Top Mistakes You Have to Avoid When Starting a Business
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Did you know that 18% of companies fail within the first two years? On top of this, 55% of businesses don’t survive past their fifth year. If you want to make sure that you are launching your company well and maximizing the chance of success, then this is the guide for you.
Being Afraid to Fail
One of the biggest mistakes you could make is being afraid to fail. At the end of the day, failure is the key to your success and jumping into your fear is positive for the future of your business. How you pick yourself up after failure and learn from your mistakes so important. At the end of the day, running a business is about taking risks and trying to make sure that you explore new opportunities. If you are always too scared to do this, then you may find that this works against you in the long run.
Not Making a Plan
Too many companies start without any kind of basic plan. If you fail to plan, then you are planning to fail. As a start-up, you need to try and map out a business plan. Even if your business plan is just one page long, you do have to include how much it is going to cost you to operate and you also need to plan out how much you anticipate selling. You need to include who is buying your product and why as well. If you can do this, then you will find that it is easier for you to get the result you are looking for.
Being organized is so important. Running a small company is very similar to being a circus ringmaster. It’s normal for you to have a ton of things happening at once. If you want to make things easier on yourself, it is so important that you have a task list. This includes all of the duties you need to do, so you can then list them by their priority.
This may sound simple, but it does work, and it makes you more productive overall. If you are the type of person who struggles with being organized then this is understandable, so make sure that you invest in apps or software to help you out. If you work with contractors, then why not explore Buildops field service management solution?
Not Defining Your Market
One major start-up mistake that people also make is that they do not take the time to understand the market or the customers they are trying to build for. If you are a technical founder, then you may find it easier to write code rather than talk to your customers. There’s no way for you to know if you are on the right track unless you are always getting feedback from your prospective customers though. You need to recognize the fact that building a great product doesn’t often translate to having a great business. You need to factor into account how much competition you have and to also find out if there is anything you can do to stand out. If you can do this, then you can allow your great product to truly shine.
Not Filing for the Right Legal Structure
One of the biggest mistakes that so many companies make is that they do not register their business. They do not pick the right entity and they do not take steps to protect their intellectual property. These areas are crucial for your business, and if you do not take the time to do them properly then you may find that you have to spend a lot of time and money correcting the issue.
Going at it Alone
Entrepreneurs often think that they can go at it alone and that they don’t need wise counsel to operate. That being said, this is a major mistake. Don’t try and run a business all by yourself. Find and then onboard a trusty advisor who can discuss your ideas with you, as well as your strategy and challenges. Wisdom and power do exist in the multiplicity of counsel, so do what you can to try and incentivize continuous feedback. If you can do this, then you will soon find that you end up making way fewer mistakes.
Partnering with the Wrong Investors
One important piece of advice that a lot of entrepreneurs should know before starting a business is that investors are just as important as financial backers. A company’s first set of investors will either make or break the business. These individuals often place their confidence in the potential of the business without having proof of concept. When you can obtain your seed funding, you can then interact with others, who may take a look at your business growth and general sustainability. If you want to present your idea to your investors then remember, you are trying to tell a story here. You want to deliver a narrative that sets up a problem and then explains how you are going to solve it.
One major mistake that you may make when starting a company would be not implementing contracts. It doesn’t matter how good your relationship may be, because it may come to a screeching halt if you do not have the right agreements put into place. Sure, you may think that you have everything sorted out and that you trust in the staff that you have but at the end of the day, you need to have contracts. This ensures that you have an agreement in place and in some instances, it can help you in a court of law. Make sure that you give some serious thought to this if you can, and that you do what you can to hire a good lawyer.
Hiring too Soon
One of the biggest mistakes that a start-up could hope to make is hiring employees too soon. You may find that you end up hiring an employee when in reality, you could get away with hiring a subcontractor. It’s easy to run a business when you have part-timers, especially when you have a small business. Make sure that you keep this in mind as it could help you to keep your expenses down, for longer.
A lot of CEOs think that they can go the distance without investing much into their business. Although this is great, you have to remember that this is not often the case. You need to plan for the best-case scenario, but at the same time you also need to make sure that you don’t overestimate your potential. The last thing you want is to run out of money and not have enough to pursue your idea. If you want to do something about this, then one thing you can do is try and add 30% to your estimated budget. If you do this, then you will soon find that it is easier than ever for you to account for any financial surprises.
Not handling money properly and not being fully responsible with your cash flow is truly a death sentence if you are a start-up. You have to make sure that you have a well-defined process, and you also need to make sure that you are not putting money to bad use. Don’t try and be everything to everyone and avoid investing your time and money in something that isn’t tried and tested. If you take blind risks then this will also work against you, so make sure that you keep that in mind.
Having the Wrong Salary
If you pay yourself too much or too little, then this is a major mistake. It’s often easy to determine the salary for a new hire, but finding out how much pay you should be giving yourself as an owner can be difficult. If you want to help yourself then it is wise for you to pay yourself a percentage of revenue where possible. Whatever you choose, just make sure that you set your pay, so it reflects a healthy expectation of what you expect of yourself. Don’t underpay yourself if you expect to work long hours, and don’t overpay yourself if you know that you are going to be doing minimal work in the early stages.
Undervaluing your Product or Service
Don’t price things too high, and at the same time, don’t price too low. Setting the right price is crucial if you want to gain a good amount of market share. A lot of entrepreneurs tend to start out with the best intentions, and they do things for free so they can appeal to charities or to gain more visibility. This is great, but at the same time, you do not want to be seen as being just a source of freebies.
Lastly, you need to make sure that you do not launch too quickly. If you do, then this will work against you, and you may find that you end up compromising your business at a later date.
*This article is based on personal suggestions and/or experiences and is for informational purposes only. This should not be used as professional advice. Please consult a professional where applicable.