No one likes to admit that they make mistakes. Especially those mistakes that are big, costly, embarrassing or seemingly unforgivable. But, since we’re all humans, we’re not perfect. Not even close.
That is why author Tom Panaggio says entrepreneurs should be on watch to avoid certain predictable mistakes that can derail a growing business. He calls them “the best odds” strategy for entrepreneurial success. Because so much can go wrong, it is important to avoid misconceptions, misguided advice and risk that might trip you up along the way.
“Don’t assume that because it doesn’t feel like a mistake that it isn’t. And don’t believe that your case is somehow different or special. It isn’t,” Panaggio says.
Along with several partners, Panaggio has built two thriving companies: Direct Mail Express (which now employs more than 400 people) and Response Mail Express (which was eventually sold to an equity fund, Huron Capital Partners). He wrote “The Risk Advantage” to help entrepreneurs face the many situations, predicaments, and crises they’ll encounter during their lives and to help formulate their leadership style and business strategy.
Here are a few common mistakes business people may make and how to avoid them:
Playing it too safe in general. Yes, risk is scary. But the truth is, unless you continually embrace risk, your business will never emerge from mediocrity. Panaggio insists that risk is the only thing that can give you the edge you need to distinguish yourself from the competition and reach your full potential…and that’s worth making a few mistakes along the way.
“Experience has taught me that some of the biggest mistakes you can make are the result of overly cautious decision making,” he shares. “You might think that you’re covering your bases, or taking the prudent path forward, but in reality you’re sabotaging yourself. Sometimes that sabotage might cost you ‘only’ a customer or a sale…but over time, a few customers here and a few dollars there can lead to your closing your doors forever.”
Holding resources in reserve: Putting it all on the line is a frightening prospect. That’s why most entrepreneurs want to keep some cash in reserve for a rainy day. And yes, Panaggio acknowledges that giving up your hard-earned money is the ultimate risk. To pour your life savings into an entrepreneurial pursuit is like walking the tightrope without the benefit of a safety net. But even though the commitment is substantial, you need to find the courage to take that first step into the void.
“Likewise, don’t skimp on the time and energy you pour into your business,” he advises. “They are even more precious than money and even more costly to waste. Never forget that a successful entrepreneur’s commitment is personal; it includes an investment of money, time, and loss of opportunity from forgoing other opportunities. The life of an entrepreneur is not glamorous; it can be stressful, and you probably won’t be as successful as you’d like if you try to hold back, hedge your bets, and settle for ‘good enough.’ Unless you’re willing to go all in with all of your resources, you are placing limits on your fledgling business that could keep it from staying afloat.”
Not allocating a marketing budget: Yes, it’s hard to know what consumers think and what their day-to-day needs are, but a business void of a long-term and consistent marketing effort is doomed. Especially in a global economy that is becoming flatter and more competitive by the day, skimping on marketing is not the way to save money, because you’ll quickly find yourself out-publicized and out-advertised by the competition.
“I do want to acknowledge that accepting marketing risk also means recognizing that some degree of failure is both inherent and necessary to find your right path,” Panaggio adds. “At RME, we knew that our marketing message was going to be received by some who were not ready to buy. Therefore we committed to a consistent, ongoing strategy to ensure that our message got in front of prospects when they were ready to buy. You can’t accomplish this by sending a single message and hoping prospects individually remember you and then respond months later.”
Keeping it all business, all the time: Many protective business owners live by the mantra “It’s not personal; it’s business” because they assume that customers have unreasonable expectations, or that their demands will increase once you open the door of a relationship. After all, what if you start talking to them and they start wanting better pricing, extended credit, or other special considerations? That might happen with a few individuals, Panaggio acknowledges, but for the most part “getting personal” is actually one of the most effective ways to earn your customers’ long-term loyalty.
“To a small business owner who has a small number of customers, losing just one customer has a significant impact on organizational health,” he explains. “If you lose a customer due to price or other circumstances beyond your control, then fine. However, losing a customer because they felt unappreciated or underserved is inexcusable; it indicates serious flaws in your internal business processes. The easiest way to avoid customer churn is by continuously reaching out and communicating; in other words, making customers feel like more than a number.”
Refusing to hire people who are smarter than you: Of course I shouldn’t hire people who are smarter than me, you might think. That would undermine my authority and make me seem redundant in my own organization, where I’m supposed to be the boss! Not so, says Panaggio. Yes, an employee might know more than you about a particular aspect of your business, but that doesn’t mean she and the rest of the team won’t respect you as a leader (as long as you earn their respect, that is).
“The best advice I got when I became the CEO of RME was to hire people who were better and smarter than I was,” Panaggio says. “By spreading the workload among team members who, yes, might be smarter or more accomplished than you in some areas, you can maximize strengths, reduce weakness, and minimize stress. So stop worrying about your ego and look for people whose talent and expertise complement your passion and goals.”
Being cheap about the wrong things: As a small business owner, of course you’re going to try to cut costs and stretch the budget wherever possible. And for each dollar you save, you (justifiably!) pat yourself on the back. But according to Panaggio, if you get too carried away with saving money, you might end up losing opportunities and customers. To put it another way: You can’t save your way to greatness.
“I’m not saying you should waste money or go into more debt than necessary; I’m just warning you not to be cheap about the wrong things,” he says. “In particular, don’t be cheap with your people. What I mean is, be willing to pay for top talent, and don’t skimp on training. Never forget that your employees—especially those on the front lines with customers—can make or break your business, so investing in their development is always the right decision.”
“Ultimately, a willingness to seek out opportunity and accept responsibility for all outcomes—including mistakes—is the mark of a true leader,” Panaggio says. “If you can learn to live with risk and even use it to your advantage, you’ll be setting yourself up for entrepreneurial success.”