So far we’ve covered three fatal mistakes cross-cultural entrepreneurs commonly make. In case you missed them, the first post covered the failure to assemble a team and the failure to find a mentor or coach.

The second post covered the failure to be cross-culturally prepared.

This final post in the series will cover two more mistakes cross-cultural entrepreneurs make: the failure to plan the business adequately, and the failure to prepare financially and legally.


Cross-Cultural Entrepreneurship Mistake #4:  Failure to Plan the Business

Toby Miles, in his book on social enterprise failures3, has two chapters on poor planning and the mystery of marketing.  While this section also relates to business experience, it has everything to do with the planning process.  It is a principle of life to plan before an activity is begun, but it is amazing how many businesses begin with minimal or no planning.

I find that it is a common vice that people who think they know how to do something, such as make good coffee, or teach English, or manufacture a certain widget, think they know how to operate a business around that skill or product. Yet product knowledge is only one facet of business success.

[bctt tweet=”Product knowledge is only one facet of business success.”]

I recently read a letter from an acquaintance and a coffee expert who had been trying to start a coffee company in an Asian country.  He truly was an expert in coffee growing and production and marketing.  It was a passion and love for him.  But the letter last month said that the business, which had been registered and operating for three years, had been closed down.  The owner admitted that he was not cut out to be a business person and had not planned well.  He had just kept working harder and harder trying to make it all work.  After requesting help from new consultants who were frank and honest with him telling him that he would not be successful and why, he was honest with himself. His heart was not in it.

Another case of poor planning took place in Eastern Europe where the labor pool is huge and poverty intense.  An agricultural business seemed an obvious and needed choice.

The crop of vegetables grew at the start but before long unforeseen obstacles developed – disease, collapse of prices, transportation issues, and broken contracts.  A debrief revealed weak planning, inadequate market studies and misunderstanding of cultural factors.  Could most of it been avoided with better planning?  Probably.

While the lean start up strategy suggests a “ready, fire, aim” approach with a propensity to “pivot”, some type of business plan is vital.  This plan will look different for every entrepreneur and at differing business stages, but certain key areas must be thought about strategically and planned carefully.


Cross-Cultural Entrepreneurship Mistake #5:  Failure to Prepare Financially and Legally

Capital is always a key issue for any business and legal propriety is always a concern for a person of integrity.  Consultants are always seeking clarity on these issues. A biblical parable reminds us that anyone building a tower first sits down to count the cost to see if he has enough to complete it.

Capital development is difficult for startups in the West and almost impossible in the developing world.  It is tempting to capitalize with donated funds which might have been provided by a charity and ignore ownership questions and IRS regulations related to private inurement, equity ownership and international tax issues.  To do so can bring ruination.  To be prepared in the area of finances and the law is mandatory.

A tour business in a large south Asia nation recently closed its doors after doing rather well for some years.  The issue:  taxes!  The owners had done a remarkable job of capitalizing the business and accounting for significant profits.  However, unknowns in tax laws for which they were unprepared brought them to their knees.  Preparation for legal and finance issues unique to the country demanded expertise beyond a foreign consultant.  Had they had that, it might have made the difference.

In another case, a manufacturing company in Indonesia was unprepared to compete with corrupt officials who expropriated the leased land and put them out of business.  There were political factors at play for sure, but a better understanding of the financial risks and the legal issues could have mitigated them closing their doors.


Failure to Prepare is Preparing to Fail

All of these 5 mistakes cross-cultural entrepreneurs make prove the point I quoted in my first post: failure to prepare is a preparing to fail.

Launching a social enterprise business in a cross-cultural environment is a very difficult task which demands the best of experience and training. It demands the best of coaching and it requires a good team. It requires cultural intelligence and consideration. It necessitates a solid business plan, adequate research, sufficient capital, and knowledge of legal and financial factors.

Without such preparation, risk factors will dominate.  These five mistakes need attention by entrepreneurs, consultants and coaches, stakeholders and anyone else concerned with the bottom lines of successful cross-cultural social enterprise.