Making the decision to open a business isn’t for the faint of heart. Not only does getting a business off the ground take a lot of time and money, but it’s also a significant emotional investment that can resonate throughout your life.
There’s very little room for mistakes during the early days of entrepreneurship as resources are limited. Here are five mistakes to avoid when starting a business that you should know if you want to be successful.
Setting Up the Wrong Business Structure
Your business structure is the foundation of your business. It determines how you will be taxed, your legal obligations, your level of liability in case of an incident and more. It’s important to start on the right foot and take your time evaluating what business structure will work for you. Choosing the wrong one can be costly and could break your business before it even gets rolling.
Many aspiring entrepreneurs will set up an S-Corp or Limited Liability Corporation (LLC) for their business, which is a hybrid between a corporation and sole proprietorship. The process to register this business is straightforward and the same in most states. The exception is a Florida LLC, in which there is no state income tax. It’s one of the many reasons Florida is a great place to do business.
Many entrepreneurs take out a business loan to get their idea up and running. However, many entrepreneurs also make the mistake of taking more than they need or spending freely without a solid budget in place. They also tend to overstretch, buying things they want rather than sticking to what they need.
When you get started, you don’t need the most expensive computers or piece of property if it won’t directly impact how you conduct your business. Know when to spend and when to save, planning accordingly ahead of receiving your loan and allowing for a buffer in case unexpected expenses arise. Pro tip: unexpected expenses always arise in business.
Not Planning All the Details
You can start a business without a business plan. You can make sales without a marketing plan. However, you are doing yourself a disservice by not having these plans in place. Consider the money you’re leaving on the table because you didn’t take the time to identify all your target markets. Think about how you will convey your brand to your customers without first outlining what you’re trying to say to them. Do you know how to do your taxes when you are self-employed? If not, go ahead and search for a good accountant or bookkeeper.
Take the time to plan the details. Create a business plan, a marketing plan, and a contingency plan for if things go wrong. Most entrepreneurs only plan for successes; they don’t outline what happens if they don’t get business or lose an important client. Learn from their mistakes and make a plan.
Not Getting Partnerships in Writing
Starting a business with your best friend might sound like an amazing way to hang out and make some money. However, it’s the downfall of many lifelong friendships. If you decide to work with family or friends rather than experienced business partners, you need to get everything in writing to protect yourself and them. Go beyond outlining expenses and the division of assets, and outline clear performance expectations for everybody involved.
Handling Everything Alone
If you’re an entrepreneur, you’ll probably put your heart and soul into the business. However, there’s only so much of you to go around. Just like it’s important to know when not to spend, it’s equally important to know when to invest in a contractor or employee to help you out. You may have incredible time management skills, but you’ll burn out eventually.
To be a successful entrepreneur, you need to be driven, knowledgeable, and logical. It’s a constant balancing act between emotions and critical thinking if you want to be successful. Do you have what it takes?