10 mistakes to avoid when starting a small business
Introduction
What are some common mistakes entrepreneurs make when starting out? Here is a list of ten of the most common mistakes new entrepreneurs make when starting their business. While mistakes can be our best teacher, they can be time consuming and expensive. So here I want to share with you my hard-earned experiences and insight I gained from my own mistakes in business judgment.
Mistake # 1. Starting without a business plan
If you really want to make your new business a success, you must have a written plan. It can be as simple as a page to get started. Writing it will force you to think about how you plan to make your business come alive and be profitable too. Force yourself to honestly answer questions like “Who will my customers be?” “Why will they buy from me?”; “How much will I charge for my products and services?”; “How am I going to get the word out about my new business?” Be realistic about the costs of running your business. Your business plan will act as an ever-changing and improving guide for you to follow.
Error #2. Have no management experience
As a small business founder, you will be directly responsible for all aspects of management: finance, marketing, sales, employee relations, dealing with subcontractors, and bathroom cleaning, etc. But if you are starting your business because you are excellent in your particular skill or service, and you want to put all of your time and energy into doing so, perhaps a family member or partner can handle most of the running of the business. This person should share their vision and goals for the business.
Error #3. Hiring help too early
Don’t hire employees until absolutely necessary. The expense of hiring help can overwhelm your small business financially very quickly. When you hire someone, make sure they are hard-working and honest. Only hire the people you really need, that will have a positive impact on your business. In our small home-based business, we try to use subcontractors as much as possible.
Error #4. Do not hire professional help
Don’t skimp on hiring professional advisers like accountants and lawyers. Interview several and find advisers with whom you feel comfortable talking. Do they understand what you are trying to achieve? Are they quick to share their experiences and knowledge with you? These professionals can save you a lot of headaches and a lot of money.
Error #5. Do not use the cash method of accounting
With the “cash method,” you record business income when it is received into your bank account. And you record an expense when it is paid from your bank account. Most of us use this method of cash for our personal finances because it is so much simpler and less time consuming. This is also the ideal method for small businesses and home-based businesses. Under the “accrual method,” you would record business income when it is earned, regardless of when you will be paid for the product or service you sold. And you record an expense when it’s incurred, regardless of when you’ll be able to write a check to pay it. This accumulation method is too difficult for a small business to follow from home.
Error #6. Not keeping track of your money
You need to track your income and expenses every month to know where your money is going. You can do it yourself with inexpensive accounting software or simply download your monthly statement from your bank and credit card. Cash flow is the life blood of a small startup.
Error #7. Not doing enough market research
This is a very common problem with startups. Market research can take many months and a lot of research to get done right. You must know who your competition is and who your customers will be. You must understand all aspects of your industry, inside and out. Read all the books and articles you can find on your particular type of business. Talk to others who are in that industry.
Error #8. Not doing the right marketing
Every company must have an online presence. No matter what business you are in, you must be online. Extensive and sophisticated marketing is now possible at no cost. Whether it is a simple website, Facebook, LinkedIn, Tumblr, or an online phone book list, it must be online.
Error #9. Spending too much too soon
If you’re on a tight budget, don’t start by spending thousands on business cards and letterheads. Don’t spend thousands of dollars paying a business to build your website when you can quickly build a great website on your own. Keep using that older computer until you have the cash flow and real need for a new computer. Before making large purchases, such as a new truck or machine, check with your accountant.
Error #10. Giving up too soon
An important part of being an entrepreneur is having stamina, drive, and determination. Not giving up on your dream for a few bumps in the road is an essential part of entrepreneurship. Building the gut strength to withstand tough times is essential if you are ever to be successful. Don’t believe anyone who tells you that starting and running a business is easy or simple. It also takes time, effort, faith, and vision.
conclusion
Feel free to ignore this advice entirely, or listen to it and keep it in the back of your mind as you start your new business. But don’t let fear of making mistakes, costly or not, deter you from starting your new business. Making mistakes and understanding why you made them and learning to correct or avoid them in the future will be your best teacher. And it wouldn’t hurt to start a relationship with an experienced accountant and attorney that you can turn to for help.
