Statistics from Bloomberg make poor reading for entrepreneurs. Eight out of 10 business owners will fail within 18 months. This goes for someone starting a lemonade stand as well as those attempting to join the illustrious ranks of the unicorn company.
So how do you make sure this doesn't happen to you? The same mistakes crop up time and time again when it comes to launching your first business; this guide shows you the seven mistakes you need to avoid.
1. Quitting your day job
(If you are unemployed, this point doesn't apply to you.) In the excitement of getting started, you may be tempted to tell your boss where to stick it. This is a mistake because you are risking everything on your success. It may be brave and it may be bold, but when the numbers are already against you, it is not an intelligent decision.
2. Doing too much too soon
Doing too much too soon is something many entrepreneurs suffer from. They are so excited to get started that they go forward with everything they have. But entrepreneurs commonly use up their mental resources too quickly and overextend. You have to pace yourself and be in this for the long term. Remember that creating a company is a marathon, not a sprint.
3. Believing in "Build it and they will come"
You may have a great product or service, but people won't find it on their own in today's crowded market. You need to go out of your way to have eyeballs on your product. An inferior product well marketed will always achieve more than a great product poorly marketed.
4. Not preparing your loved ones for your lifestyle change
You will quickly discover that running a business comes with big changes in lifestyle. You will be working longer hours. You may be working from home. And you have to accept that you will frequently have to seek out privacy. Make sure you notify your family and friends of your plans to ensure that they don't mess things up for you.
Let them know what they can expect from your new career path.
5. Failing to check your business name
So you've come up with a great name for your business?
You may have already imagined what it will look like on a sign. However, you may be disappointed to find out that someone has already trademarked it. It's not always obvious whether someone has trademarked something. It's your job to check it out. You can search online for business names registered with your state's secretary of state.
This will tell you what has been trademarked. You should perform a national trademark search as well.
6. Choosing the wrong business structure
A sole proprietorship may be the hassle-free option, but later in life it will become a hindrance. Every business structure comes with pros and cons. Pick the wrong one and it could land you in a situation where you are paying more tax than you need to. The liability of your personal assets will also change depending on what business type you opt for.
Make sure you speak to a professional to find out about the right type of business structure for you. It will do you the power of good.
7. Mixing personal and business finance
Whenever you start a business, you should make sure to open up a business bank account. This will keep everything separate from your personal finances. Don't think that you can mix them together and keep track of everything. It will only end badly.
Furthermore, you are opening yourself up to questioning from the IRS. It will question every transaction. Good luck trying to untangle the mess when you are selected for an audit.
A business bank account will mean less time spent going over your finances.
The way you run your company
The way you manage your business will make it or break it. A lot of business owners assume that they can simply create a great product or service and get results. This couldn't be further from the truth. The way you manage your company and the way you approach the business of finance will determine whether you achieve your goals.
It's best to start out on the right foot so you don't run into problems further down the line. You should be concentrating on important things such as getting your name out to customers.
How will you go about managing your company in light of this information?