Self-employeds are a special breed. We are confident risk-takers; we love a challenge; we have passion for what we do; we cannot imagine ever going or returning to a job in which we make someone else rich and in which we do not have complete control over our work life. And we live in a great age for entrepreneurship – there are resources like never before. Still, the statistics don’t lie. Over 50% of start-ups fail within the first five years of operation. They fail for both personal and professional reasons. Here are nine of those reasons, a combination of the personal and professional.
1. No Routine
This is really ironic. One of the reasons we leave employment by someone else is because we hate the routine of set hours. But, if we don’t get ourselves on some kind of regular work schedule as a self-employed, we will fail. It really is that simple. We need to get up at an established time (unless we’ve pulled an all-nighter for a client), and set established periods of work. The blessing, however, is that we can set those established periods of work. People who are self-employed often put in far more than an 8-hour day, but they get to choose which hours they are. It is a good thing to be as consistent as you can with your work hours, even if they are 4 hours in the morning, 2 hours in the afternoon, and another 4 at night.
2. Disorganized Finances
When startups are still very small and there are only a few clients, keeping track of the financial side of your business is easy. You can set up a simple spread sheet or ledger and track income and expenses. Taxes are pretty easy at this level too. As we grow, however, things become more complex, particularly in the areas of taxes and keeping track of accounts receivable and payable, invoicing, capital investments, etc. At some point we have to optimize these functions – either with a great total software package or by contracting with an accountant. It will reach the point of being unmanageable when other responsibilities are demanding our time. Failing to do something about it can become a nightmare.
3. Isolation
Particularly for freelancers, this is a real pitfall. And it’s the same for the sole entrepreneur who works out of his/her home and whose business is largely web-based. It’s easy to get up in the morning, stay in the PJ’s and work, fix a lone sandwich for lunch, take a break to read, access Facebook, watch a bit of TV or play a game. We can get into a rut so easily. At least twice a week, get dressed and take your work to a coffee shop, even if you are working around strangers. And, even if you are working on weekends, get out once a week to be with friends. Joining a local business networking organization can do “double-duty”. You get out among other people and you get to promote your favorite brand – you. Staying in isolation will take its toll both on your work and on your mental health.
4. Over-Selling
Of course we want customers and clients. And in our enthusiasm, we can go overboard with our sales pitches. All of the current marketing research tells us that we have to move slowly, develop relationships and trust and then go “in for the kill.” We, however, may be a bit desperate to make that sale, and so we push for it. The end result is a lost customer or client who wants nothing more to do with us. If you pick up that a potential customer is not ready, let it go. You’ll leave a good impression, and s/he will not be afraid to come back later.
5. Not Planning for Setbacks or Too Much Success
Both of these possibilities are real. New businesses do not follow a straight path. If we have not set aside enough reserve cash to make it through the rough times, we can go “belly-up” when if we had been able to stick it out a bit longer, we would have turned the corner. Likewise, there are times when a product or a service hits the market and the intended audience at just the right time, and more business comes in than we can handle. Having someone in the wings who can pitch in to help is pretty critical. This is the type of planning that should occur before launch.
6. Not Drawing Lines Between Work and Home
One of the lovely things about being self-employed with a family is that we can take some time from our work to attend a soccer game or to become a taxi once in a while. For the most part, however, keeping home and work separated will mean greater success. If you work from home, your work space is sacred territory and no one enters without invitation, unless there is fever, blood or fire. Not having real boundaries for yourself and everyone else in the household leads to frustration, stress, and anger. Setting the schedule in advance prevents all of this.
7. Poor Marketing
A new small business can’t compete on the big advertising stage. Fortunately, today you don’t have to. Truly, most marketing is all about relationships, brand building, and trust, and all of that can be established with a great digital marketing campaign, supplemented by some other outreach. If you are not an expert in content marketing and using all of the digital resources to spread you and your brand, then you will have to find someone who is. This is one expense you must budget for, because it will really mean the difference between success and failure.
The outreach part really is up to you. Join groups related to your business – both online and offline. Again, this is about building relationships and your brand. Groups have a way of turning into larger communities through referrals and additional contacts.
8. Too Much Formality
This is not your grandfather’s or even your father’s world. In those days, business people wore formal clothing, made appointments, and met in nicely appointed offices. Suits and ties were the norm, and greetings started with “Mr.,” “Ms.” or something equally as formal. Today, introductions and meetings are just as likely to take place online, over a coffee or a beer, or, in some instances, at social or meeting events. No one wants a relationship with a suit and tie or a company anymore. They want relationships with real people who have first names (and good personalities, too). Be friendly, conversational, and real.
9. High Expectations Too Soon
Businesses tend to grow slowly over time. Of course, there are a few exceptions, but the rule is you will have a few customers or clients initially and more will come much more solely than you would like. It’s easy to get discouraged and think that your business will not make it. Don’t throw in the towel – this is your dream. Develop an attitude of patience. In the meantime, make sure that your marketing campaign is on track and spend your time “knocking the socks off” the few clients or customers you do have. They will be amazed at your attentiveness, you hard work for them, and are sure to recommend you and your product or service to others. Goodwill is a long-term goldmine.
There are obviously lots of other pitfalls, and most self-employeds who have “mad it” can probably name at least 20 more than are on this list. Reach out to those who have made it, listen to them, and actively seek out their advice. Most entrepreneurs, as long as they are not competitors, are happy to share.