Each month, nearly half a million small businesses are launched in the United States. It's a thrilling proposition to open and helm your own small business—but it's also accompanied by risk. How do you avoid mistakes when you’re in the start-up phase of your business?
To help your company flourish and minimize your business risk, take a look nine of the most common pitfalls that befall start-ups.
Mistake 1: Not Writing a Business Plan
Once you have a business idea in mind, it can be tempting to launch it right away. Why wait? Well, as it turns out, a bit of research and patience is advantageous, allowing you to identify and solve potential problems early on. Going through the process of writing a business plan is one of the best ways to avoid being blindsided by preventable errors.
When you develop and plan your business carefully on paper, you’re better able to avoid mistakes that are difficult to take back, such as putting up a storefront when selling your products via a website might be cheaper and more effective.
Mistake 2: Failing to Keep Good Records
During any month that isn't April, tax time can feel far away. But for small business owners, tax preparation should be a year-round practice. Do better than a shoebox of receipts: develop a system to clearly track your expenses and earnings early on, and tweak it as necessary.
For that matter, it's not only financial matters that it pays to track carefully. Keep notes on people you meet, helpful businesses, tips, apps, and other items you learn about during your research, so you can potentially follow-up and take action.
Mistake 3: Quitting Your Day Job
It can feel tempting to quit your current position so that you can devote yourself to developing a new business. Resist the urge, and hold off for as long as possible. A steady source of income is reassuring to lenders. And, keeping a plan B in place as long as possible is smart, not cowardly.
Mistake 4: Doing Too Much, Too Quickly
It's every new business owner’s temptation to strive towards getting everything in the business up-and-running now, now, now! But a slow, deliberate pace may save you money and heartache in the long run. Develop a business plan, and think carefully before investing time and money in non-essential projects.
You may eventually need employees, but avoid that expense at the beginning if you can. And similarly, a storefront may eventually be the right idea, but may not be necessary during your first month in business.
Mistake 5: Doing It Alone
While you’re not necessarily ready to staff up, it doesn’t mean you have to figure out how to start a business all alone. Join a network of entrepreneurs so you can bounce ideas off each other, commiserate when necessary, and inspire each other to succeed.
Find a business counselor or ask a friend to help you polish and refine your business plan. Many local governments provide free resources and counseling through their economic development department or through a dedicated office for small business services. Also, there are many local, regional, and national organizations dedicated to small business development. Contact your local SBDC or SCORE office to learn about the counseling services they provide. Having those second set of eyes will help you to better understand exactly what you’re writing and committing to in your plan, and discover things you may have overlooked.
Mistake 6: Not Using Available Resources
It’s important to learn as much as you can on an ongoing basis to stay on top of business trends and developments in your business community. Get on mailing lists and email newsletters of organizations in your industry. Search out workshops, seminars, webinars, and conferences that might help you learn more. As mentioned above check out your local government's office of small business services or your nearest SBDC or SCORE branch.
Mistake 7: Mixing Personal and Business
Keeping your finances separate can help protect your assets in many ways, and it makes it easier for you to honestly asses the performance of your business. Open up a separate bank account and credit card for your business to make tracking expenses easier.
If you cannot yet open a business account, simply open another personal account exclusively for your business. Remember to pay yourself and all business expenses from there, rather than your personal account, so as not to cloud your business’ success with your personal spending.
Mistake 8: Being Unaware of Weaknesses
We all have a mix of strengths and weaknesses. Figure out what yours are, and hire help when necessary to accommodate your less-than-expert areas. While you may know a lot about your business, that doesn't necessarily make you an expert on accounting or the other skills necessary to running your company. Outsource to the experts wherever necessary.
If you're skilled at scheduling, accounting, and behind-the-scenes work, and less confident dealing with customers, hire a bubbly person to handle those interactions.
Mistake 9: Getting Discouraged
In an ideal world, all will go smoothly as you start up your business. But let's be realistic: mistakes happen, and most likely, not everything will fall into place perfectly from the get-go.
Use your mistakes as an opportunity to learn. Think: how will I do this differently next time? If something doesn't work initially with your start-up, consider it an opportunity to pivot, rather than a reason to end your business.
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