introduction
What are some 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 the mistakes we make can be our greatest teachers, they can be time consuming and costly. So here I want to share with you my hard-earned experience and the insights I gained from my own mistakes in business judgment.
Mistake #1. Getting Started Without a Business Plan
If you are serious about making your new business a success, you must have a written plan. It can be as simple as one page to start with. Writing it down will force you to think about how you plan to make your business come alive as well as profitable. Force yourself to answer questions like “Who are my customers”; “Why would they buy from me?”; “How much will I charge for my products and services?”; “How will I spread the word about my new business?”. Be realistic about the costs of running your business. Your business plan will act as an ever-changing and evolving guide for you to follow.
Error #2. 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 sub-contractors, and bathroom cleaning, etc. But if you’re starting a business because you’re great at your specialty or service, and want to devote all your time and energy to doing this, perhaps a family member or spouse can handle most of the company’s management. This person should share your business vision and goals.
Error #3. Hiring Help Too Soon
Don’t hire employees until absolutely necessary. The cost of hiring financial help can sink your small business very quickly. When you hire someone, make sure they are hardworking and honest. Only hire the people you really need, who will have a positive impact on your business. At our small home business, we try to use as many sub-contractors as possible.
Error #4. Not Hiring Professional Help
Don’t skimp on hiring professional advisors like accountants and lawyers. Interview several people and find an advisor you are comfortable with. 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. Not Using Cash Accounting Method
Under the “cash method,” you record business income as it is received into your bank account. And you record expenses when they are paid from your bank account. Most of us use this cash method for our personal finances because it is much simpler and less time consuming. It is also an ideal method for small and home businesses. Under the “accrual method,” you will record business revenue as it is earned, regardless of when you may be paid for the products or services you sell. And you record expenses as they are incurred, regardless of when you will write checks to pay them. This accrual method is too difficult to follow for small and home based businesses.
Error #6. Not Tracking Your Money
You should 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 monthly statements from your bank and credit card. Cash flow is the lifeblood of a fledgling small business.
Error #7. Not Doing Enough Market Research
This is a very common problem with start-up businesses. Market research can take months and a lot of research to get right. You have to know who your competitors are, and who your customers will be. You have to 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 other people in the industry.
Error #8. Not Doing the Right Marketing
Every business should have an online presence. No matter what your business is, you have to be online. It is now possible to do extensive and sophisticated marketing at no cost – for free. Whether it’s a simple website, Facebook, LinkedIn, Tumblr, or an online phone book list, you need to be online.
Error #9. Spending Too Much Too Fast
If your budget is tight, 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 quickly build a great website yourself. Keep using the old computer until you have the cash flow and actual need for a new computer. Before a very large purchase, such as a new truck or engine, seek advice from your accountant.
Error #10. Giving up too soon
The main part of being an entrepreneur is having stamina, drive and determination. Not giving up on your dreams because of some obstacles in the way is an important part of entrepreneurship. Developing gut fortitude to face tough times is essential if you are to achieve any success. Don’t believe anyone who tells you that starting and managing a business is easy or simple. It also takes time, effort, belief, and vision.
Conclusion
Please ignore this advice completely, or listen and keep it in mind when you are starting a new business. But don’t let the fear of making mistakes, expensive or not, keep you from starting your new business. Making mistakes, and understanding why you made them, and learning how to correct them or avoid them in the future, will truly be your greatest teacher. And there’s nothing wrong with starting a relationship with experienced accountants and lawyers who you can turn to for help.