“Many entrepreneurs have the guts to take that dramatic first step of sparking something into creation,” says Nelson. “But too many lack the perspective to reflect on what’s needed for the next step.”
And there simply are no required tests or qualifications to become an entrepreneur. Anyone can attempt it. That’s different from what Nelson experienced in the Navy where he served as a nuclear submarine office and had to prove his qualifications before advancing.
Because entrepreneurs often lack the skills to take their companies to the next level, they end up making mistakes that can quickly put those businesses at risk. Here are five such mistakes identified by Nelson, author of a new book called “The Second Decision – The Qualified Entrepreneur.”
1. Insisting on autonomy. One trait many entrepreneurs share is a desire for autonomy. That’s often why they became entrepreneurs in the first place. And that’s great starting out, because in the startup stage, the business is often all about you. Your fingerprints are on everything and there’s little you don’t know and aren’t directing.
But in the growth stage things become more complex. The business becomes more vulnerable to industry and economic trends. At that point, an entrepreneur’s insistence on autonomy can hurt the company’s ability to respond quickly and intelligently to challenges.
2. Unwillingness to build structure, cultivate expertise or delegate. As a business grows, many smart entrepreneurs surround themselves with a strong executive team – or at least a steady right-hand individual – to help ensure the company’s success, says Nelson. But too many business owners fail to create the kind of structure that produces good leadership decisions within a management team. As you grow your business, you must also build in accountability.
3. Lack of financial leadership. Many business owners simply are not strong on financial skills. This includes such things as tracking cash levels and trends, financial covenants, metrics and expenses. As the business grows, these things become more time consuming and complex. The business may need a financial expert to ensure the business owners gets good financial advice and input to grow the organization.
The U.S. Small Business Administration estimates that 60 percent of businesses that fail owe their demise to a lack of cash. Says Nelson, “When it comes to financial leadership, it’s what entrepreneurs ‘don’t know that they don’t know’ that will multiply the risk that their business will ultimately fail.”
4. Failing to adjust to the day-to-day. For entrepreneurs – especially serial entrepreneurs – starting a business is exhilarating. That’s one reason they do it. By comparison, the reality of operating a growing business day-to-day can pale in comparison. A bored or disinterested founder can create big troubles for a growing business. A bored business owner might decide to start another business, or make abrupt changes to the current company to keep the level of excitement high.
“Entrepreneurs are to be celebrated for their desire to innovate. But when a serial entrepreneur habitually looks for new sandboxes to play in, what happens to the existing company often isn’t good,” says Nelson.
5. Failure to self-examine. Business owners are typically good at certain things. For example, some excel at salesmanship, others at marketing, and others at product development or perhaps customer service. But almost no entrepreneur is great at everything it takes to grow a successful business.
For that reason, entrepreneurs need to be aware of their own strengths and weaknesses – the same things they gauge in their employees. Set aside your abundant self-confidence and take stock of what you know, what you’re good at and what skills you still need to master.
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