Launching a business can be exhilarating yet daunting, and even seasoned entrepreneurs can fall prey to common pitfalls. In a recent YouTube short, Shark Tank star and entrepreneur Robert Herjavec shared his insights on what not to do when starting a new business. Drawing from his years of experience as a successful investor, Herjavec pinpointed three crucial missteps that aspiring business owners should avoid to pave the way for sustainable growth and success.
1. Don't Spread Yourself Too Thin: Focus on Core Competencies
Herjavec's first piece of advice is to focus on the essentials and avoid overextending. He encourages new founders to identify the "heartbeat" of their business – the core area they excel in – and prioritise becoming an expert in that specific field. "Remember, the only place general knowledge gets rewarded is on Jeopardy!," he quipped, emphasising that business success is rooted in specialisation rather than attempting to do everything at once.
By narrowing focus and mastering a primary skill or service, entrepreneurs can differentiate themselves in the market and build a solid foundation. Herjavec believes this approach is often more beneficial than the allure of branching out too early. According to Herjavec, investing in developing a unique skill set can be the fastest way to build wealth, as he advises, "If you're starting out and you don't know anything, become an expert at something."
2. Don't Run Out of Cash: Cash Flow Is Key
The second major pitfall Herjavec addresses is the importance of cash flow. "Cash is king," he stated, because once it's depleted, "the game is over." He stresses that maintaining a robust cash position is vital, allowing entrepreneurs to navigate unforeseen obstacles and seize opportunities without risking their business's stability.
Herjavec likens cash flow to "ammunition," essential for staying in the game. Just as a steady cash reserve provides financial resilience, it also gives a business the endurance to outlast competitors and withstand economic downturns. Building a strong cash flow from the start, according to Herjavec, is a necessary strategy for long-term survival in the business world.
3. Don't Sell Out Too Soon: Hold Onto Equity
Many entrepreneurs, eager for immediate growth or financial relief, make the mistake of selling equity too early. Herjavec cautions against giving up ownership before the business has proven traction. "Even a little bit of sales proves the concept and gets you a higher valuation," he explained. Demonstrating sales, even if modest, can significantly increase a company's valuation, ultimately leading to better investment opportunities in the future.
Herjavec encourages founders to remain patient, balancing ambition with practicality. A compelling vision might be appealing, but without tangible sales data, investors may be less inclined to offer favourable terms. "Investors will pay you more for tangible proof," he advises, highlighting that showing results often leads to more advantageous investment conditions.
Staying Disciplined: A Path to Success
Herjavec's insights shed light on the importance of balancing enthusiasm with careful planning and restraint. His top three "don'ts" serve as a roadmap to help aspiring entrepreneurs avoid common mistakes and build a solid foundation for their businesses. By staying focused, securing financial resilience, and exercising patience, new business owners can increase their chances of achieving lasting success.
In his continued effort to support up-and-coming entrepreneurs, Herjavec recently shared additional insights in his series, Things I Learned from a Billionaire to Become a Billionaire, which includes ten lessons he learned from his mentor and fellow Shark Tank star Mark Cuban. Herjavec's guidance underscores that while ambition and vision are essential, disciplined decision-making and a strong foundation are crucial for realising entrepreneurial goals.
