I never thought about running my own business until the opportunity presented itself and in 2009, I launched A City Law Firm. Along the way, I made good decisions but more importantly, I made mistakes – and quickly learned from them.
Now, as I support other entrepreneurs and start-up companies through their journeys, I use my experience to help navigate them through the pitfalls that lie ahead.
So, what are the biggest mistakes entrepreneurs (including myself) can make?
1. Choosing the Wrong Partner(s)
This was one of the first mistakes I made in business and unfortunately, choosing the wrong business partner can be costly. In addition to the financial impact, your reputation is at risk so it’s important to have a co-founder’s agreement in place.
When starting a business, so many entrepreneurs forget to do this or don’t even think it’s required, especially if starting a company with friends of family.
What happens if someone offers to buy the business or you need an investor? What happens if you want to leave or your partner isn’t pulling their weight?
An agreement is vital and getting this in place from the very beginning avoids disaster further down the line if you face disputes.
2. Get Support
Starting a business means cash flow is often quite tight and business owners will try to juggle 3-5 people’s jobs until they can afford to recruit. I have also seen owners try and handle aspects of the business they’re not trained in such as the legal department. It’s easy to think you can do it all but having the right team is paramount to success.
3. One Step at a Time
Securing large established clients and the sexy contracts that come with it is an aspiration many entrepreneurs have, but it can be disastrous to obtain it too early in the journey.
One client I represented,took on a contract and the extra staff to service this amazing venture, but he made no contingency plan.The completion was pushed back six months which meant he had to fund the staff and office space for an extra six months without being paid. Sadly, he couldn’t and the business folded.
Carefully plan the next step up and ensure you have a plan b if things go wrong.
When you’re in the position to employ staff, it’s important to keep them motivated and cultivate an environment people want to work in.
Whilst keeping your team happy is imperative for productivity, some business owners overlook the importance of a good employment contract.
Bad relations and access to sensitive material can lead to employees leaving and potential competing against you. Have water-tight contracts in place that caveat anything like this happening.
5. Not Having Sufficient Cash Flow
Cash flow can cripple the most established businesses and poor financial management and overspending can have a huge part to play.
Get savvy with money and ensure you have a strong team in place to forecast big expenses such as tax bills, office repairs or even legal issues.
6. Be Selective
In the excitement of building a business, we can sometimes take on clients without real consideration and as hard as it might be to say ‘no’, it’s important to be selective.
In the early days of my company, I was too flexible withpayment and extended credit to the wrong clients.
My advice is to carry out some due diligence and watch for warning signs of them being unable to pay you.
7. Finding the Right Balance
If you are investing in several businesses, sharing your time amongst them can be a difficult balance to strike.
Entrepreneurs love to overstretch themselves but it can be detrimental to you, your staff and your business.
Alternatively, if you are focused on only one business, don’t micro manage staff members as they can lose motivation.
Getting the balance is tricky but essential.
As we all know, some things will never goto plan or conclude on the deadlines set. As an entrepreneur, we want to be in control but it’s not always possible and we have to adjust our expectations.
I’ve learnt to berealistic and set achievable goals for me and my team. Otherwise it will seem that you are always winning bronze than gold.
9. Know the End Game
Are you going to sell, take on investors, expand overseas or run the business to pass on to your family? Planning your exit and making this clear to others is absolutely key to achieving this aim otherwise no one knows the ultimate goal. A business plan and shareholder’s agreement are key to this along with your Wills to be clear of you future goals.
10. Don’t Make It All About You
If you decide to sell the business, it’s important for the brand to stand alone without you.
No one wants to buy a brand or company whose goodwill and reputation will be lost if you walk out the door.
Some entrepreneurs think it’s all about ‘them’ but actually, it’s about having a fabulous team who deliver exceptional service.
Karen Holden is the founder of A City Law Firm