Pitfalls in an Enterprise: Part I


By Bhasker  Assoldekar*

Starting a new business is one of the best ways to invest in yourself and your future. But with those massive opportunities come big pitfalls. If you want to give your business the best chance of success, it is important to understand what the most common mistakes are and then find ways on how to avoid them.

Pitfalls in business are akin to potholes encountered on a rainy day on a smooth motorable road.  On the face of it they may appear harmless but could prove to be extremely dangerous for the very survival. If you’re trying to picture all the events and factors that can possibly ruin a business — stop. It would be virtually impossible to list out every conceivable piece that could ultimately lead your company to a disaster. And although some of them are quite common, you never seem to see them coming.

Many businesses do collapse as a result of common, preventable issues. Understanding those issues before they do any real damage can put you in a position from where you can prevent or mitigate them.

Startups are especially vulnerable with limited resources and a weak, volatile structure but entrepreneurs can prevent disaster simply by taking measures to look for these all-too-common pitfalls. We shall deal in two parts with some of the most common pitfalls (as an entrepreneur I have seen some of them from very close quarters.).

kipping the Planning Phase

Planning may be tedious and time consuming. But without a solid plan for your business that includes business idea, market  research and market potential, you will be operating in the dark. The most important plans to consider include a business plan, a financial plan and a marketing plan. These plans should be referred to at regular intervals. Find out the reasons for deviations. And find out the ways to control the deviation periodically.

Set Up Goals

Goals can give you a direction when you first start your business, which then should keep you on track during the day-to-day operations. Those should be the guidelines and the path which you should walk on. By making sure your goals are smart goals you can identify where you want to go and outline specific steps that you will take to get there.


Insufficient capital and its

wrong usage

In order to function businesses need money and a good share of it. Startups usually have trouble finding the resources to start — either finding funding, attaining credit or pooling personal financial resources to try and make ends meet. Very often there are project over runs due to delays in implementation or for some other reasons. More experienced companies usually suffer from insufficient capital when their spending starts to outweigh their revenue. We should also utilize appropriately the two types of funds normally made available by bankers: 1) term loans and 2) working capital loans. More often than not there is a tendency of not treating them separately. There are many instances where working capital loan is used to refurbish the promoter’s cabin or for buying a new sedan car and when it comes to buying raw material or packing material they invariably struggle. In fact, I have seen many entrepreneurs throwing  lavish parties to their friends, creditors and others to celebrate sanction of the loans by banks and financial institutions.


Being afraid of marketing and competition woes

Never underestimate your competition. Competition can crush your business totally if you aren’t careful, especially if you haven’t taken the time to fully understand it. Bigger companies also struggle with competition. Remember 30 years ago multinational giants like Hindustan Lever underestimating the threat to their detergent brand “Surf” by “Nirma”? Indifferent approach coupled with complacency dethroned Surf in no time from the top position.  There are many strategies to deal with the competition, but you need to have at least one.

Marketing can take many forms from word of mouth referrals to traditional advertising or to internet marketing. There aren’t any set rules when it comes to marketing. The best type of marketing for you depends on your business and your target audience. The mistake is assuming you don’t need to market and that business will come to you. That could be suicidal.

One vital part of any successful marketing campaign is understanding who your ideal customer is. It’s not enough to create a marketing budget and try a little bit of everything. You need to do market research to identify who you are trying to reach, where you can find them and how they will react to your marketing activities.

There’s nothing wrong with making mistakes in your business, and in fact, that’s one of the best ways to learn and improve (although it is always ideal to learn through other’s mistakes.) We shall discuss the other possible pitfalls in the next article .But don’t worry if you’ve fallen into one (or all) of these pitfalls. All you have to do is to take timely corrective action and attempt to honour the commitment you have made to yourself.


*The author is M.Sc.(Tech), MBA(IIMA, managing director of Vibha Natural Products Ltd., Mumbai