While building a business for the first time, it’s normal to let enthusiasm take over and make significant mistakes.
However, to ensure your business stays strong for years to come, other than commitment and hard work, ensure that you don’t make these common grave mistakes:
1. Lack of business plan
This is one of the greatest mistakes of new business owners. They believe they have it all figured out in their head. But that’s just a bad recipe for failure or poor growth.
Instead, it’s known that businesses with plans expand 30% faster than those without a plan.
While you create a business plan, you’ll notice whether the existing plan in your mind has any flaws.
With a robust business plan, you can evaluate the target market for your offering, the funds needed, and the prospective income from your business.
2. Not getting the correct business entity
First-time business builders are always in a rush – and that’s completely understandable.
They feel overwhelmed by all the different processes and delay setting up the right business entity. Some even form a limited liability company just because someone suggested that.
However, the wrong business entity or the lack of one may lead to serious financial consequences like these:
- In a general partnership, you’re personally liable for all business debts. It doesn’t matter whether you agree with them or not.
- In a corporation, you’re taxed both at the corporate and personal level. Thus, you pay much more!
3. Doing everything by yourself
One of the greatest mistakes of entrepreneurs is thinking they must do everything on their own. They don’t seek professional advisors to avoid spending more.
However, you’ll undergo complicated processes like company tax return while building the business.
If you rely on experts in such cases, it’ll save you a lot of resources and avoid the hassle. You’ll be able to focus on more important matters while the reputed experts deal with these. As a result, you’ll be less likely to get burnt out and stay motivated!
4. Overspending
If you don’t keep your business expenses under control, you might run out of funds sooner than expected. Such situations may lead to losing financial backing, as they assume you’re incapable.
Moreover, you’ll sign a personal guarantee for any loan since you’re a new business owner. So, if you fail or get into debt, you’ll be responsible for all losses.
So, spend money wisely with these tips:
- Don’t rent an office space that’s too big or expensive.
- Don’t hire too many employees.
- Don’t favor employees with certain degrees over ones with valuable experience.
- Avoid investing in fancy equipment for tasks that can be done manually.
5. Underpricing
Often, small businesses underprice their offerings to grab the target audience’s attention and seem better than the competition. However, this will make your business flourish only if the prices are low.
Sometimes, it’s also an honest mistake from the lack of knowledge about market prices and necessary pricing to make a profit.
Underpricing may even make you struggle to cover your and others’ salaries.
6. Wrong salary for yourself/partner
When it comes to paying yourself wrong, some pay themselves too much while others don’t pay themselves enough to stay motivated.
Research the right payment for yourself or your business partner. Decide on a certain percentage of revenue. Ensure it’s enough to care for your needs, and the remaining must balance all management tasks.
7. Ignoring insurance
With the right business entity, you can protect yourself from complete personal liability from your business obligations. However, it’s not a foolproof method.
You won’t be safe, especially if any of the following happens:
- Someone sues you for product defect, malpractice, or personal wrongdoing.
- Someone sues you after getting hurt on your business premises
- Your business vehicle gets into an accident, hurts others, and is sued.
If any of these happen, it’ll affect your business and may also attack your finances. So, get the right kinds of insurance ASAP.
8. No protection for intellectual property
This is applicable if your business is in the art, music, inventions, or software industry. You must protect your business products with a copyright or patent. Your business logo and name must also be under federal or state trademark protection.
Register your business with government agencies to prevent competitors from stealing your creation.
Conclusion
The best tip to avoid these mistakes is to take enough time for every little thing in your business. Don’t rush, and seek experts whenever necessary!
