A surprising fact for many is that most entrepreneurs made more money when they were employed by someone else than what they earn in their own business. This astounding truth seems at odds with what you know when you see successful entrepreneurs featured on television shows and in magazines, and you hear their tales of success. What you fail to realize is these impressive stories make the news because they are the exception rather than the standard result. Five critical reasons exist as to why most entrepreneurs fail to be profitable in their businesses and what causes them to fail.
Reason 1. They become comfortable in their lives.
The first 18 years of your life are spent following specific routines set your teachers and your coaches, and especially your parents. You follow a schedule to get up, go to bed, go to school and even when to take lunch. You’re allowed a certain amount of time to play and have fun. Fast forward to college, and the routines continue. Once you graduate, you follow new schedules on when to go to work, when you can leave and even when you take lunch or have breaks.
When you become an entrepreneur, the goal is often to be free rather than successful. They may use the term “successful entrepreneur” but what is really meant is a business owner who is free. However, there is a purpose behind the structure you’ve had for most of your life. Without these rules, most people won’t follow through on required tasks, and entrepreneurs are especially susceptible. Once you become an entrepreneur, don’t think you can live without morning alarms, time clocks or other regulations you’ve lived with. You will discover as an entrepreneur that you must be even more disciplined than what you were previously.
Reason 2. They focus on the infrastructure of the business.
When a person becomes a small business owner or entrepreneur, they often start with functions that make them feel like an owner. They will build a website and social media pages, order flyers and business cards, and purchase desks and chairs for their new office. These tasks cost thousands of dollars and a great deal of time without adding much value to the business.
Rather than focusing on outside features that make you feel more like a business owner, direct your attention to promoting your products and services in whatever ways you can. The only way to succeed is to start bringing in revenue to sustain your business for the long-term.
Reason 3. They attempt to hire someone for the most important tasks.
Many new business owners try to hire an expert to deal with their problems. They look for someone to do their sales, write their book or even take care of the operations side of generating revenue. The problem with this method is that it often results in disaster when the entrepreneur hires an expert to do what they should be doing.
There are several reasons this should be avoided, but the most important reason is the entrepreneur will be unable to manage someone in a task they don’t completely understand. Another issue is with limited revenue it can be expensive to cover the high salaries for people who are considered experts in their fields. You want to get involved in as many aspects of your business as you can until you need to hire people. Once you get to this stage, you will understand the tasks and know how to manage the people under you.
Reason 4. They limit their time in sales.
You must sell if you want to generate revenue and turn a profit. There is no way around this fact, but many entrepreneurs fail to focus properly on the sales aspect of the business. They focus on the operations side. While all areas of a business are important, spending more time on something besides sales will lead to a disaster.
Spend as much time as possible on sales for your services or products and then turn your attention to the operations to support your sales.
Reason 5. They don’t understand the three parts of being a CEO.
As I’ve covered in my book, The Business Bible, along with other articles and publications, there are three parts or facets to being a CEO of a company. All three traits must be embraced for your business to be successful. You must recognize which trait is predominantly in your makeup and which is second. The third trait, which is least, must be developed. At some point, you will want to hire someone who primary trait is the one you lack.
- The Artist – This aspect of the CEO focuses on the vision or mission behind the company. It’s the inspiration for the business, such as when a person uses an old family recipe to start a restaurant or café.
- The Operator – While the operator wants to stay true to the mission of the business, they also focus on the systems that operate the business. Their concern is on training the employees and ensure everyone is doing things the same way for ultimate customer satisfaction.
- The Entrepreneur – This person is willing to take big risks to move the company forward, often without considering the cost. They will figure out how to make things work after they’ve taken on more than they can handle.
Find out which one best describes your leadership style and which one is the next most predominate. Once you know which aspect you lack for your business, work on cultivating it. Make sure it isn’t ignored in your day-to-day operations. Find someone who can fill this area of need, and remember they won’t always agree with your ideas. Give them the freedom and authority to do what needs to be done.
Even though it’s a fact that most entrepreneurs won’t make a profit, there are some who do. If you want to be one of those who are enjoying massive success, you must learn and grow as you model your life after those who are successful. Avoid these five mistakes, and you will enjoy life as a profitable entrepreneur. You deserve the good fortune.