Familiar Pitfalls: Avoiding Mistakes in Business Ownership
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According to studies, over 20% of small businesses fail within the first year and over half within the first five. Put simply, entrepreneurship is full of risk, but if you’re able to recognize the pitfalls early on, it’s possible to minimize the chances of failure and maximize your chances of success. Here’s what to look out for.
Legality
When you’ve just founded a new business, one of your top priorities should be to keep everything above board - that is to say, legal. Start by addressing the subject of licensing - your local government will have requirements that you must adhere to, else you’ll end up paying fees. Depending on your state, the costs can deviate but the requirement to have one is constant throughout the country. If you’re forming a Limited Liability Company (LLC), it often makes sense to go through a formation service - experts can help you to navigate regional regulations and avoid hefty lawyer fees. As an LLC, Arizona promises reduced paperwork, provides tax advantages, and, of course, reduces your own personal liability.
You should also pay close attention to trademark infringements. Before naming your business, brand, or products, you’ll need to carry out plenty of research to ensure that no other entity owns the trademark to a name. Infringement, even when honest, can land you in legal hot water (especially if your business is doing well).
Planning
One of the most common mistakes made by new business owners relates simply to planning and organization. It’s easy to get caught up in the regular day-to-day running of a company but you should always aim to keep one eye looking ahead - this means writing a solid business plan, which covers budget, market analysis, product development, marketing strategies, and clearly outlines the nature and definition of the business itself for potential investors. Your business plan is not only an asset for use in pitches, it’s also your roadmap to success.
If you haven’t already, it may also be necessary to move your operations into the digital space. This is important from an operational point of view as it allows you to easily store and control data, schedules, timesheets, budgets and more. Accountancy software, for example, has been refined to a greater ease of use so that business owners can manage their own finances (up to a certain point) without having to hire an expert. In a nutshell, failure to adapt to digital solutions can result in disarray.
People
Early on in the lifecycle of a business, the people you hire and associate with take on a role of increased importance. If you’re hiring new employees, it’s vital that you take your time to vet applicants properly and ensure anyone that you’re bringing on board is going to contribute positively. As a small business, you will be tempted to forego recruiters (and this may be an important cost-cutting strategy) but this means you must also commit extra time to browsing resumés, checking references and carrying out thorough interviews, ensuring their credibility and attitude is aligned with your own.
The same level of diligence (or even more so) should be applied to anyone you intend to partner with. If you’re pitching for investment, remember that this is a shared venture and the individuals you’re bringing on board should offer more than just credit. A good investor brings expertise and won’t diminish the company in any untenable ways. The same is true for any sponsorship deals or cross-company partnerships - especially on a micro level, you want to protect your brand and try to avoid any risky alliances.
For small business owners, caution and a conservative mindset is often a huge advantage. If you’re able to plan ahead, stay out of legal trouble, manage finances efficiently and manage carefully who you allow into the business, there’s no reason why you can’t dodge the litany of mistakes that so often sink new entrepreneurs.
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About Sam Marcum:
Sam Marcum created bizbenefitguide.com which aims to help organizations thoroughly-articulate their benefits with brief, engaging multimedia material and genuine thorough reviews of health insurance companies. The site combines deep expertise in video presentations to create solutions for employers, consultants, financial institutions, and CDHC partners.
