Category Archives: management

The Seven Biggest Mistakes that Entrepreneurs Make

Which ones are you making? How can you avoid them?


I was recently asked to do a presentation with my associates at a breakfast seminar for business clients. We had arrived at the title “Seven Biggest Mistakes that Entrepreneurs Make” before I had the list prepared, so I decided to do a survey of entrepreneurs and their advisors to complement my own ideas. The feedback was enlightening.


Here are some of the suggested “Biggest Mistakes” from the survey:
“Cash flow, cash flow, cash flow”, “Afraid of Marketing and Sales, “Reactive, not strategic”, “Not delegating”, “Hiring too fast, Firing too slow”, “Not focused”, “Communicating too much, or too little”, “Not using consultants” (That last one was from the consultants, not their clients!)

The feedback also reinforced my own experience that it is OK to fail and make mistakes, as long as they are small, frequent, and early. It’s all part of the learning experience to get better. But big mistakes can kill your business.

Here is my final list of the Seven Biggest Mistakes that Entrepreneurs Make.

#1 Too Entrepreneurial
Certain characteristics of entrepreneurs are necessary for them to be successful. But if over-indulged they can lead to big mistakes. These include the tendency to be too opportunistic and not be sufficiently selective and focused; to be too optimistic and miss or ignore the warning signs; to be too impatient and expect too much too soon.

Entrepreneurs usually have great confidence in their instincts and consequently rely on “gut feel”. The mistake is to neglect or ignore market feedback and analysis of the facts. Being action-oriented, the tendency is to react and “fire” before the “ready, aim” stages are complete. Painful surprises can result.

Many successful entrepreneurs have achieved a lot based on their energy, charm, charisma, and persuasiveness, but then get caught by selling on personality, not on performance. Clients start to notice that expectations are not being met.

Entrepreneurs are expected to be decisive and demonstrate “leadership”. Both can be overdone – deciding too quickly and providing too much direction so that input, initiative and creativity are stifled.

“Doing it my way” often means improvising and learning on the fly, or sticking with what works, until it stops working. The mistake is in neglecting to evolve and grow by optimizing systems and installing best practices and latest technologies.

All these mistakes can lead to serious consequences, as a result of being “too entrepreneurial”.

#2 Lack of Strategic Direction

Another consequence of the action-oriented entrepreneurial approach is the tendency to get lost in the daily details and completely neglect the original strategic plan and objectives. The owner-manager soon becomes pre-occupied by operating decisions and all the demands on his time from customers, employees and the constant fire-fighting. It leaves little time for fire prevention.

This situation is worsened as the entrepreneur concludes that the best solution is “do-it-myself”. Not delegating to staff or using external expertise may seem like the least-cost solution, but probably undervalues the owner’s own time and expertise and does not lead to long-term solutions.

The entrepreneur may have good awareness of long-term strategic issues and had them in mind when the business was launched. But they are now neglected, and the original Business Plan (if there was one) is not documented, updated or shared.

Lack of strategic direction is listed here as #2, but may be the Biggest Mistake that Entrepreneurs Make.

#3 “That was Easy, Let’s Do It Again!”

Another common mistake that can have devastating consequences on the business is the over-confident entrepreneur who concludes, “That was easy, let’s do it again!” So he or she leaps into new markets, new product lines, or even a new business or investment opportunity.
It’s important to remember: Making money doesn’t make you smart.

Do you really know what you did to succeed? Or what mistakes and risks you avoided? Is now a good time to start something new? How much will the current business be impacted by new initiatives? Is your success really transferable?

Many successful entrepreneurs have made the mistake of jumping into a new venture – merger, acquisition, restaurant franchise or real estate investment – and blowing away the equity value they generated in their original business.
Another big mistake to avoid.

#4 Focused on Profit

Being focused on profit doesn’t seem like a mistake. After all, isn’t that the whole purpose of running a business? No, actually. As I explain to students in their first Finance class, the primary financial objective of any business is “to enhance long-term shareholder value”.
Many short-term profit-oriented decisions can hurt long-term value. Examples are many: cutting staff, maintenance or marketing expense; not upgrading systems and technology; accepting high credit risk or low margin customers; avoiding taxes, environmental or quality issues.

Most entrepreneurs are very focused on managing the bottom line by monitoring sales, gross margin and expenses. They always know those numbers.

But they are usually ignoring asset management, especially cash flow. The business may appear very profitable, but have constant cash flow challenges because management is neglecting inventory and receivables, in particular. And unfortunately it is not as simple as: Collect fast, Pay slow. Customer and supplier relationships can be at risk if cash flow issues force you to take that approach.

Managing the Balance Sheet also requires good management of debt and balancing short-term and long-term needs with short and long-term sources of funds.
And the Most Undervalued Asset doesn’t usually even appear on the Balance Sheet: Human Resources. That leads to Biggest Mistake #5.

#5 Neglecting Key Relationships

The key relationship for any business is the one between its owners and the staff. Management and employee communications are essential to business performance and often not managed very well. Key employees need to be recognized and engaged. Mistakes made with key employees can jeopardize the whole business.

Similarly, don’t make the mistake of being distracted by the most annoying and persistent customer. Your biggest customers are not likely the “squeakiest”, just the most important. Don’t make the mistake of letting them be neglected.

Do you need to squeak more yourself? Do your suppliers appreciate you enough?
Fast growth and profitability may be coming from one or two key customers or suppliers which can lead to over-dependence on their business. And your success may be convincing them that they don’t need you in the middle any more. Be wary.

Another key relationship not to be neglected: Is your bank a welcome and willing partner in your business? Remember “friends in need” have to be developed in advance.

#6 Poor Marketing & Sales

You know there is a problem brewing when you hear the entrepreneur explaining that “The product sells itself”, or “Price is all that matters”, or “Our Sales Reps need to do a better job”. These are signs of poor marketing and sales results. Usually the company is failing at both the strategic marketing level and at the execution of effective marketing and sales activities.

Not only are opportunities for profitable growth being missed, but the company may be on the downward slide to “out of business” without a well-conceived marketing plan and effective sales strategies.

#7 Distracted by Personal Issues

And finally #7 – Personal Issues that distract attention from good management of the business.
Personalities and their issues can seriously affect business performance regardless of whether they are owner, management or staff issues. Sometimes they are simply ignored until they become a problem. Sometimes they are a result of too much success and behaving like a rock star.

Family businesses in particular run the risk of favouritism and having family matters interfere with business success. Managing personalities and corporate culture are a particular challenge in family businesses.

In Summary, the Seven Biggest Mistakes that Entrepreneurs Make:




  1. Too Entrepreneurial

  2. Lack of Strategic Direction

  3. “Let’s do it again!”

  4. Focused on Profit

  5. Neglecting Key Relationships

  6. Poor Marketing and Sales

  7. Personal Distractions
Now the obvious question is: How to Avoid Them?

The answer is: Balance!

Each of these Big Mistakes is a result of the entrepreneur failing to achieve balance between opposing approaches and decision making processes. Avoiding these mistakes requires the entrepreneur and business owner to:



  • Balance the Entrepreneurial Approach with Analytical Input

  • Balance Strategic Vision with Operational Detail

  • Add the Head and the Heart to the “Gut Feel”

  • Manage for Long-term Value not just Short-term Profit

  • Keep Personal Priorities in your Plan but Out of your Business


I hope that helps you to grow and prosper in your own business and avoid the Seven Biggest Mistakes that Entrepreneurs Make.


We could all be even worse off, but let’s hope it gets better from here. For most of us the impact on our businesses has been inconsistent and inconclusive.

What are the right management strategies and action plans to get through this economic turmoil with a more resilient and successful business?

Here are the lessons we have learned from clients, commentators and other experts, so far:

1. Do not rely on the headlines.
They are just trying to get your attention and a train wreck is more interesting than a success story. They will not provide either balanced or insightful input to your planning or decision making. You will have to dig deeper. Make sure your market data and competitor intelligence is current and accurate.


2. Communicate Communicate Communicate.

Keep employees and customers informed. They are worried, confused and need to be reassured that they can count on you. Unfortunately, you may not have good news for them, but it will be appreciated that they are hearing directly from you and are not left guessing what’s next.


3. Keep on Selling.

Now is not the time to cut back on marketing and sales. Your efforts now will be more even conspicuous and effective as your competitors back out of the market and away from their customers. Be selective and very focused. Work on building stronger customer relationships by being relevant and responsive to the current economic circumstances. Avoid the “cry for help” advertising that only confirms “we’re desperate and need the sales”. Calmness, confidence and competence are much more appealing to those potential buyers who are still spending and want reliable, long term suppliers.


4. Do quickly what obviously needs to be done.

If it’s clear to you it’s also clear to the people affected. They are waiting for you to act and will be more confident and proactive themselves if they see you taking action. Face the facts, don’t fight the facts.


5. Adapt.

Remember Darwin’s “survival of the fittest”: those who adapt to their environment are most likely to survive; not the strongest or the biggest. This is not the time to be stubbornly persistent about your plans. Look around and be creative. Your destination may still be the same, but the route, the vehicle and the passengers may need to be changed.


6. Be confident, but cautious.

Recognize the difference between calculated risk and a state of uncertainty. Make a decision if the potential outcomes and the percentage probabilities are reasonably clear, but hold fire if they are not.


7. Show conspicuous leadership.

President Obama understands the concept of being the conspicuous spokesman for his plans and policies. No one can do it better than the one who is ultimately responsible. We may not all be as adept communicators as he is, but we can all speak with more sincerity than any spokesperson or intermediary on our concerns, our strategies and our plans.


Good management will be tested during these times, but good decisions now will mean a better business for the future. Keep at it. This too will pass.

I was in a good discussion today on the special challenges of managing young employees from the twenty-something generation.

There is often a large gap in job expectations between the 30 to 40-year old managers and their younger staff. Loyalty, extra hours, and commitment to the company are concepts familiar to the managers but foreign to new employees. Their key issues are flexibility, social time, open communication and personal attention. Work habits may include continuous connection to their cell phone and online text messaging. These young employees present management with new challenges to attract, recruit and retain them.

Meeting their needs is difficult in an environment that has to remain equitable for all employees and still be a productive and customer-centered work place. Progressive companies have found creative ways to achieve their goals and to meet the expectations of desirable young employees.

They have implemented flexible work schedules within reasonable limits, make senior managers accessible, and recognize personal needs that have priority over job responsibilities. Adapting old personnel practices to the expectations of the newest employees requires careful assessment and implementation. It is worth learning from the successful employers so that your company can also become recognized as a great place to work. It is key to attracting and retaining the best qualified employees.

Again I learned something new at the McGill MiniBiz Seminar this week. The topic was managing diversity, especially the generational gap between those born before WWII, the Boomers, Gen X and Gen Y.

For both managers of those diverse groups and for members of each generation the recommendation was to remember the Platinum Rule.

OK, we all know the Golden Rule, “Do unto others as you would have them do unto you”. Apparently a pretty universal concept that has worked for many generations. Essentially, treat other people the way you would like to be treated. Seems good to me.

But consider the more effective Platinum Rule, especially when there are large cultural or generational differences to consider: “Treat other people the way they would like to be treated.” Powerful concept.



I had the pleasure yesterday of hearing a presentation by Henry Mintzberg, McGill professor and management guru. One attendee described him as the “Tiger Woods of management science”.

I know him as the Strategy professor during my McGill MBA program from 35 years ago. (Yikes, neither of us seem to have aged that much! OK, maybe less hair.)

He is a widely respected academic and the acclaimed author of “The Nature of Managerial Work “, “The Rise and Fall of Strategic Planning”, “Managers not MBAs” and many other books and articles that argue against the conventional wisdom and provoke thoughtful reflection on management and business. He is also the co-founder of the International Masters Program in Practicing Management (IMPM), a unique approach to learning that is designed to flow from the experience of the participants.

His presentation yesterday was originally advertised to be on the dilemma of corporate compensation, but that turned out be only part of his critique of the modern CEO focus on shareholder value that is leading to the great depression of 2008.

Some of his points to consider:
  • Productivity is a euphemism for cutting costs, mostly by firing employees, while maintaining short-term revenues.
  • The theoretical corporate objective of maximizing long-term shareholder value has been hijacked to mean pushing short-term earnings to inflate current market share prices.
  • How can employees be motivated to work for shareholders they have never met? Many of whom have no interest in the company except for the short-term ability to make a profit on their investment – they are day traders or hedge funds.
  • Shareholder value is not a worthy objective of the corporate institution as it specifically ignores (or exploits) other stakeholders, especially employees.
  • Mercenary corporate leadership is stealing from shareholders with absurd compensation and severance packages that are not tied to performance. The “robber barons are back!”
  • The old corporate silos have been replaced by horizontal slabs of concrete separating executives from their employees and the real operating issues.
  • “Human resources” is a term that dehumanizes human beings. It makes it easier to treat people like other “resources” to buy, sell, use and dispose of them. It’s like describing airline passengers as “self-loading cargo”!
  • Corporations need to remember that customers are people too. They are not just another asset to be exploited.

Professor Mintzberg also suggested some remedies to avoid the great depression of 2008:

  • Stop being misled by the apparent productivity gains and profitability of large American corporations.
  • Get the mercenaries out of the executive suite and add employee voices in the boardroom.
  • Stop running businesses to satisfy financial analysts or investors with no interest in anything except short-term results.
  • Install real corporate leadership that is concerned, engaged, and modest. (Interestingly close to Jim Collins description of Level 5 Leadership from “Good to Great”.)
  • Ignore the obsession with measurable factors and reconsider the immeasurable – values, benefits and impacts of economic activity.
  • In the larger context, get back to a better balance of the three sectors in society – public, private and social.

His full commentary is available at How Productivity Killed American Enterprise.

Lots to think about and to influence if we can.

I’m currently reading Stephen Covey’s latest – “The 8th Habit”; following of course his best selling “The Seven Habits of Highly Effective People”.

On the subject of management and leadership he summarizes the themes and concepts of many other authors. (Give him credit for some humility.) What sticks with me are the stated principles of: 1. Set the direction, 2. set an example, 3. define the values, 4. provide the systems; then let people manage themselves.

My own summary of management has always been simply to communicate the objectives and then remove the obstacles to achieving them. The guiding principles may be simple, it doesn’t mean they are easy to follow.

I am just completing the teaching of two summer courses in Financial Management at Concordia University. It’s time for their final exams so I’m now thinking about what are the most important lessons to learn for future business managers and entrepreneurs. Or alternatively, what do most entrepreneurs neglect in the management of their businesses?

Most of us focus regularly on the income statement – revenues, gross margins, expenses and the resulting profits. But we often neglect the management of our balance sheet – inventory, receivables, return on assets, and the short and long-term sources of funds. These issues can all have significant impact on profitability and the long-term value of the enterprise.

So I will try to emphasize the importance of regularly reviewing performance of assets and liabilities in addition to the more obvious and intuitive issues of sales and income. How does balance sheet performance compare to prior years? the plan? or the industry averages?

Can we improve turnover on inventory and receivables without losing sales or diminishing service levels. Can we extend payables and get additional short-term financing without hurting our credit ratings or adding to our costs? Are we making good use of long-term debt to add financial leverage and improve the return on our equity investment?

All important issues for effective financial management.

I had lunch yesterday with a client and friend who represents for me the essence of entrepreneurship. (He is too modest and discrete for me to mention his name here.)

In my opinion, the essence is to combine the strength of a marketable expertise with the ability to think and act strategically. In his case, he has a very high level of knowledge and experience in the design, build and maintenance of computer data centres. He initally worked for another a specialist in that field then left to start his own business. Over time he successfully positioned his company as the recommended service centre for the industry’s leading manufacturer; grew to a size that exceeded his own management abilities; introduced a new partner and executive management team; accepted a new role in the company that leveraged his unique expertise and skills in developing customer relationships; and managed to re-position the company as a major project contractor to design and build large computer room installations from its origins selling and servicing basic hardware.

Many entrepreneurs I work with are equally competent and dedicated to their area of technical expertise but much less capable of managing their business strategically. Others may have the education and experience to manage and think strategically but have little to offer in unique expertise.

Success flows more easily for those that have both.

Mothers and business seems to be my current theme. Perhaps it’s the subliminal (or blatant) advertising for Mother’s Day this weekend.

My Uncle Ralph persona is partly inspired by my father and his well-recognized character and manner of dispensing wise advice. But my mother also had a strong influence on my personality and management style (other than the genetic connection), but it was more subtle and less frequently stated than demonstrated. Quiet, hard working, good humoured, and responsible are the characteristics that immediately come to mind. Things we all learned from her example, simply by being around her. Of course, she was also good at reminding us when we forgot those important principles or our behaviour was not up to her standards. And it’s still a pleasure to make her proud.

That’s why I recommend you use the test “What would Mom think?” before your actions and decisions in business too.

Thanks Mom. And Happy Mother’s Day.