The Entrepreneur encounters numerous strategic, legal, and other " Sand Traps " during the fund-racing cycle and needs of awareness and skills in coping with a good deal. Here are some sand traps that the entrepreneur might face.
These are the following:
1.
The lure of money often leads to the common traps which is called the OPPORTUNITY COST TRAP.The opportunity cost trap is what happens when you really would like to do something, but have to give up too much to get it. For example, becoming a businessman after earning a lot of money and going back to be an employee of a big company. The trap is that you are kept doing what you like less just because you gain more, yet you don't feel any happier having more, because you aren't doing what you want anyway.
Significantly Opportunity Cost is also incurred in foregone business and market opportunities that could have been pursued.
2. UNDERESTIMATION OF OTHER COST
Costs are the necessary expenditures that must be made in order to run a business. Every factor of production has a cost associated with it: labor, fixed assets, and capital, for example. But Entrepreneur tends to underestimate the out-of-pocket cost associated with both raising the money and living with it. There are incremental costs after a firm becomes a public company. The Securities and Exchange Commission requires regular audited financial statements and various reports, their are outside director fees and liability insurance premiums, there are legal fees associated with more extensive reporting requirements. This can add up quickly more money to spend for that the entrepreneurs are not aware of.
3. GREED
Being greedy and wanting more than your fair share is one of the traps that the entrepreneur wont be succeeded. But being greedy requires a great planning. As saying goes “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”, which means that when markets are down and the news is ugly, you don't go away and hide. You need to draw on your best valuation work and act decisively. Work for the best that you can make and never to a tempt doing such monkey business for there is no reward for it.
4. BEING TO ANXIOUS
Anxiety is fear. Anxiety is normal. It's normal to feel scared before a big event. Anxiety can show up as a variety of body signals: elevated heart rate, excessive sweating, cold hands, diarrhea or those butterflies in your stomach. It can also show up as difficulty sleeping, difficulty concentrating, and jumbled thoughts. These symptoms are telling you that you are feeling threatened and they are your body's way of telling you to "get ready". Some entrepreneur feel this anxiousness after the deal is close they think that after hand shaking or perhaps with an accompanying letter of intent or an executed term sheet. This feeling would fall entrepreneurs to this trap of believing the deal is done but actually it is not. It is very important that you should negotiate your partners in order that you will both updated to the happenings of your business flow with that there is nothing to worry about.
5. IMPATIENT
Now the difficult thing for entrepreneurs around the world is that they are often impatient and distracted with the day to day operations involved with running our company. So finding the time to do this isn't as easy as you'd like it to be. Life is really a series of “miss outs” and trade-offs. But we have to find a bit of balance with it if you don't want to wake up one day and realize you missed out on the most important things because you was chasing things that you thought were significant, but really weren't.
6. Take the money and run Myopia
This is the final trap in raising money for a company that invariably prevents an entrepreneur from evaluating one of the most critical long term issues to what extent can investor add value to the company beyond the money. The entrepreneur falls to this trap if they does not possess a clear sense that his or her prospective financial partner has the relevant experience and know how in the market and industry are. As what have been said that the development of a company can be critically affected by the interaction of the management team and the financial partners. If an effective relationship can be established, the value added synergy can be a powerful stimulant for success.
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