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10 Small-Business Start-Up Mistakes To Avoid
What are the common mistakes entrepreneurs make when starting out? Here is a list of the ten most common mistakes new entrepreneurs make when starting their business. Although mistakes can be your greatest teacher, they can be time-consuming and expensive. So here I would like to share with you my hard-earned experiences and insights gained from my own mistakes in business decisions.
Mistake #1. Starting without a business plan
If you are serious about making your new business a success, you must have a written plan. Getting started can be as simple as one page. Writing it down will force you to think about how you plan to bring your business to life and become profitable. Force yourself to honestly answer questions like “Who will my customers be”; “Why would they buy from me?”; “How much should I charge for my products and services?”; “How do I know about my new business?”. Be realistic about the costs of running your business. Your business plan will serve as a guide for you to constantly change and improve.
error #2. Lack of management experience
As a small business founder, you will be directly responsible for all aspects of management – finance, marketing, sales, employee relations, dealing with sub-contractors and cleaning bathrooms, etc. But if you’re starting your business because you’re good at a particular skill or service, and want to devote all your time and energy to doing it, perhaps a family member or partner can handle most of the company’s management. This person must share your vision and goals for the business.
error #3. Seeking help too soon
Do not hire staff unless absolutely necessary. Hiring costs can sink your small business financially very quickly. When you hire someone, make sure they are hardworking and honest. Hire only the people you really need, it will have a positive impact on your business. In our home-based small-business, we try to use sub-contractors as much as possible.
error #4. Not seeking professional help
Don’t skimp on hiring professional advisors like accountants and attorneys. Interview several and find a consultant you feel comfortable talking to. Do they understand what you are trying to achieve? Are they willing to share their experiences and knowledge with you? These professionals can save you headaches and a lot of money.
error #5. Not using the cash-method of accounting
Under the “Cash Method,” you record business income when it is received in your bank account. And when it is paid from your bank account, you record the expense. Most of us use this cash method for our personal finances as it is very easy and less time consuming. It is also an ideal method for small and home businesses. Under the “accrual method,” you record business income regardless of when you get paid for the product or service you sell. And you keep track of when that expense is incurred, regardless of when you can get around to writing a check to pay for it. This accumulation method is very difficult for small and home-based businesses to sustain.
error #6. Not keeping track of your money
You need to track your income and expenses every month so you know where your money is going. You can do this yourself with inexpensive accounting software or download your monthly statements from your bank and credit card. Cash-flow is the life-blood of a small business.
error #7. Not doing enough market research
This is a very common problem in start-up businesses. Doing market research properly can take months and lots of research. 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 about your particular type of business. Talk to others in the industry.
error #8. Not doing proper marketing
Every business needs to have an online presence. No matter what business you are in, you need to be online. Free – Extensive and sophisticated marketing is now possible for free. Whether it’s a simple website, Facebook, LinkedIn, Tumblr or an online telephone-book listing, you need to 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 letterhead. Don’t spend thousands paying a company to build your website when you can build a great website yourself. Keep using that old computer until you have the cash-flow and real need for a new one. Before making a big purchase like a new truck or machine, consult your accountant.
error #10. Giving up too soon
The core of being an entrepreneur is endurance, drive and determination. Not giving up on your dream because of some bump in the road is an essential part of entrepreneurship. If you want to achieve any kind of success, you need to develop the guts to face the tough times. Don’t believe anyone who says starting and managing a business is easy or simple. It takes time, effort, faith and vision.
Please feel free to ignore this advice entirely, or listen to it and put it in the back of your mind as you start your new business. But don’t just let the fear of making mistakes, costly or not, deter you from starting your new business. Making mistakes, and understanding why you made them and learning how to correct or avoid them in the future, will truly be your greatest teacher. And it won’t hurt if you start a relationship with an experienced accountant and attorney who you can turn to for help.
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