Risky Entrepreneurship Pitfalls to Avoid

Entrepreneurship is Risky Business: How to Avoid 10 Potential Pitfalls

Venturing out on your own as an entrepreneur is a big risk. It’s a risk that is associated with a high reward though when entrepreneurship is done correctly. In this post, we will go over the 10 most common pitfalls that face entrepreneurs and how you can avoid them.

Company managers

Entrusting people to manage your company is a big risk because how these people manage employees and day-to-day tasks will have a big impact on employee performance, customer satisfaction and your business’ bottom line. You want to make sure that you hire managers that are aligned with your company mission and values and that truly see your vision for business. Then, it is up to you to train them on the specifics of your business model and teach them the values of how you want them to lead employees and foster meaningful relationships with staff and customers as well as the community. Hiring the wrong people to lead your company can result in chaos and disaster. But, taking some time to vet potential management candidates and train them properly should avoid any potential pitfalls.

Hiring inconsistency

You want to make sure that your hiring process is consistent across the board. This is crucial to avoid any legal EEOC actions. You also want to make sure the public, applicants and employees see that you are a fair company to work for. In order to do that, you must come up with a consistent and uniform hiring process. This means, conducting background checks, calling references, and making sure the offer process is fair and that all parties are under a mutual understanding. The last thing you want is a reputation out there that your company does not provide fair, or even worse legal, hiring practices and opportunities.

Onboarding inconsistency

A consistent onboarding practice is key to make sure new employees learn expectations, values of the company and get accustomed to the workplace culture as well as their duties. If you just a new employee into the fire without any onboarding you are setting them and in turn, your company up to fail. To avoid the pitfall of an inconsistent onboarding practice, come up with a standard process. It’s a good idea to have employees sign off after every step they’ve completed and make sure you give them time and resources to ask any questions they may have during those first few days. A good first few days is critical in order to foster longterm success and employee retention.

Compensation inconsistency

This is another area where you have to make sure that your ducks are in a row or you could face serious legal problems. In order to avoid any kind of lawsuit or friction among employees, tie compensation to competitive market rates. This will bring a consistent scale to employee pay and will enable you to have some concrete examples of why you are choosing to compensate in certain ways. Of course, there is room for some variability in pay but that should be merit-based. For example: education, experience, tenure and skills.

Inconsistent overtime policies

Federal law mandates that certain employees receive overtime pay when they work overtime hours. If you incorrectly classify employees as exempt from those federal protections, they can be awarded back wages and you can be fined and receive penalties against your company. The best way to avoid this potential pitfall as an entrepreneur is to seek some legal counsel, especially if you are hiring and marking employees as “contractors,” you’ll want to make sure you are paying them in accordance with federal requirements.

Not documenting enough

When it comes to employees misbehaving or performing poorly, documenting each incident is your best bet in order to appropriately resolve the issues. Documentation will also save your company. When you fail to properly document the incidents, it leaves the employee unaware of their need to improve their behavior or performance and can lead to liability issues for your company.

Inconsistent performance management system

Implementing a performance management system helps improve communication while also making sure that employees’ actions are aligned with the company’s philosophy and goals. This kind of system can also help you document employee accomplishments or misses and provide guidance and incentives for outstanding accomplishments.

Inconsistent job descriptions

When you clearly lay out the job duties, goals and expectations, you are setting up the employee for success because their expectations are clearly outlined. These descriptions can also protect the business from allegations of discrimination. You’ll want to include the essential job duties and physical requirements for each job description, this is necessary in order to be compliant with the American’s with Disabilities Act.

Not following policies

We’ve established that policies are a great tool when it comes to laying out expectations and guidelines for your employees. But, if you don’t follow them then it’s all for nothing and will set an example for employees that they do not need to pay attention or adhere to company policies. In order to be able to follow all policies, make sure the ones you implement will be able to be consistently followed.

Not training on harassment

Allegations of harassment is a pitfall that can immediately bring down your entire company as well as your reputation. In order to prevent this as well as your potential liability in a harassment complaint, it’s imperative that you conduct harassment training for employees. This training can be rolled into the on-boarding training and then done periodically for established employees. Don’t forget to document the training dates and the names of participants.

How To Avoid These Pitfalls

Most of these potential pitfalls for entrepreneurs deal with an inconsistent work environment and policies. In order to avoid these pitfalls, you want to make sure that your policies are even and fair across the board and that you follow the policies for every employee. It’s not a bad idea to get some outside counsel involved when developing the policies to ensure that they are done and implemented correctly to save your business time and money.