Top 10 Mistakes New Business Owners Make
When starting a new business, you may wonder what it takes to achieve success. Statistically, 20% of organizations will fail within the first two years, 45% within the first five years, and 65% 10 in the first ten. Reading that may sound discouraging, but avoiding the ten biggest mistakes new business owners make will increase your likelihood of developing a profitable business.
Not Creating a Business Plan
A well-detailed business plan is the foundation of success. Even the best business ideas will not succeed without a plan. According to the U.S Small Business Administration, a well-devised plan should include “your mission statement, your product or service, and basic information about your company’s leadership team, employees, and location. You should also include financial information and high-level growth plans if you plan to ask for financing.”
These are aspects many people will rush or skip over. Following the steps of a carefully created business plan gives you a clear idea of what you want for your business and where you are going.
Not Keeping the Books Up to Date
When starting a business, staying on top of company expenses is essential. Any money spent should be reported and tracked fast and efficiently. Keeping track of expenses will make filing for annual taxes much more straightforward.
In addition to following all costs, logging calls and saving emails will cover you from potential liabilities that can occur while conducting daily business. If you are getting overwhelmed by the day-to-day tasks that need to be completed, try writing everything out in order of importance. Doing this will help you focus on finishing one task at a time, minimizing your chances of making mistakes.
Trying to Do Everything Yourself
There are only twenty-four hours in a day. Even the most efficient small business owners find it impossible to complete every task alone. Even if you do not have formal employees, asking for help from family and friends is a great way to help alleviate stress.
Once you can take on employees to help you conduct daily business, hiring will allow you to work where your strengths are and do the aspects of the job you enjoy doing. Running a successful business is measured in many different ways. It does not have to be money made; it can be with joy or fulfillment. Do not feel rushed to succeed in a specific time frame; each company is different.
Filing for the Wrong Business Entity
Among the top new business mistakes, setting up your business involves more than just picking a name and filing paperwork. Choosing the correct business entity is imperative to the success of your company.
Midland Forms can help you navigate the process of determining which business entity is right for you. Making the correct choice allows you to reach your goals and plan for the needs of your business. These legal and tax consequences will affect your company for many years. You must choose the proper structure for your business.
You never think you need a contract until you need it. Too often, businesses fail to put things into writing. When going into business with another person, allowing your current positive relationship to get in the way of intelligent business decisions is easy.
Unfortunately, disputes arise too often, which can cause expensive legal issues. Every business needs a written document that explains each partner’s rights and responsibilities and describes what will happen if one of them leaves the company.
Not Having Insurance
Depending on your business entity, your personal assets are protected from accidents that occur at the workplace. Not having insurance can cause devastating damage to a company regardless of size by either not having any insurance or not being insured enough. Consult with your insurance agent about the options available for your business.
In addition to your company's protection, your ideas must also be protected. It is natural to think no one would ever claim your work as their own. Lawsuits over this are all too common. Registering marks, names, and concepts are imperative in any aspect of your business and should be taken seriously.
This tip should be obvious, but do not spend more than you need. Being frugal with your money in the early stages can sometimes be the key to success. Watching your cash flow is essential and is important to run a business.
Good practices to implement when starting your business include hiring qualified candidates and keeping your staff lean, renting or buying the smallest office space that fits your needs, and only buying the necessary equipment to get the job done. If you acquire any debt during the duration of your business, even if your company fails, the bank will still require you to pay back all loans taken out from them.
Not Researching Your Market and
No matter the product or service you offer, understanding what your product or service is and who it should be for is critical in making your company successful. You need to identify the best ways to appeal to your target audience so that you can differentiate your company from others.
Your target demographic is who you are trying to appeal to. This is the age, location, interests, and values of your company's "Ideal" customer. Using those demographics can help to determine where to advertise, what groups or community events to get involved in, and what social media channels are right for your business.
Although word of mouth is a powerful tool, it can only get you so far. Investing your time in creating a social media outlet, such as LinkedIn, could help you expand and grow your business.
Forgetting to Be Patient
Building a successful company is not built overnight; everything takes time. Remember this on especially rough days. Allocating your funds is imperative for your business's first two years; be prepared for that.
According to FreshBooks, “Most small businesses take at least two to three years to be profitable and become truly successful once they’ve hit the seven to the ten-year mark.” Growing your customer base takes longer than a day. Rising to the top takes time, but being patient allows you to beat out your competitors and achieve the goals you have for your company.
Being Afraid to Try, and More Importantly to Fail
Lastly and arguably the most important is, being afraid to fail. No company has done everything correctly. How you choose to respond to those mistakes is what separates your company from others.
Learning from your mistakes allows you to improve and avoid mistakes in the future. If you fail to recognize it, reflect on where you made your error.
Business mistakes are common when getting your business up and going, and are only a tiny stop on your road to success. How you prepare for these mistakes makes the difference. With this list of ten, they can prepare you to either mitigate the potential or avoid these mistakes altogether.
Midland Forms can help you with the process. We are here to get your business established and help you achieve success. Contact us to learn more about the possible opportunities creating your business has, or click here to get started.