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Wednesday, March 4th, 2015


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Top Five Pitfalls Every New Business Needs to Avoid

If anyone ever saw my business partners and me together in one room, you would never think that we all owned a car wash.

True, we might all be Arizona State University alumni who happen to be related, but it’s not every day you see a team of eight real estate agents, engineers, scientists, and cocktail waitresses drawn together to start a company. In fact, none of us had a clue what it took to run a car wash in the first place.

It took an ungodly amount of blood, sweat and tears to get from Point A to Point B, but eventually we got there. Within six months, the team took a struggling car wash and turned it into a passive-income generating asset. Now we’re busy opening a second location in Central Phoenix.

Although we’re still afloat and enjoying life, that doesn’t mean we weren’t close to drowning in the process. Based on our experience, here are five major pitfalls that every new business owner should try to avoid at all costs.

5. CREATING A BUSINESS THAT CAN’T SURVIVE WITHOUT YOU

Financial guru Robert Kiyosaki sums it up when he relates McDonald’s to hamburgers. McDonald’s isn’t a billion-dollar business because it has the best burgers – it’s the system that has enabled the company to become the largest restaurant in the world. Organizing manuals, procedures, employee handbooks, bookkeeping, marketing, customer service – that doesn’t happen overnight – but it’s critical to turn all the unknowns into a consistent, functioning system.

The point of starting your own business isn’t so you can work like an indentured servant for the rest of your life. Create a superstar team, delegate the work, and for God’s sake, learn to pass on the reigns. Consider the business successful when you can walk away and it doesn’t burst into flames without you.

4. BELIEVING IN SHORTCUTS

Are there faster ways to do things? Of course. But when it comes to rising up in the business world, don’t even kid yourself. When we first opened the car wash, trying to juggle work, school and a social life made 100-hour work weeks the standard protocol. Ironically, as much as the world admires ambitious entrepreneurs who start businesses out of their garages, people who work "too hard" are often frowned upon.

We’re accused of letting our lives pass us by, and in some ways, that might be true. But in reality, all we’re concerned about is reaching financial freedom while we’re still young and healthy. Bottom line: There are no shortcuts. Do your homework, work hard and work some more.

3. COMPLICATING A SINGLE, BASIC STRATEGY

Ask bestselling author Eliyahu Goldratt what the goal of any company should be and he’ll tell you it’s one simple thing: "To make money." It may seem blunt, perhaps even callous at first, but if it’s not guiding your business, then surviving in the long run would be near impossible. Most new business owners fail to control their spending.

Start-up costs may be high, but you’ve got to keep your thumb over that erratic financial pulse. Focus your energy and resources only on the activities that count. Spend your money wisely.

2. NOT ENOUGH CASH ON HAND

Don’t fool yourself into thinking you can survive the first year with a small nest egg or your father-in-law’s wallet. Before we owned the car washes, all of us invested heavily in the Arizona real estate market prior to the big boom. Property values soared at astronomical rates and enabled us to borrow against the existing equity.

It was a good thing, too, because our early spending was out of control. In fact, our original budget miraculously doubled for no apparent reason (or so we say). Not only did the power of leverage keep us afloat during this highly uncertain phase of ownership, but we didn’t go stir crazy wondering if we’d be able to pay our water bill. Whether it’s a line of credit against your primary residence or a small business loan from a bank, make sure that cash is readily available.

1. TAKING YOUR BUSINESS PERSONALLY

If there’s one lesson we’ve all learned from owning a business, it’s this: Don’t take it personally. This thing is your business, not your baby, and anyone who tells you different will burn out by age 30. Vendors will screw you over. Customers might spit in your face. But sometimes, there’s just nothing you can do about it.

Have you ever seen the formula "Observation + Reaction = Outcome"? I can guarantee you right now that unexpected nightmares will inevitably occur, but it’s your reaction to them that counts.

You can’t control everything, but you can mitigate the impact by reacting quickly and intelligently. Expect the worst, hope for the best, and above all, don’t let things get to you.

© 2008, Young Money Media, LLC. All rights reserved.

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