Why entrepreneurs fail.So…you have an idea, and you’re confident that you can turn your idea into a huge business — or at least a business that would allow you to quit your day job!
Fast-forward 5 years; there’s a 98% chance your idea will have gone nowhere, and you will still be working at your job and struggling to make ends meet. What’s the difference, then, between the 98% who fail and the 2% who succeed? One answer is that successful entrepreneurs avoid the traps that stop everyone else from succeeding.
Here are three traps that, in my experience, will trip up even the most motivated entrepreneur:
Trap #1: You Jump at Every “Opportunity”
You’re getting ready to start your business when a “friend” (and I put “friend” in quotes here because these people aren’t really your friends) pitches you on a “killer product.” “It will fit right into your business!” your friend says, usually with a superior smirk. “All you have to do is sign up and begin making money!”
What you don’t realize is that each idea or “opportunity” you explore takes time away from your current idea…and makes it less likely that either idea will succeed!
As an entrepreneur, you must have the diligence to pick one business idea and stick with it for at least 6 months. Ignore all other “opportunities” during this time. After a few months, you will have a feel for whether your business is working or not.
It’s worth noting here that your business plan may change during that time. When I started my company, we offered every type of web hosting, from $7/month shared accounts to dedicated servers to colocation. As the business grew, I slowly stopped offering so much and focused on our most profitable areas — high-end dedicated servers and colocation.
One thing you may not know about me is that I actually sold two web hosting companies. I spun off my shared hosting company into a separate brand, 10for10.com. Then, I shopped it around and sold it in 2006 to Empowering Media, who runs the company today.
My business plan changed over time, but my company remained lean and mean. I didn’t start off trying to run several different businesses at once. From the beginning, we only did web hosting — not web design, SEO, or any of the many offshoots I was tempted to explore. In the end, we were far more profitable than firms that tried to do everything.
Bonus: Your Business Becomes Easier to Sell
An added bonus to focusing your business is that it’s easier to find a buyer. Spinning our shared hosting company off into its own business and then selling it was one of the best business decisions I made. Buyers want to buy a business that has one or two major product lines, not 20. It would have been harder to sell my business had we tried to do every type of hosting.
Start one business. If that doesn’t work after a few months, try iterating your original plan instead of scrapping it. Remember that there are very few, if any, businesses that are overnight successes. After over a year of running my hosting company, it was making the grand total of just over $400/month! But 5 years after that, it was pulling in revenues of over $72,000/month. All because I stuck with my original idea instead of scrapping it when it didn’t immediately pan out.
Trap #2: You Develop “Bright Shiny Object” Syndrome
You have your idea. Now, you’re looking for more information on how to promote it and get the word out. You see a conference that looks like just the ticket, and go. Then, before you get the chance to implement anything from it, you’re invited to another seminar…
This is Bright Shiny Object Syndrome. Another variant of it is when you get so obsessed on getting “up to speed” that you find yourself joining 57 social networking websites and spending all your time reading industry news — instead of building your business and getting customers.
You know you have Bright Shiny Object Syndrome if you call your friends and the first words out of your mouth are, “Hey, did you hear about XYZ? I hear it’s the next big thing…what do you think? Is it awesome?”
If you call me and say this, I will usually reply, “How is your business going?”
There will always be some new, super-cool, awesome thing that’s guaranteed to make you thousands of dollars a month “virtually overnight!” The best way to avoid getting sucked up into these vacuums is to have a business plan. I don’t necessarily mean the 40-to-80-page document describing every aspect of your business. I just mean: What’s your revenue model? Who is your target audience?
Once you have a solid idea of how your business intends to make money, you can quickly filter out all the “opportunities” and pinpoint what you need to move forward. I get pitched constantly, but I don’t let myself get distracted from my goals. The gurus pitch their products year after year, so don’t worry about missing the “next big thing.” There will always be another.
Here’s how I avoid getting sucked in: I don’t allow myself to buy another product until I have completed the last one. Have I read or watched it and implemented its action steps? If I haven’t, I buy nothing else until I have. (I set this rule for any product over $50.) I also limit myself to buying one product per seminar that I attend, and I often buy none.
Avoid Bright Shiny Object Syndrome, and your wallet will be happier. Plus, by denying yourself access to those “cool” products and websites, you will force yourself to take action instead of simply absorbing information!
Trap #3: Your Target Market is “Everyone Who…”
This is potentially the worst offender, and I have been as guilty of it as anyone. Here’s what happens: You come up with a great product idea — let’s say, for example, a classified ads website.Your next step is to go out and build it, right? Not so fast!
If you tell me about it, my first question is typically going to be, “Who do you expect will use this site?”
You know you are stuck in this trap if this question throws you. You will have no immediate answer. You will stumble around, stammering a bit until you finally seize on, “Why, anyone who uses classified ads!”
Nope, sorry. You have failed the test.
If your idea of a target market is a descriptive term that includes millions of people, like “women”, “men”, “small business owners”, or “kids”, you don’t really have a target market at all. I addressed this from the perspective of web site copywriting secrets earlier, but it holds equally true when you’re figuring out what type of business to start — or trying to figure out why your business isn’t gaining traction!
Here are some examples of interesting target markets:
Accountants and attorneys who make over $150,000/year, yet have no free time
Disgruntled freelancers who make less money and work more hours than they did when they had a “real job”
Deli, catering company, and pizza store owners who want to be able to accept large catering orders through their own websites
Silicon Valley startups that need highly scalable dedicated servers — and want those servers local to them
Having a clearly-defined target market allows you to quickly and effectively network at a party, write good copy for your website, and create advertising that gains new clients. It also helps your employees, friends, and contacts filter leads and send them to you.
Once you define your target market and make that definition clear on all of your marketing materials, you should start to see results. (If you don’t, it may mean you have defined your target market too narrowly, or that your target market isn’t interested in your product. In these cases, it’s time to go back to the drawing board.)
How To Avoid These Traps
If you see yourself in any of these three scenarios, it’s not the end of the world; it’s just time for a course correction.
Avoiding these traps is often as simple as focusing on your idea and shutting out distractions. It also takes courage to tell others “No” when faced with an opportunity that will split your time and energy.
Finally, it takes an admission that succeeding in business is less about jetting off to every conference and joining every social network and more about putting your nose to the grindstone and making sure Stuff Gets Done.
Do you see yourself (or other entrepreneurs) in these traps? How have you avoided them (or fallen into them) in the past? I welcome your comments.
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