5 keys for building a business without money (Entrepreneur.com)

By: Michael Glauser November 9, 2016

Source: https://www.entrepreneur.com/article/284808

“I want to start a business but I don’t have any money.” I hear this statement over and over again as I work with aspiring entrepreneurs. Many of them have sound ideas, but feel they need a lengthy business plan and a large amount of cash to get started. The reality is, most successful entrepreneurs end up bootstrapping their business. If you are passionate about what you are doing, there are always ways to get things done with limited resources. Here are five keys successful entrepreneurs use to build thriving companies.

  1. Build a Brain Trust of Free Advisors

Nicole DeBoom was a professional triathlete for 11 years. She knew a lot about women’s sports clothing, but very little about the apparel industry. Her solution was to find a group of advisors who could teach her what she needed to know and introduce her to other contacts. Nicole explains: “When I started out I had coffee meetings ten times a week. I just started picking people’s brains.” The end result: Nicole found the resources she needed, launched her company, and has now sold over $25 million in women’s running skirts. Her advisors have been a huge key to her success.

  1. Find an Enthusiastic Angel Investor

One of the goals of building your brain trust is to find potential partners who want to get involved in your company. Jeff Wester is a great example. Jeff wanted to build an old-fashion Black Smith shop in Sisters, Oregon. He found a wealthy mentor who had built a blacksmith shop earlier in his career. He gave Jeff a piece of ground and funded his new shop. He then created a promissory note so Jeff could pay him back over time, which he was able to do.

  1. Start with Borrowed or Used Equipment

Justin Gold was making the best nut butters on the planet with a food processor in his kitchen and selling his creations at farmers’ markets. When he was ready to scale his company, he talked with several large peanut butter manufacturers. They told him they couldn’t add honey, maple syrup, and other ingredients because it would burn out their large industrial grinders. Justin wondered why he could do it in his kitchen, but they couldn’t do it in their multimillion-dollar plants. So he went out and found some old used industrial food processing equipment for almost nothing. Justin recently sold his business to Hormel for $286 million.

  1. Find Something to Sell to Get into the Game

Allen Lim spent his early career in the cycling industry. He created several all-natural hydration drinks that some of the top cyclists in the country loved. He wanted to turn his hobby into a business but had not money. He found an old used funnel cake cart and converted it into a burrito kitchen. He sold burritos at running and cycling events around the country to pay the costs of marketing his new products. With the revenue from burrito sales, his total cost to launch his new products nationwide was $800. Today, Skratch Labs is a major supplier of healthy products to both professional and amateur athletes.

  1. Sell Your Product Before You Create It

The ultimate validation of a business model is to have customers buy your products. In many cases, you can sell products before you even produce them. I sold a half million dollars of frozen dessert products before I created my new brand. David Cann sold a million dollars of his “Double Robots” before he built them. And the founders of Power Practical raised $1.5 million for their energy generating products on Kickstarter before they built these products. Crowd funding is a fantastic way to test products before you spend a lot of time and money on your business.

In sum, there are always ways to get things done with limited resources. Find a group of mentors who will advise you for free, get to know potential angel investors, start with used equipment, find something to sell to raise funds, and sell your product before you

5 necessary conditions for entrepreneurial success (Entrepreneurship)

By: Steve Tobak May  14, 2015

Source: https://www.entrepreneur.com/article/246121

Every week I hear from people desperately trying to become successful entrepreneurs. They inevitably have loads of basic questions that instantly tell me they’ve taken the plunge prematurely and, as a result, have severely limited their chances of making it on their own. I’m sure that’s not what you want to hear, but if I don’t tell you the truth, then who will? The problem is that’s the wrong way to do it. The hands-down best way to become a successful entrepreneur is to not try to become an entrepreneur in the first place. Wait, what? That doesn’t make any sense. It sounds like a contradiction. Au contraire, it does make complete sense. Not only that, it’s the best advice on entrepreneurship you’ll ever get. The thing is, nobody becomes a successful entrepreneur over the long haul by setting out to become one. It happens organically under certain conditions.

The problem is one of competitive markets. Entrepreneurship is about business, and a business that beats the competition and takes off is not so easy to contrive. For a venture to have even a snowball’s chance in hell of making it, several factors have to come together:

Opportunity.

Like it or not, opportunities don’t just pop out of your Mac’s screen and shout, “Here I am!” You have to go out and find them and explore them. Think of opportunities as branches off a tree trunk. You need to get out in the real working world to gain exposure to enough branches. That’s where everything else stems from.

Discovery.

Perhaps the hardest thing about a business is figuring out the right customer problem that needs to be solved. Without that, you’ve got nothing. Usually, that requires significant exposure, expertise, and experience. Otherwise, you’ll never come up with a winning product that beats the competition.

Expertise.

Every successful entrepreneur has some sort of expertise by the time they come up with the product or company that ends up making it. Maybe it was their passion from day one or perhaps they developed it while working for others. Whichever it is, there’s something they can do better than the pack … and BSing isn’t it.

Network.

Whether its equity partners with the right mix of talent, investors, adult supervision, or some combination thereof, successful businesses almost always have several key players involved from the start or relatively early on. That requires a network – not an online one, a real network of real people you meet in the real world.

Savvy.

Not to be cliché, but businesses have lots of moving parts and it’s not easy to get everything working together unless you have some sort of business savvy. There are only three places to learn that: from your family, from business mentors, or by working hands-on in the business world.

Notice that the factors overlap. They’re actually all intertwined. That’s why not setting out to become an entrepreneur but getting out in the world and getting your hands dirty working is the easiest way to someday make it on your own. The real business world is where all those conditions come together. And that’s where most successful entrepreneurs find them.

The only caveat is that I assume you’re looking for some sort of breakout success where that becomes your livelihood and you make a very good living at it. Of course, you can slug it out with a gazillion competitors in a number of small businesses or make a go of it as a solopreneur, but that’s not exactly knocking the ball out of the park, if you know what I mean.

Look, I know this might be disappointing for some of you, but trust me when I tell you, if you really want to make it big someday, you’ll be better served by getting out and getting some experience than banging your head against a wall trying to figure out why things aren’t working out for you.

4 tips for stopping unprofitable growth(Entrepreneurship)

By: Doug and Polly White April 19, 2016

Source: https://www.entrepreneur.com/article/274238

A small manufacturer contacted us — an owner who had seen his revenue double in the past year but still wasn’t making any money. To the contrary, he was barely breaking even. When we looked at his operation, we saw that, over the same time period, his costs had also doubled. This shouldn’t have been the case, of course. As a business grows, its costs should increase more slowly than its revenue, so that profit compounds. If you find yourself in a similar situation, we suggest four places to look for your lost profit.

  1. Product profitability

If you don’t already, you need to understand the gross margin of each item you produce (gross margin = sales price – the cost of goods sold). The cost of goods sold is everything you spend to make your product. At a minimum, this will include materials and labor. You may well find that some of the items you produce have a negative gross margin. You can’t make that up in volume because you’ll be losing money on each unit you sell. And negative gross margins are sometimes justified, if they allow you to sell other products that make lots of money. Razors are the oft-cited example here: You may be willing to lose money selling razors if the result is profitable blade sales.

However, in general, you should not have negative gross margins. If you do, you should either increase the price or find a way to reduce the cost of goods sold. In many businesses, it makes sense to establish a minimum acceptable gross margin. Then, price your products so that you achieve at least this level. For example, if your overhead as a percentage of revenue is 20 percent, establish a minimum acceptable gross margin of 25 percent (gross margin percentage = gross margin ÷ revenue). This means that, at worst, you will cover your overhead and make a 5 percent profit. In the case of our client, he had some products that were not covering their share of the overhead. We set out to help him find ways to improve these gross margins.

  1. Customer profitability

You also need to understand the profitability of each of your customers. Most often, some customers will pay lower prices than others will, and some customers will cost more to serve than others. These differences drive different levels of profitability. And you may find that some customers are just simply unprofitable. So, take steps to improve the profitability of these relationships: Increase the price you charge these customers, or reduce the costs of serving them. You can do the same analysis of customer profitability that we describe above, for product profitability. You can also set minimum profitability goals in the same way. We’ve done this analysis across a broad range of industries. We have often, but not always, found that large-scale customers are less profitable because they can have the volume to negotiate lower prices. Small-scale customers are frequently less profitable because they are expensive to serve. Midsize customers may be the most profitable to serve.

.3. Overhead

As revenue grows, overhead should remain relatively constant. Take a look at what happened to your overhead as your business grew. Too often, small business owners let their overhead costs rise with revenue. If that is the case in your situation, cut overhead back to pre-growth levels wherever possible. We understand that some overhead costs may grow with revenue.

For example, if you are sending out more invoices, that effort will likely require more labor hours. However, many overhead costs can be held constant as revenue grows.

  1. Cost reduction

Does your new higher volume provide opportunities for cost reductions? Since your volume has doubled, you may be able to negotiate material prices. If you are sending out twice the number of invoices, perhaps the process can be automated. Volume growth provides opportunities for cost reduction. Make sure you capture these opportunities.

Overall, we’ve noted, too many small businesses fail to capture the economies of scale that should accrue to them as their volume increases. Following the tips above will allow you to claw back the profit you’ve missed.

6 link-building tips for bootstrapped entrepreneurs (Entrepreneur)

By: Josh DenningAugust 25, 2016

Source: https://www.entrepreneur.com/article/280522

It’s no secret: If you want to rank high on Google’s search engine results pages (SERPs), you need to make backlinking a priority. The more backlinks you receive from authoritative websites, the more trust you’ll have in the eyes of Google, the more traffic it will send you and the more high-quality leads you’ll generate for your business. The problem, though, is most link research and backlink checker tools are costly, and when you’re bootstrapping a start-up, you money is best allocated elsewhere. While much has been written on backlinking, little has been written on backlinking for bootstrapped start-up founders. Here are seven backlinking strategies for when you have a shoestring budget.

  1. Become a columnist on an authority site.

While some experts will want you to believe guest blogging is dead, the truth is guest blogging is still a viable link building strategy, if it’s done correctly and consistently. In the old days of blogging, you would pitch a guest post, write it, and then move onto another website. Today, writers like James Clear and Neil Patel aren’t just guest posters on authority sites – they are columnists. Having a high authority domain regularly linking back to your website can only mean good things for your ranking.

  1. Collaborate with influencers in your field.

It doesn’t matter what industry you’re in, what you’re selling or where you want to go with your online business, connecting and collaborating with influencers helps you go further, faster. Why? It builds trust. When your customers see you co-creating a product, service, blog post or resource with a trusted authority, it gives you social proof. The more trust you have, the more likely other influencers will link to your content and, you guessed it, the better your ranking on Google. Granted, it isn’t always easy or quick to collaborate with a mover and shaker in your industry, but the payoff is huge.

  1. Create an epic resource.

Getting noticed in today’s noisy world is harder today than ever. With more than two million blog posts published every day, the 400-word list posts that were once a staple of blogging no longer suffice. To stand out, you don’t have to shout louder, you just have to invite others to come to you. The best way to do that? Craft an epic resource, such as an ultimate guide, a case study or a research-backed report. One that demonstrates your skills, knowledge and expertise and leaves experts no choice but to link back to you.

  1. Get interviewed on podcasts.

Getting featured on authoritative podcasts is one of the most effective ways of reaching new audiences. What most people don’t realize, though, is it’s always one of the most underrated link building strategies in a marketer’s toolkit. Here’s how it works. The next time you go on a podcast, and you’re asked where listeners can learn more about you, instead of directing them to your homepage like everyone else, create an interview-upgrade – a resource that adds to what you discussed in your interview, and direct them to that. Not only will you get more opt-ins, but you’ll also get a high-quality backlink from an authoritative podcast site.

  1. Do reverse guest posting.

We’ve all be there – spending hours pitching guest posts only to wait days without a reply. With reverse guest posting, the tables are turned. Instead of pitching to other authors, you invite them to write on your site. Many bloggers have a page on their sites with a list of the guest posts they have have published. With your’s added to the mix, that’s an easy backlink – one that requires minimal effort on your part. If you can’t secure a big name to feature on your site, try someone from a shoulder niche who is looking to expand into new markets.

Whether you’re a marketer or a mortgage broker, you need to prioritize backlinking. Without it, your site will struggle to rank, and your business will suffer for it. As we’ve seen though, backlinking doesn’t have to be a costly affair. You can get backlinks without breaking your bank or bankrupting your time. You’ve watched others do it. Now, it’s your turn.

7 reasons to start a business while in college(Entrepreneur.com)

By: Josh Steimle April  28, 2016

Source: https://www.entrepreneur.com/article/273689

I started my business in 1999 while a student in college. There were pros and cons, but I’m largely thankful for the experience and would recommend it to other aspiring entrepreneurs. Here are seven reasons why.

  1. Low risk, high reward

What have you got to lose? You don’t own anything, you have few commitments relative to later in life, and the worst case scenario is that you go back to doing what you’re doing now. This isn’t to say you should take a casual approach to starting a business. Your years in college will be over before you know it, and suddenly the risks will be larger. You probably have time to start one serious business venture per year of college and within 12 months figure out if it’s going to work out or not. Maybe you’ll get it right the first time, maybe you’ll pivot, maybe you’ll quit and start something new. The sooner you can test your ideas, the better.

  1. Campus resources.

Universities have access to the fastest internet connections, free consulting from professors who often love getting involved in student run startups, meeting rooms, and many other resources you would pay dearly for outside the campus. The truth is you are paying dearly for these campus resources, whether through tuition or taxes, so you might as well take advantage of them.

  1. Real-world education.

You can only learn so much in the classroom. The startup world is a great bridge between material taught and applied concepts. “There is no better way to accelerate your growth than to build a company,” says student entrepreneur Jordan Gonen, a freshman at Washington University in St. Louis. “It is 100X harder than anything that happens in a classroom, but also 100X more valuable than any textbook lesson.”

  1. Accessible customers.

Students are a valuable resource for testing out your ideas. They’re cheap, and they tell it like it is if they don’t like what you have to offer. If you can get students to pay for something it’s a good sign your product or service is viable. Students are also connectors. They have the power to manufacture virality.

  1. Mentoring.

When I was a student I could get access to anyone. All I had to do was contact a CEO’s assistant and say “I’m a student at BYU and I’m starting a company and I’m interested in getting some advice from so and so.” Successful entrepreneurs love to give advice to young entrepreneurs. They’ll make time that they wouldn’t make for anyone else, and they’ll speak more openly with you than anyone else because they don’t see you as a threat or someone with an ulterior motive.

  1. Co-founders.

It’s true that college students lack experience, but think about it this way–the successful entrepreneurs of tomorrow are in college today, and when are you going to have a better time to recruit them than today, when they don’t yet realize what they’re capable of? The next Zuckerberg may be the guy or gal sitting next to you in your finance class looking bored.

  1. Career building.

Even if you start a business in college and it fails, it’s a huge plus on your resume. Starting a business shows that you’re proactive, creative, and driven–just the type of employee successful companies are looking for. Startup experience while in college can put you on the fast track to leadership opportunities at another company if you decide you’re not ready to be a full-time entrepreneur and want to get some work experience under your belt first.

Are there negatives to starting a business while in college? Sure, you might spend some money launching your business and you’ll definitely lose sleep. But these investments will pay off in other ways both tangible and intangible, making it a rewarding experience you’ll always be grateful for.

4 simple technologies that will help double your sales(Entrepreneur)

By: Toby Nwazor April 12, 2016

Source: https://www.entrepreneur.com/article/269617

It is a new year and you must have made your plans. You must have made some projections with your management team to decide where you want your organization to be at the end of the year. One area you just can’t afford to ignore during this planning process is your sales department. It deserves your attention because your sales team determines how successful your business will be. To a large extent, whether you make profit or incur losses depends on it. Take a good look at the sales figures. What are they like? What kind of results did you get from the sales department in the previous year? How can it improve? What can you do to ensure that the sales team delivers this year?

One of the best things you can do for your team of sales professionals is to provide the needed motivation to pursue the goals you have set for the year. At times, motivating your sales force may not be enough. The use of some innovative ideas or employing the aid of some basic technology may be the solution your organization needs. Below are technological innovations I wish I knew about earlier, as they would have allowed my business to grow beyond my wildest imagination.

The alarm clock.

An alarm clock is the simplest tool you can use to get more productive and boost your sales. Most sales people get poor results simply because they all follow the same pattern. Decide to be different this year. Get your alarm clock and set it to wake you up an hour earlier each day. One extra hour a day gives you the ability to prepare your sales calls. It gives you the chance to develop ideas that will nurture the existing relationship with your clients. That one extra hour can equally give you time to do some research that will maximize the limited attention span that your prospect has. Lastly you can use it to read or listen to an audio program on sales. At the end, you get to have seven extra hours of self improvement each week. That alone could be all you need to double your sales.

A business website.

Some SME entrepreneurs feel that since their business is still quite small, having a website is an unnecessary hassle. For other SME entrepreneurs, they love the idea of a vibrant online presence for their business, but they worry that having a business website is too technical or expensive, and they may not be able to run it. Not having a business website in 2016 is suicidal because US online retail sales is projected to grow to $480 billion by 2019. Getting a business website helps you reach out to new customers that your sales team may never get to see. It gives you a shot at driving an effective internet marketing campaign. Starting from search engine optimized adverts to Email marketing, it helps you make more online product sales. Thanks to the internet, there are countless free resources to help small business owners start and run a business website. Moreover, there are thousands of webhosting companies that can help you create one and host it easily.

Virtual phone systems.

A typical customer sees a large and successful organization as a reliable one; one that he/she should do business with. A virtual PBX phone system will help you give your customers the impression of being a big and successful company with a ‘real’ receptionist even when there is none. For instance, this system comes with an automated receptionist that will greet your callers and offer options like: Press 2 for Sales, Press 3 for enquiries, etc. This feature alone helps your business create a professional image especially for people calling for the first time; and is guaranteed to increase your sales.

Real-time video chats.

Delivering an excellent customer service is one way to ensure that your business stands out. This is why millions of dollars are invested each year in customer service to ensure regular customer satisfaction. One way to improve your customer service is to go beyond answering customers conventionally through emails or online chats, and employ the use of video chats. Doing this will help you see your customers’ emotional expressions and adjust your approach accordingly.

This experience will give your business a personal touch which customers will love to identify with, and hence drive more sales.

5 simple ways to improve your work-life balance (Entrepreneur)

By: Jonathan Long March 31, 2016

Source: http://www.entrepreneur.com/article/273184

Every entrepreneur knows first-hand how difficult it can be to balance the heavy workload that comes with owning a business, and life away from the office. While every entrepreneur would love that mythical healthy work-life balance, few are able to achieve it. Complete balance is an unrealistic goal, as nothing is perfect, but there are steps you can take to improve that balance. Here are five suggestions.

  1. Establish your priorities. 

Make a list of everything you have going on in your life and rank those tasks and responsibilities, in order, from most to least important. This will include your business, your friends and family, hobbies, etc. — everything. It’s important to be 100 percent honest with yourself when ranking your priorities. For example, if you just started seeing someone, that brand new relationship, while important, won’t be as high priority as your business. Ranking your priorities in order from highest to lowest makes it much easier to ensure you are allocating time to the most important things in your business, as well as your personal life.

  1. Account for every (waking) minute of your day.

Have you ever jumped online to check social media or watch a YouTube video, only to look at the time and wonder where the past hour went? It happens to everyone — I’ve done it, and you’ve probably done it at some point, as well. Time flies, and when you don’t account for every minute of your day, it’s easy to waste it. However, when you account for every minute of your day your productivity will increase, allowing you to get your work tasks completed yet still leave time for personal and family time. I know some entrepreneurs who are in their offices until late evening; but if they improved their productivity by keeping a tight schedule, they would be leaving at a decent hour every day.

  1. Don’t be afraid to say ‘no.’

Some people have a hard time saying “no,” but trying to please everyone can result in a major time-suck, cutting into your time away from work. Don’t be afraid to decline last-minute meetings or send an unscheduled call to voicemail. Don’t do things out of guilt; instead, focus your time on your top priorities. While that may be difficult at first, you will soon feel comfortable saying “no,” especially when you notice how it improves your productivity and has a direct impact on your work-life balance.

  1. Understand that there is no ‘perfect’ scenario.

As an entrepreneur, you may find it difficult to achieve the perfect work-life balance. But, if you go in knowing this, you will find it much easier to focus on making adjustments that improve your work-life balance, not perfect it. Unexpected meetings will come up, and you may have to cancel plans to attend a social event at the last minute. It happens. Expect it. Some people like to think the grass is greener on the other side. It’s not. Every time you begin to think that a 9-to-5 job would give you more personal time, there’s a nine-to-fiver out there somewhere who is thinking that being an entrepreneur would provide him or her with a better scenario.  So, focus on improving your work-life balance, not perfecting it.

  1. Unplug from work when it’s family/personal time.

Two hours of quality family time in the evening that are completely distraction free are better than three hours of family time that include checking your email every 15 minutes and doing other work-related tasks. When you are away from work, either engaging in an activity you enjoy or spending time with your family, try to completely unplug from work. That’s not always possible to do — and that potential impossibility is something you sign up for when you become an entrepreneur — but when it is possible, take full advantage.

The quality of time, not necessarily the amount, will play a bigger role than you expect in improving your work-life balance.

The 5 biggest mistakes entrepreneurs make

By: Timothy Sykes March 02, 2016

Source: http://www.entrepreneur.com/article/271673

Being an entrepreneur may very well be one of the most difficult jobs on the planet. There are very few career paths that require the same amount of work, skill, sacrifice and commitment. Being an entrepreneur is really hard but also really rewarding. No matter what field you are in, or what type of business you own, it is so important that you understand some of mistakes that tend to plague so many entrepreneurs in today’s market. These are by far the biggest mistakes that any business owner can make. Avoid these mistakes at all costs and you will set yourself up for success.

  1. Expecting success right away.

If you are expecting success right away from your business, then you are setting yourself up for disappointment. Yes, it is great to have the confidence and the drive to want to be successful fast, but you shouldn’t expect these results right away. It takes a long time to grow a business. It takes an even longer time to make money from a business. You need to be realistic about your expectations and try to be patient. One of the many reasons that so many businesses fail so early on is because entrepreneurs expect they can open their doors and just like that they will start making money. Many times these companies go out of business because the entrepreneur can’t afford to pay the rent anymore, they were expecting to earn money right away to cover their expenses. This is why having a cushion to fall back on and being realistic about how much money you can actually make at first is so important.

  1. Trying to do everything yourself.

A good entrepreneur knows how to delegate, plain and simple. If you try to do everything yourself, you are only setting yourself up for failure. You need to know how to outsource. I talked in great deal about outsourcing in the past and hiring others to take care of some of the tasks that I simply cannot handle on my own. Different entrepreneurs will have different types of tasks that they want outsourced. No matter what those things are it is important that you are delegating them to others so you can make better use of your time and put yourself in the best position possible, to do your best work possible. Doing everything yourself will only cause you to burn out or draw focus away from the tasks that actually need your expertise and attention.

  1. Ignoring your true passion and just going for the money.

If you aren’t passionate about your business and the field you have chosen to open a company in, then you will never be successful. One of the biggest mistakes that any entrepreneur can make is ignoring their true passion and just opening a company to make money. I was passionate about penny stocks even though the rest of Wall St. wasn’t. Many people urged me to “follow the money” and go into different sectors, but I already had success with penny stocks so I decided to stick with it. I made a free guide and now I’m the biggest teacher of this undeserved niche; in fact my own teaching business now makes 8 figures annually. Entrepreneurs who do this get no fulfillment out of life, even if they are successful. I guarantee you money alone will not comfort you in the way that feeling fulfilled can.

  1. Not being adaptable.

If you want to be a successful entrepreneur in today’s ever-changing market, then you need to learn to be adaptable. If you are not adapting and you are putting too much expectation on one product or service, you will never succeed. You are putting all of your eggs in one basket, so to say. Instead, you need to test, test and test again. Try various products and solutions. Explore new options. Go with what is working now, but always be ready to make changes in the future.

  1. Ignoring social media.

There are so many traditional industries that think they don’t need the Internet. Whether you are a package store or a dry cleaner, it doesn’t matter, you need the internet. Why? Customers are on the internet and any business that wants to be successful needs to be where their customers are and put themselves face-to-face with their clients.

There is a tech revolution right now and entrepreneurs need to use it. The internet and social media are very cheap tools for any entrepreneur to use, and most importantly, they can be very effective.

Decisions, decisions…5 ways to stop making bad ones in business(Entrepreneur)

By: Anna Johansson

Source: http://www.entrepreneur.com/article/271762

One of the biggest contributors to a business’s success is its entrepreneur’s ability to make good decisions. What makes a “good” decision doesn’t necessitate a guaranteed better payoff, but it does increase your odds of success to a significant degree. For example, if you make a decision based on a coin flip, it may end up working out, but it’s still a “bad” decision. If you take your time gathering information, contemplating the possibilities and calculating the risk versus reward, you aren’t assured a perfect final outcome — but you will have made a “good” decision. There are certain psychological dispositions in all of us that influence our decisions without our knowing. These are biases, which may exaggerate certain realities or blind us to logical truths. It’s not possible to objectively eliminate these biases, but if you’re aware of them, you can compensate for them and end up making better decisions.

  1. The anchoring effect

The anchoring effect is best described with an example. A car salesman offers you a car for $30,000. When you leave, he catches you and offers it to you for $20,000 instead. Seem like a good deal? What if he had initially offered it to you for $18,000, but when it came time to do the paperwork, he revealed the real price was $20,000? In the former example, you’d feel like you were getting a better deal — even though the car and the final price of both examples are identical. Once you catch wind of a number, a trend or even a basic fact, it tends to serve as an “anchor” in your mind that distorts how you view future — sometimes even unrelated — information.

  1. The fundamental attribution error 

The simple way to explain the fundamental attribution error is the human tendency to blame things on the nearest plausible agent. For example, if you get rear-ended by a vehicle, you may instantly assume that the person behind you is a bad driver who wasn’t paying attention, neglecting to consider the possibility that he / she was rear-ended first, or that there was a mechanical failure in the vehicle in question. We’re wired to jump to conclusions, because fast judgments were once necessary for long-term survival. However, now that we have ample time and information available to us (with not-so-life-threatening repercussions of making extended decisions), it’s better to question your first impressions and use data to inform your final judgments.

  1. Confirmation bias

Confirmation bias exists, because we like to reaffirm our existing beliefs. We subconsciously try to make new information fit into our existing views on the world, because it’s easier and requires less reordering in the brain. Unfortunately, it leads us to misinterpret new information at times. For example, if you’ve made the assumption that the best demographic for your product is teenagers, and you conduct a market survey among only teens that shows a 60 percent favorability toward your product, this may reaffirm your belief. However, this survey doesn’t prove that another demographic wouldn’t be even more interested in your product. Be wary of what types of studies you conduct, what types of sources you consult when researching and how you interpret objective data. Try to distance yourself from your preconceived notions.

  1. The availability heuristic

The availability heuristic is related to the confirmation bias, because it has to do with how you process information. Put simply, you tend to rely on convenient information to make your decision rather than going through more significant challenges. For example, you might rely on anecdotal personal evidence to a given trend, like how you saw a cousin use your product, rather than more in-depth data, like how your product performed to a random sample of participants.

  1. The overconfidence bias

The overconfidence bias is especially important to note, because it affects entrepreneurs and executives even more than the general population. With this bias, you believe that your own judgments, decisions and observations are disproportionately more reliable than they actually are. For example, you may estimate that you’re less prone to make typing errors than the average person and fail to proofread your outgoing proposals, or you may believe your risk calculation to be inherently correct, because you’re more skilled at calculating risk than the average person. This isn’t to say you’re overestimating your abilities in every area, but it’s more than likely you’re overestimating yourself at least some of the time. Try not to give yourself too much credit.

Human beings aren’t perfect, and no matter how aware of our biases we are, we’ll never make perfect decisions. However, if you take the information available to you, recognize your own imperfections and work to make all-around better decisions, you’ll put yourself and your company in a far better chance to eventually succeed.

 

The 5 biggest psychological hurdles of entrepreneurship

by Jayson Demers February 4, 2016

Source: http://www.entrepreneur.com/article/269883

As an entrepreneur, you’ll face plenty of logistical hurdles. Quitting your day job, getting funding, finding a location and hiring are just a few of the challenging obstacles you’ll have to overcome. The good news is that most of them are procedural, and though they may pose difficulties, they can be surmounted by following a logical process and committing yourself to seeing a final solution through.

The more difficult obstacles, however, meaning those most likely to impact your livelihood, are the psychological ones. The reason is that these are internal struggles. Sometimes spurred by events and sometimes brought up spontaneously, these obstacles interfere with your ability to make decisions, the confidence you have in your own actions, your enjoyment of the work and ultimately your capacity to continue as the head of your organization. The following psychological hurdles are ones every entrepreneur must someday face, especially in the earliest stages of a startup’s development:

  1. Uncertainty

Uncertainty is around every corner, especially when you’re first developing your business. You don’t know if your market research is accurate. You don’t know what competitors might emerge in the coming months. You don’t know if your profitability model will work in real life as efficiently as it seems to on paper. These uncertainties can get the better of you if you let them, but remember this: Uncertainty exists for everyone, and successful entrepreneurs are willing to embrace it, because they realize that without risk, there can be no reward.

If this isn’t enough to motivate you, understand that the worst-case scenario is never as bad as you imagine: Even if your first business fails, you’ll always have a chance to build something new.

  1. Instability

Beyond the uncertainty of your startup’s infancy, be prepared for some inherent instability in your first several months. You’ll have sudden surges of consumer interest, followed by long droughts. You’ll have random, necessary expenses crop up; major team members leave the company; and windfalls that will make all those losses seem insignificant. To abuse a common cliché, startups are a roller coaster ride, but even if you enjoy that ride, the constant instability can get to you. People crave routines, foundations and reliable structures. Without those, you’ll experience much higher levels of stress, which in turn can make you impatient, overly emotional, and miserable, in general.

  1. Responsibility

Being an entrepreneur means investing yourself in a venture in ways you’ve never experienced. Every decision you make, from naming the company to closing your first client contract, will affect your business’ bottom line. As your business grows, this responsibility will grow.

And, eventually, it won’t be just you on the hook, but your partners, employees and investors, as well. There’s no easy way to overcome this other than by reducing decision fatigue in your daily life and understanding you can recover from a bad decision.

  1. Balance

It’s easy to get sucked into the daily work your startup involves, especially when you’re passionate about the industry. It’s your idea — your baby — and it’s natural to want to invest as much time as you can into it. Unfortunately, that desire sometimes leads to 100-hour weeks, long weekends and sleepless nights, leaving you little room for anything else in life. What’s most dangerous is that this imbalance often sets in without entrepreneurs ever realizing it. So, make sure to prioritize your health, and don’t be afraid to take breaks.

  1. Loneliness

Loneliness is a bigger problem in the entrepreneurial world than most people realize. Entrepreneurs are often depicted as naturally isolated geniuses who function contentedly as introverts when working on a project and then turn into extroverts when it comes time to talk to clients or the press. In reality, though, every entrepreneur is pulling off a delicate balancing act, bottling up stresses, worries and fears when he or she is around other people. This is a defense mechanism, because telling clients or the press how scared you are could ruin you. Showing your anxieties to your team members could unsettle them and destabilize your company.

So, the only time you get to be your true self is when you’re alone. This is a manageable lifestyle for a few weeks, but after a few months, it starts to interfere with your health. Instead, seek support — from friends, family, mentors, peers and even counselors who are there to help you through difficult times. Overcoming these hurdles isn’t about ignoring them, pretending they don’t matter or avoiding them when they manifest. They’ll stick with you, whether you like it or not.

What really makes the difference is how you respond to these hurdles. You can overcome them by accepting them, yet not allow them to interfere with your plans or your goals. You can ask for help from those around you. And you can make meaningful changes in your life to compensate for them. All along, realize that your strongest asset against psychological turmoil is awareness. So, remain cognizant of these potential mental pitfalls, and keep moving forward.