What are some of the most common mistakes entrepreneurs make when starting out? Here is a list of the ten most common mistakes new entrepreneurs make when starting their business. While mistakes made can be our greatest teacher, they can be time-consuming and costly. So here I want to share with you my hard-earned experiences and the insights I’ve gained from my own bad decisions in business.
Mistake #1. Starting without a business plan
If you’re serious about making your new business a success, you need to have a written plan. It can be as simple as one page to get started. When you write it, you have to think about how you want to bring your business to life and become profitable as well. Force yourself to honestly answer questions like “Who will my customers be”; “Why are you buying from me?”; “How much do I charge for my products and services?”; “How will I advertise my new business?”. Be realistic about the cost of running your business. Your business plan serves as an ever-changing and ever-improving guide for you to follow.
Mistake #2. Have no management experience
As a small business founder, you are directly responsible for all aspects of management – finance, marketing, sales, employee relations, dealing with subcontractors and bathroom cleaning, etc. But when you start your business because you are great at your particular skill or service and want to put all your time and energy into it, perhaps a family member or partner can do most of the running of the business. This person needs to share your vision and goals for the company.
Mistake #3. Hire help too early
Do not hire employees until absolutely necessary. The cost of hiring help can financially drown your small business very quickly. When you hire someone, make sure they are hardworking and honest. Only hire people you really need, it will have a positive impact on your business. In our small business back home we try to use subcontractors as much as possible.
Mistake #4. Not hiring professional help
Don’t skimp on hiring professional advisors like an accountant and a lawyer. Interview several and find consultants you feel comfortable with. Do you understand what you want to achieve? Are they quick to share their experience and knowledge with you? These professionals can save you a lot of headaches and a lot of money.
Mistake #5. No use of the cash accounting method
With the “cash” method, you record business income as it arrives in your bank account. And you record an expense when it’s paid from your bank account. Most of us use this cash method for our personal finances because it is much easier and less time consuming. This is also the ideal method for the small and home based business. With the “accrual” method, you would recognize business income as it is earned, regardless of when you may be paid for the product or service you sell. And you capture an expense as it occurs, regardless of when you get around to writing a check to pay for it. This demarcation method is too difficult to keep up with a small and home-based business.
Mistake #6. Not keeping track of your money
You need to track your income and expenses each month so you know where your money is going. You can do this yourself with inexpensive accounting software or simply download your monthly statement from your debit and credit card. Cash flow is the lifeblood of a small young business.
Mistake #7. Not doing enough market research
This is a very common problem in start-up companies. Market research can take many months and a lot of research to do properly. You need to know who your competition is and who your customers will be. You need to understand all aspects of your industry – inside and out. Read all the books and articles you can find about your specific type of business. Talk to others in this industry.
Mistake #8. Not doing the right marketing
Every business needs to have an online presence. It doesn’t matter what business you’re in, you have to be online. It’s now possible to do massive and sophisticated marketing for free – for free. Whether it’s a simple website, Facebook, LinkedIn, Tumblr, or an online phone book entry, you need to be online.
Mistake #9. Overspending too soon
If you’re on a tight budget, don’t start out spending thousands on business cards and letterhead. Don’t spend thousands paying a company to build your website when you can create a great website yourself very quickly. Keep using that older computer until you have the cash flow and actual need for a new computer. Get advice from your tax advisor before making very large purchases such as a new truck or machine.
Mistake #10. Giving up too soon
A big part of entrepreneurship is perseverance, drive, and determination. Not giving up on the dream because of a few bumps is an essential part of entrepreneurship. Developing the gut strength to weather the tough times is essential if you are ever to succeed. Don’t believe anyone who tells you that starting and running a business is easy or simple. It also takes time, effort, faith and a vision.
Please feel free to ignore this advice entirely, or listen to it and keep it in mind as you start your new business. But don’t let the fear of making mistakes, costly or not, stop you from starting your new business. Making mistakes and understanding why you made them and learning how to fix them or avoid them in the future will truly be your greatest teacher. And it wouldn’t hurt if you start a relationship with an experienced accountant and attorney who you can turn to for help.