Being an entrepreneur comes with a lot of freedoms...and a lot of pitfalls. What follows are some of the top wealth killers for new entrepreneurs and how to avoid them.
1. Not Understanding Your Value
Are you undervaluing your services?
To create a strong perception, you must understand the competition and have a strong "unique value proposition." Daniel Richards offers these tips:
Keep it short and uncluttered. Your value proposition explains why customers should buy from you. If you can't sum it up in 10 words or less, chances are you won't be able to execute it, either.
Be precise. Your customers have specific needs; your value proposition should offer targeted solutions
This is about your customer, not you. Your value proposition should discuss only what matters to your customers and the value you can bring to them.
Value comes in numerous forms. Money, time, convenience and superior service are a few of the ways you can help deliver value to your customers.
2. Health Care Costs
You're ready to become an entrepreneur. You've quit your job, you've written your business plan, but have you overlooked one critical detail...your health?
If there's anything a freshly-minted entrepreneur has been known to skimp on, it's health insurance. When you are just scraping by or investing all you've got in building your business, a monthly insurance premium can seem like a luxury. Beside, insurance has traditional been tied to a job, and so when you no longer have a "regular job," you may be hard pressed to find an affordable way of seeking health insurance.
Profitable sole proprietors are sometimes surprised to find that self-employment tax ( social security and medicare tax for self-employed individuals) can be overlooked and may be a significant part of their total tax bill. Be sure to calculate these taxes as part of your total estimated taxes when paying quarterly estimates. Also be prepared for the April 15 surprise. Not only is the balance due for last year’s taxes, but also due is the first quarter installment of the next year’s taxes. Cash flow must be monitored to have these funds available.
4. Bad Clients
Bad clients or customers come in many shapes and sizes but they inevitably become a drain on your time and energy.
Warning signs of a bad client include:
Not on the same page
Of course, sometimes a client/customer relationship is just a bad fit and it’s no one’s fault.
Be selective about your clients -- when many consultants and freelancers start out, they believe that they should accept any and all work. Book Yourself Solid argues that creating a "Red Velvet Rope" policy is essential to making yourself a highly sought after consultant. Port believes that having only "star clients" that inspire and energize your work will help you do the caliber of work that will help you attract more star clients. The solution is to separate your clients into three groups -- duds, mid-range and stars. Cut loose your dud clients, and decide if you can develop your mid-range clients into stars. Within the book is a series of exercises on deciding what exactly constitutes a "star" client for you.
5. Not Delegating
If you can do everything yourself, you save money, right? Not so fast.
David Osorio built his CrossFit affiliate literally by hand, starting with a couple jumpropes in a public park. But he reached a point in his business where he realized bringing in outside help was essential for growth.
Osorio reports: "I think I tried to do too much on my own for too long." Hiring employees helped him to focus on longer term projects that he had put on the back burner.
Don't hold so tightly to your original vision to stop your business from growing.
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