If you are an entrepreneur, you are already a risk-taker and an optimist rolled into one. You have confidence in your actions and faith in your own judgment. The ability to control events is ingrained in you. You also get a lot of validation from your peers, which contribute, to your confidence and optimism.

That was the good side. The other side of the coin tells a radically different story. Entrepreneurs tend to underestimate risks they could face. Psychologists term it “entrepreneurial delusion”. This has been proved to be true by a number of studies where entrepreneurs calculated their chances of a successful outcome at 70 percent or higher, but facts state that only 33 percent of all businessmen achieve what they wanted in the first place.

In their own world

It can be argued that entrepreneurs are acutely involved in what they do and so emotions get in the way of good judgment. But that is only a fraction of the reason why entrepreneurs tend to underestimate risk. A more valid explanation could be found in the cognitive bias of the entrepreneur. To put it simply, they create their own universe – a distortion of the actual world around them – and one that is not consistent with the facts. The often-repeated phrase is “ there is no competition”, “ we are the only providers of this product or service”.

Most Common Bad Habits to Avoid as an Entrepreneur

Here are some bad habits of entrepreneur you should avoid as an entrepreneur.

Do not fail to plan:

Many entrepreneurs forget they have no boss and do not structure their days. Many entrepreneurs are incapable of managing themselves. They arrive at different times to work each day. Many entrepreneurs hold the belief that a structured company will destroy their creativity. But what they fail to understand is that structure gives more freedom when it is set correctly.

Do not get fixated on a plan:

Never assume only the best option scenarios where there are a number of ways for a plan to ground to a failure. You should not assume that you might achieve the goals in the exact same way you have planned.

The illusion of control should be avoided:

If you try to predict your future, or try to analyze the past, do not downplay the influence of luck. It is seen to play a major role in the successes of many notable individuals, which is far beyond the talent of the persons involved. Numerous times the success of business decisions are influenced by factors that are beyond your control.

Do not concentrate only on the known:

Try to learn new things and have an open mind. Focusing on only what you know will result in overconfidence that will blind you to factors you never thought of to begin with.

Avoid halo effect and outcome bias:

If a business fails, then people claim that the founder did a few things wrong, like he or she hired wrong personnel, had inadequate strategy and so on. But it is important to remember that the outcome of a business does not depend solely on the founder. When a business fails, people feel the need to blame someone and the head of the company is a logical target. As the founder of a business you are indeed responsible for the results, but try not to be too hard on yourself. It is possible that you encounter failure, despite your best efforts. Take it in your stride and learn from your mistakes.

Failing to solve employee attrition:

You can never stop an employee from leaving. The best way to tackle attrition is to build a system of redundancy where people train counterparts and their replacements. The aim is to permit them to transfer smoothly into more challenging and new roles. If you do not focus on the development of a team, you are not creating a business.

Doing business with friends:

When a friend is your client or customer, you can be pretty sure that the stakes are higher. If everything happens as planned, then it is fine. But in the event of a glitch, like a bad product, less than ideal customer service or worse, a heated argument over the issue of payment, your friendship will suffer. Remember that money comes and money goes, but friendship is meant to last.

Use time wisely:

Do not waste your valuable time or the customers by explaining in unnecessary detail the product features nobody cares about. Instead, it will lead you to sidestep real issues. In such a scenario, the best thing to do is to step back and take a look at how you spend time.

The best thing you can do as an entrepreneur is to create meaningful job opportunities so that people can learn new skills, advance careers and earn sufficient wages to enable them to go on with their lives. Work closely with your team and put the interest of the business before your personal gains.

The first and most important part of any business plan is market analysis. New and emerging companies must conduct a detailed market analysis before beginning operations to gain a deep understanding of what they’re getting into. This article highlights the importance of market analyses for businesses and what an effective analysis should include.

A marketing analysis provides much-needed direction for your marketing campaigns and ensures that your money is spent in the most productive manner possible. In the absence of such valuable information, a company would merely be gambling on hunches of the strategies it ‘thinks’ would be successful in the hopes of earning positive returns on their investments.

Furthermore, a clear understanding of your direct and indirect competition is integral to business success as they impact your overall effectiveness and profitability. The key is to understand what makes customers choose one product or service over another.

It is key to clearly define your market before endeavoring to conduct this research. By definition, the pool of customers that are willing to buy your good(s) or service(s) can be defined as your market. However, when speaking of market analyses, the market in question is your potential market in its entirety, not just the actual market served. Your target market isn’t confined to the people you currently cater to. It extends to the people you might potentially reach someday in the near or even distant future.

Given the volatile nature of markets, knowledge of this information is extremely valuable for your company. Begin with a summary of the market, explain your segmentation, the market’s needs, growth, and trends, and then evaluate the information to arrive at a strategic advantage.

A comprehensive market analysis should include:

Industry Description and Outlook – This entails describing the characteristics of the industry you operate in, such as life cycle stage and historical, current, and projected growth rates and other significant trends characteristics.

Historical Research – Any secondary data available on the market or industry via trade publications, newspapers, industry magazines, the census bureau, the department of labor, the department of commerce, and the internet must be thoroughly examined to gain an understanding of the historical trends and characteristics of the market. Of course, your own market analysis also entails extensive primary research to derive specific information that caters to serves your purpose.

Target Market Description – As mentioned before, your target market refers to that consumer segment of the market towards which your marketing efforts and, ultimately, merchandise are aimed. You must identify your target market in the analysis; otherwise, you will end up with a lot of information that doesn’t particularly pertain to segments of the market you cater to. Other information relevant to your target market includes:

• Characteristics Of Target Consumers – You must define the locations and demographics of your target customers, their purchase preferences, determine their critical needs as well as whether those needs are effectively being met, and if not, how you can step in to fill those gaps. Any particular seasonal or purchasing trends (such as Christmas, Easter, Ramadan, etc.) that may impact your business are also worth identifying. Be sure to include any information on how your business can improve on competitors’ goods and services.
• The Size Of Your Primary Target Market – This not only refers to the absolute number of potential customers but also data relating to the annual purchases your market makes in the industry, current growth rate as well as forecasted market growth rates to determine future profitability.
• Market Share – This refers to the share of the market’s sales you control expressed as a percentage of total industry sales in a particular period. Upon analysis of various segments based on geography and other demographics, you need to establish the expected percentage and number of customers you can acquire within the short and long term. You will need to examine brand perception, customer loyalty levels, and the overall competitive edge and develop a strategy to make your current share more profitable and acquire a larger market share from the competition. As an aid to decision making, make it a point to explain all your calculations’ logic.
• Pricing Strategy – You will need to define your pricing structure by identifying various costs incurred in your good or service production, primarily materials, labor, and overheads, among others. You might also need to develop differentiated pricing strategies (such as discriminatory pricing and discounts) for various market sectors depending on purchasing power and consumer preferences.

Legislation – Government regulations and restrictions relevant to your market (i.e., any customer or government regulatory requirements) must also be closely studied to avoid any legal action in case of non-compliance.

Competitive Analysis – This is perhaps the most difficult part of the market analysis as it involves defining your competition in terms of product line/service, market segment, and market share. This information is sensitive and can be extremely hard to acquire. You should assess the following characteristics of the industry’s competitive landscape:

• Each competitor’s respective market share, product lines, pricing, advertising and promotional strategies, unique selling propositions, and brand positioning.
• Strengths, Weaknesses, Opportunities, and Threats (this can be done by conducting a SWOT analysis).
• The importance of your target markets to your competition.
• Any potential entry and exit barriers in the market. Entry barriers include high set-up costs, a fully saturated market, economies of scale, high switching costs, patents, lack of qualified personnel, the presence of cartels, and monopoly control. In contrast, barriers to exit include sunk costs (due to investments in special-purpose equipment), specialized skills that are of no use elsewhere, and highly dedicated fixed costs.
• Identification of any secondary or indirect competition that may impact your chances of success

The purpose of your entire analysis is to provide a brief overview of market trends and competition and to determine how your business will effectively address market needs as compared to the competition.

So to summarize, a good market analysis should provide

An Economic Overview – This helps you understand where your current market is and where it is going. This entails a detailed analysis of both micro and macroeconomic factors such as consumer spending, growth rates, interest rates, and in the case of foreign markets, exchange rates.

A Competitive Overview – This helps determine important information about competitors, the number, strength, intensity of competition prevalent in the market, and their strengths, weaknesses, and policies.

A Strategic Advantage – This is the result of a market analysis; the detailed information puts you in a better position to analyze the economy and market comprehensively. This enables you to determine your company’s strategic advantage over the competition and identify factors that provide certain leverage in your business area. This can be an internal or external strength or some major opportunity just waiting to be exploited.

Diversification is when a company produces a range of completely different products from one another but can benefit the business as a whole by improving its sales and increasing its clientele.

The most common reason for diversification is the need to survive. Businesses fight for their survival in the market and are willing to expand their production lines to incorporate new products to earn bigger profits.

In cases where a business produces seasonal products that only earn revenue for a selected time of the year, diversification of products can ensure that revenue flow remains constant throughout the year.

For instance, the market demand for ice creams, juices, and soft drinks is more during summer but less in the winter season. If the companies producing these items diversify their production line to include winter apparel, they would be able to earn revenue for their business during the winter season.

Not every company needs diversification. Some use it purely to expand the grasps of their business further into every field of production. Depending on the strategies implemented and the demand for the goods produced, diversification can be a good investment or a waste of precious resources.

Why diversification is important in business?

However, if successful, diversification has many benefits, which is why it is considered essential for the growth of every business and therefor the diversification is important in driving business.

Growth of the Business

This one is straightforward and clear. There are a variety of ways in which you can diversify your products. If you increase the number of products you offer, you will automatically expand your business, resulting in its growth. These ways can include:

Expansion of the Existing Production Line

An example of this could be a company that produces fashionable shoes and diversifies its business to incorporate children’s toys. The two products have nothing in common, but as long as they are both in demand in the consumer market, the company is sure to earn a considerable amount of profit.

Provision of Additional Services

To grow a business through diversification, companies often add additional services to existing products. For instance, a car manufacturing company can offer maintenance and repair of its cars on every new purchase. The provision of goods and services alongside one another can maintain steady revenue for the company.

Brand Extension

A brand extension also becomes easier with the help of diversification. Famous brands and established businesses can extend the range of products to gain more customers. Brand expansion is often quite profitable if the same standard and quality of the goods are maintained because brands usually have many loyal customers who will buy every product they introduce into the market.

Creation of a New Production Line

Some businesses prefer to diversify their products but use different names for each of their production lines. The reason for this approach is that using the same brand name for new products is a risk. If the new goods and services are not as popular as the previous products, their failure can negatively impact the entire brand’s success.

Hence, the importance of diversification for business success cannot be denied. As the business gains success, it provides monetary benefits to its owners and leads to further opportunities for progress. Considering the number of ways in which diversification can be used to expand and grow a business, it becomes clear that every booming business must eventually opt for diversification to survive and prosper.

However, entrepreneurs need to be cautious when using choosing to diversify their products. Diversification, if implemented too early, can lead to the downfall of a new business and can be a costly failure even for established businesses if it lacks the same quality as previous products.