4 Rules for New Entrepreneurs

With new entrepreneurs, there are many mistakes that can happen. Navigating to avoid them isn’t easy when you have never started a company before. Accordingly, here are four handy rules for new entrepreneurs to follow.

1.      Burn Slowly Through the Capital

Keeping costs lower is always good practice. It means you’ll borrow less or sell fewer shares of the company to secure sufficient funding to last before (hopefully) reaching profitability. Should the business become successful, you’ll be glad you were smart with spending in the early going.

There are many ways to keep expenses down. This might be through better business electricity deals, training up junior staff rather than hiring someone at a higher salary with 10 years’ experience, or skipping non-essential services. More affordable business electricity deals can be re-checked annually and the company saves every time they receive a new bill.

2.      Don’t Invest Time/Money in Shiny Objects

Shiny object syndrome is very real for new entrepreneurs. Rather than sticking to a solid idea that just needs time to bear fruit, the inexperience shows in either a lack of confidence or a willingness to focus on a single plan. Shiny object syndrome sees new founders put time and money into a variety of business ideas without researching their validity or their likelihood of success first.

Avoid wasting vital early working capital on bad ideas. Instead, make the core focus the best idea and have dry powder ready to back up that belief. Then invest more to develop out the product, refine the service, or for promotions once the results look favourable.

3.      Avoid Trying to Ride a Dead Horse

Equally a problem for entrepreneurs is to hold on for dear life to an idea that hasn’t played out as they envisaged. It will also have failed to be fixed despite reasonable attempts to do so. Instead, founders try to ride a dead horse which wastes time and money sticking with a business plan that’s already failed.

Entrepreneurs need to listen to common sense and their head (not their heart) to accept when a plan hasn’t worked. Either the product wasn’t great, or the market didn’t readily embrace it. Either way, developing several new ideas, finding a single workable one and pushing forward with that is better than wasting months running in circles.

4.      Know How You’ll Pay Your Bills in the First 1-2 Years

How will you as the founder survive financially over the first couple of years? The business isn’t likely to have sufficient profits to pay a salary. Also, if there are outside investors, they won’t be too pleased to hear that a significant chunk of their investment is flying out the door to the founder!

Any plan when starting a business must include how you’ll support yourself outside of the business. It’s true that the founder should get paid, but that’s only when the business can afford to do so. Therefore, plan for self-sufficiency while running the company. Even if that means you must run it as a side hustle for the first year or more. To create a successfull business, it’s as much about what you do as it is about what you don’t do. Finding that balance along with great execution is what’s required to develop a lasting business.