funding. These three hiccups will definitely hurt your chances for outside investment. Although are you sure you really need it?

These three common mistakes are:

1) Lack of risk planning and mitigation

2) Unwillingness to step (and stay) out of your comfort zone

3) Overvalue how their (or others) work experience translates to business success

I’d like to add a little more context to each of these.

1) Lack risk planning and mitigation

This manifests for first time CEOs and Entrepreneurs two ways. First, they over estimate their ability to execute. This results in building in little or no pad into financial plans for failure or hard times. They don’t take stock of their blind spots or admit when they don’t know the answer or what the right move is.

Secondly they assume people who are going to profit off of them have their best interests at heart. This goes hand in hand with blind spots and something new.

Investors who know your industry and know you’ve missed risks are not going to invest. They know it’s one of the fastest and easiest ways for a business to fail. This is especially true of a business who hasn’t even opened yet.

The solution here is spend more time figuring out what could go wrong and plan your timelines, financials, approaches and advice gathering to account for those things. It also wouldn’t hurt to run ideas/plans by an unbiased peer- they must not have any conflicting interests or something to gain/lose by your decisions.

2) You are unwilling to step (or stay) out of your comfort zone

Whatever your business is, it’s a point of passion. But running a business as it scales requires more than passion. Some of the skills needed to be successful you likely don’t possess or have never had to use before. Every first time CEO experiences this. But in order to be successful, you’re going to have to do the stuff you don’t know or even don’t like. As a CEO, for example even if are technical you have to oversee accounting; even if are customer focused, you have to understand operations, etc.

This particular mistake manifests itself for first timers when they communicate only their strengths, and leave out how they manage their weaknesses. Their focus when seeking outside help is to express where they are strong. But those who will truly can help you need to know how you are managing your weaknesses as well.

Any investor is going to want to know your areas of risk and how you are doing with them. They are a lot more interested in that then your strengths.

Best advice I was ever given to combat this is, if you are adding leadership to your team, do it in an area you know. You’ll have better luck hiring the right person and overseeing their results because you know it. Then as a CEO you need to dive into and learn about your weaknesses, rather than purely relying on your strengths.

I’ve absolutely been guilty of this myself. But it is also one of my points of pride. I was able to lead an area (sales) in an organization to rapid growth even though this was not an area of expertise for me.

3) Overvalue how their (or others) work experience translates to business success

Just because you’ve worked in the industry doesn’t mean you are an expert in running a business. While the practical industry experience is very helpful, it doesn’t insulate you from your short comings. This is a painful lesson we all eventually learn. Depending on the type of company you are building you’ll learn quickly that you won’t always pick it up as you go along.

Even worse is when industry experience breeds overconfidence. Just because you worked somewhere or someone you know ran a business doesn’t make you an expert. You’ll need to be humble enough to ask for advice and support.

Investors are not going to care about your resume or the resume of people who are not involved daily in the business. Make reference to it and move on. You are not going to sell them on investing because of your resume.

Easiest solution here is to find someone in the industry (friends, family, former bosses) – preferably those that have operated at a truly executive level (Cx0, GM, etc) and ask them questions. But do your research before asking. You don’t want to wear out your welcome, nor do you want to waste your precious opportunities asking about things you can easily learn from the internet.

I’ve also been guilty of this. While the industry experience gave me a great foundation, it didn’t help when it came time to do things like plan cash flow or manage financial KPIs. I wanted until too late to seek out the advice of former bosses, many of whom were downright excited to offer their insights.

Lastly I would suggest – read books. You’ll be amazed how many industry specific books that are out there that provide a nearly play by play. They at least will give you a great foundation and a lot of pitfalls to lookout for.