But when you start your venture make sure that you are going in the right direction. I agree the fact that every entrepreneurs makes mistakes but the adage “prevention is better that cure” is applicable here to avoid time and money loss. Having said that, when you start new venture, most of them makes mistakes, it is very good because each mistakes is an learning opportunity.

1) Unclear Goals, Mission & Focus

This is one of the common mistake made by new entrepreneurs, though most of the entrepreneurs come with an innovative idea and business model during its execution they fails to focus. There are several different reason for this. During the execution, entrepreneurs often fail to manage the cash flows, sales etc. This will bring them to focus more on the survival strategies rather than their main business strategy.

Most of the entrepreneurs fails to answer the questions like What is your Goal? What is your mission? What are your success criteria’s? These questions are very crucial for all entrepreneurs. If you are not able to answer those question you may end up with a tragic entrepreneurship story. So whenever you start a new venture sit down and write the answers to the question in a paper and read it often; I swear it really work.

2) Identifying Wrong Primary Customers

It is very important to identify the primary customers for all business ventures. Lot of new entrepreneurs identify wrong primary customers and they usually tend to identify broad customers are primary customers.

Let me consider an example; If someone ask who is the primary customers for McDonald, lots of people misunderstood it as customers who are intend to buy foods from them. But in naturality, their primary customers are customers who would like to franchise McDonald shop.

When you identify the right customers, your business strategy become entirely different. So identifying right primary customers is very important.

3) Early search of venture capital fund

Entrepreneurs usually start with search of venture capitalist or private equity firms or angels before starting the venture. By doing this, the chance for getting a investment become very less and might be end up giving huge equity to the investors. Investors often look at companies who proved the business models, they want to know how much sales have you done? What is the value proposition you are making?

4) Hiring people they like

When building up a team, entrepreneurs tend to hire people they like rather than they need. The team is very crucial for start ups. Each and every penny you invest in start up matters, so hire people who are crucial to business.

I have seen the tendency in universities and schools where friends join together to form company so that they can work together. So hire the right people not for keeping your friendship.

5) Becoming greedy

Having said about point 3, lot of entrepreneurs are not interested in giving out major pie to the investors. Always think about how much value that investment create to your business. If the value creation with an investment is more compared to holding majority of equity in hand then go for things that create value.

6) Thinking about selling the company before starting up

I know most of the investors ask about exit strategy. Everyone come up with exit strategy as selling the company to someone. So you have to think what can make you to reach the height of selling so that you will have the authority when you sell.

7) Not doing realistic self assessment

Some people are good at starting up but they might not be the right person to scale up and they are not ready to give up the power and role as being a CEO. I really admire Bill Gates for this, he is a great strategist who knows when to step down and step up himself.

Right self assessment is necessary for all entrepreneurs and identify your right skills.

Finally and most importantly, if you’re considering seed fund from relatives make sure that you are not messing up your relationships. Try to get money from relatives who are ready to give up that money if something happens for your business. All I want to say is that relationships are very important for human beings than any other business so keep your relatives away unless they are ready to throw away the money they invested so that they won’t be affected by your failure.

If you like the post or if you have anything to add, please leave a comment. Please share the post in twitter and Facebook.

Yesterday, I attended a session about protecting your idea in the pre-patent phase. Thanks to Alan who taught us an unconventional way without investing any enough money to protect the idea which was really helpful. Though it was not foolproof idea, but it was an idea that can worth try.

Finally, I found some interesting thing yesterday, the majority of participants were females. It was really interesting and surprising for me that more females are taking their career path as entrepreneurship.

Look at this picture they are trying to make the cash flow positive but you can see that the obligation of previous month is still there then how can they make cash flow positive?

1) Negotiate with your supplier for delayed payment. For instance piggyback your this month payment to next month ending so that you can get time to collect money from your customer.

2) Cut unnecessary operational cost. Don’t purchase any items which are not critical for the business. For example your company need transportation it is not a good idea to buy vehicle, instead hire it. Once you hire a vehicle you don’t need to worry about its maintenance, tax insurance etc.

3) Be selective about customers. Try to get customers with good credit history. You can buy those reports from credit agencies where in you will get the full details of payments, credit ratings etc. You can also select customers without good credit history by availing a deposit for using the service.

4) Accurately raise the invoices. Poor administration and handling of invoices delays payment.

5) Re-arrange customer payment cycle. This is very effective if you are doing some service business with a monthly payment. A simple example is if you can re-arrange the cycle and raise the invoice by 20th of every month with a due date on next month beginning collection can be very effective because most of the customers will get salaries at the end of the month so can pay money easily.

6) Offer early settlement discounts. Offer discounts for early settlements, but the downside is it will affect the profitability. Remember one penny today is not one penny tomorrow it is much more depends upon the interest rate. In this case we have to take net present value of the payment into consideration.

7) Compel customer to avail direct debit by offering some difference in transaction charges.

8 ) Diversify your customer base. It is not good to have a 2 or 3 service contract to run a business. Payment delay in any client will affect your cash flow there might be chance for the business to meet financial obligation.

9) Payment reminders, this is very effective sending reminders to the customer compels for payment.

10) Use a third party to collect your debts, make sure that the agency is reputable and recommended by people.

11) Consolidate your loans, if your business have multiple loans consolidate the loan with a single bank and negotiate the interest rates.

Remind Cash is the life blood  of business, so if you are not able to manage cash inflows and outflows don’t do business.

Potentially angel investor can be a family investor (parents or relatives), relationship investor (co-workers or friends who knows your potential of idea and you as a person), reference investor (those who don’t know you or your idea but they know the people who referred you they convert the trust in the person who refer into business) or idea investor (investor who may works in the same sector which your business targets).

Things to be keep in mind while approaching angel investor from my personal experience

1) Due diligence: The investor should be take care of the business from big harm that may affect the business. The potential harm can be financial loss, legal problems, business risks etc.

2) Experience: It is better to select “idea investor” as your angel because investor can help you to grow by giving strategic advice to the business situations and also able to provide industry insights.

3) Make Investor a active participator:  This will give double effects for the business to grow.

4) Negotiate proper terms and regulation: This is very important to agree with pre-defined terms and regulation before agreeing to the investments. The terms should include the working policies, lock in periods, share transfer policies etc. Lock in periods are very important because of the uncertainty about the idea or business and effort the innovator should put through for a certain period of time.

5) Share transfer: Agree upon the investment and share transfer periods. It is not a good decision to get entire investment and transfer the entire stake agreed initially, because there is no sense in getting the money and depositing it in the bank. Make the investment and period wise (say for eg monthly or quarterly) according to your requirements and transfer shares accordingly upon the money invested in the business.This will also gives a good cash flow in the business. If the business doesn’t require capital to go ahead stop getting money from the investor, this will give you a better liquidity of share.

6) Second round investments: If the business want more money to grow, it is not a good idea to get money from the same investor because your % shares will severely be affected.

7) CA firms: Keep another CA firm rather than using the same chartered accountant firm of the angel investor.

And finally the best way to get an angel investor is to approach the best chartered accountancy firm at your place. The truth behind this is chartered accountants know who has the real money to invest and their background experience.

This seems to be funny right, but this is one way to retain employees in start-up companies. May be the way is not ethical but somehow if your intention is good this is a simple way. This is advisable if the founder have the vision to achieve the objective but he is not able to make the employees happy during the maturity cycle.