Avoid These 7 Common Mistakes When Starting Your Own Business
If you’ve taken the leap and opened your own business, you may have initially relished being your own boss—but then you quickly realized being in charge carries its own set of headaches. Entrepreneurship is a lot smoother when you avoid the most common mistakes made by new business owners.
1. Not starting with a business plan
The first item on your to-do list should be crafting a business plan. The U.S. Small Business Administration offers starter templates you can modify for your needs. The essential elements of a business plan include a company description, market analysis and competitive research, information about your legal structure and management, a description of your product or service line, and a marketing and sales strategy.
You may want to include a SWOT analysis (strengths, weaknesses, opportunities, and threats) and/or some SMART goals (specific, measurable, achievable, relevant, and time-bound).
Starting with a clear plan will give you a roadmap to get started. A business plan will also be the first thing a potential outside investor asks to see.
2. Not taking care of the legal stuff
You want to start your business on the right foot, and that means incorporating in your state in the right manner. This can help protect your personal assets in case of financial trouble or a lawsuit. Do you need to protect any intellectual property by filing for a patent or registering a trademark? Are you hiring employees? With what state and federal laws must you comply? Consulting with an attorney might be expensive, but it can save you money in the long run.
You also need to make sure you’re carrying the right types of insurance, which may include coverage for general liability, errors and omissions, and cybersecurity issues. Again, these might seem like extra expenses now, but if you run into trouble, you’ll be glad you have made the investment.
3. Not signing contracts with partners or vendors
When you’re just starting out, and especially if you’re working with friends or family, signing contracts regarding business arrangements might seem unnecessarily formal. Get over it. If things go wrong—which, unfortunately, is all too common—both parties will be glad if there is a legal document to fall back on. A handshake is not good enough.
4. Handling money incorrectly
You probably decided to own your business because you loved your product or service—not because you enjoyed bookkeeping or keeping up with tax law. Unfortunately, being your own boss means arranging for the accounting, as well as paying the appropriate taxes. Again, this is a good time to call in the experts and consult a CPA.
5. Not investing in good marketing
If no one knows about your product, no one will buy it. This is another area you may need to outsource. At a bare minimum, your company needs a professional-looking website, as well as a presence on social media platforms. You also need to monitor reviews of your business on sites such as Google and Yelp. Working with a professional copywriter, website designer, or social media strategist will greatly improve your marketing.
6. Undervaluing your product
A loss leader strategy—selling your product or service at a price too low to make a profit—may initially attract customers, but it can hurt long-term prospects. Your new customers may feel like you’ve given them a bait-and-switch. This pricing strategy works best when you’re selling many products and can use the loss leader to draw customers in, not when the loss leader is your only product.
7. Burning out because you don’t take a break
When you’re the boss, work easily bleeds over into all aspects of your life. After all, you no longer have PTO. But don’t let yourself burn out. Be sure to set and stick to some boundaries between work and your personal life.
Owning your own business is an exciting twist to your career. Just don’t let yourself turn into the worst boss you’ve ever had.