Running a small business comes with many responsibilities. When starting a business, business owners often have great ideas, but poor execution. That’s why knowing common small business mistakes can help you. Knowing what not to do can help give you good ideas on what you need to do – not just for short term progress, but for long term success. Some mistakes that business owners make include:
- Not having written contracts
- Relying on poorly-designed partner or investor agreements
- Failing to realize how many government entities regulate different aspects of running a business
It’s impossible to provide a comprehensive list of mistakes, but we’ve put together 10 common areas where pitfalls can happen.
1. Not Taking the Time to Plan
A common startup mistake is diving right into opening a business. Taking the time to plan can help make sure you start your small business on the right foot. Doing your research and due diligence about great ideas can give you a good foundation for success when you open your doors for business.
Before starting a business, it’s a good idea to:
- Do market research
- Create a business plan
- File for the proper legal structure
- Buy the right types of business insurance
2. Forgetting to Set Goals for Your Startup
Opening a business requires hard work, but it doesn’t stop there. Make sure you have goals for your small business. This includes having both short-term and long-term goals to help your business grow. Setting clear goals means you have S-M-A-R-T goals that are:
- Specific
- Measurable
- Achievable
- Relevant
- Time-based
3. Trying to Do It All by Yourself
Successful entrepreneurs have a solid business plan and know they can’t do everything on their own. As your small business grows, you may have to expand your team. This can mean hiring partners or employees to handle the day-to-day operations. It can also include working with essential advisors to help guide your small business towards success.
4. Skipping the Contracts
Relying on verbal or handshake agreements is one of the most common startup mistakes and is a predictable source of legal problems for startups. It’s human nature to believe that “your word is your bond” and business dealings should be based on trust, but it’s almost inevitable that squabbles will come up because of different interpretations of verbal agreements.
If you want things to run smoothly, you need to create clear, professionally written contracts with all of your:
- Employers
- Vendors
- Investors
Remember that contracts help protect all parties involved in the agreement. So, don’t feel reluctant to ask for things to be put in writing.
5. Overspending or Underspending
It’s essential that you keep a budget for your business. A common mistake that small business owners make is not having a budget, which causes them to overspend and wastes valuable time and money. With a budget, you can track your business’ cash flow and understand how much you spend on a monthly basis.
If you don’t have a budget for your business, it’s not too late to start. Setting up your budget is easy, it just takes time. You’ll want to keep it as simple as possible and know which expenses to track, like:
- Payroll
- Office supplies
- Advertising
- Materials
6. Forgetting About Financing
Another common startup mistake is not researching financing for your small business. Whether it’s reaching out to investors to help with funding or looking into alternative ways to pay for something, financing can help your small business’ cash flow.
When it comes to startup financing, many business owners apply for a business loan or use personal financing or credit cards. They may also reach out to different types of investors, like angel investors or venture capitalists.
7. Not Marketing or Advertising
There’s only so much business you can get through word-of-mouth. Business owners can lose out on potential customers and revenue if they don’t have a marketing plan or advertise their company.
When it comes to marketing for startups, a good place to start is social media. You can create a business profile on different platforms and use them to promote your small business. Whether it’s offering a behind-the-scenes look at running a small business or offering giveaways or promotions, social media is an easy way to reach a broader network of customers.
Make sure you’re familiar with federal regulations related to marketing and advertising. For example, you could violate a Federal Trade Commission (FTC) regulation if you unintentionally send out a newsletter to someone who requested to opt out of the mailing list.
8. Undervaluing Your Product or Service
Your business ideas are valuable. After all, it’s what led you to start your small business. Undervaluing or selling your products or services at a low price can put your company at financial risk. When you did market research before opening your business, you likely compared your products and services to competitors. You can use these findings to determine if you’re undervaluing your business and how you can change it.
9. Not Protecting Your Intellectual Property (IP)
Protecting your intellectual property – and respecting the IP of others – is essential for your small business. If it’s necessary, make sure you’ve filed the correct paperwork for trademarks, patents or registered names. If you find someone is violating your IP, you can work with your attorney to address it.
Be aware that IP is a nuance topic that can cause your business to face legal risks. For example, let’s say you work for a tech company in Silicon Valley and you come up with an idea for an invention. You eventually leave the company and start your own business to bring the idea to life. But do you really own the rights to the business idea? Depending on the waivers and paperwork you signed when you got hired, your former employer can sue you and your business for the idea.
That’s why we’d recommend working with an IP attorney. They can help you better understand the law and address any potential IP-related issues.
10. Losing Focus
One of the biggest common mistakes new business owners make is losing focus. Whether it’s getting comfortable and coasting or losing interest in their company, it’s critical for you to focus on running your small business to help it grow and succeed. A good way to keep you focused is to set goals for your startup. This can help you monitor and track your progress towards short- and long-term objectives you set.
