When you’re running a business for the first time, it’s very much a case of learning the ropes while climbing them for your life. You’re not going to know everything there is to know, and sometimes you can make a mistake along the way. There are plenty of learning opportunities to take from your errors, but there are some errors, even right from the very beginning, that can make your life a lot harder. Here, we’re going to look at some of those errors and what you can do to avoid them.
Not Having A Clear Business Plan
If you want to make sure that your business has a clear direction from the very beginning and gets off to a flying start, then you’re going to want a business plan. This important document isn’t just important to show to potential funding sources to get the capital you need, it’s a blueprint that outlines your goals, target market, competition, funding needs, marketing strategy, and financial projections. It keeps you focused and makes it easier to secure investors or loans by displaying the fact that you do have a feasible idea of how to run the very business you’re trying to start. It can also identify problems like pricing strategies, operational barriers, or market fit long before they become expensive mistakes to make on their own.
Choosing The Wrong Business Structure
There are various potential legal structures that your business can fall into, and it’s important to do your research and understand them before you make your choice of which best fits your needs and plans. For instance, forming an LLC, S-corp, or sole proprietorship each comes with unique tax obligations, liability protections, and paperwork. Picking the wrong one can lead to higher taxes or personal legal exposure. Working with a business lawyer can help you get a much better idea of which structure fits the business you’re trying to create, as well as making sure that you go about the rest of your formation in the right way. The more you build up your business, the harder it can be to switch structure in the middle of it, so choosing the right one now can save a lot of heartache down the line.
Not Having A Founders’ Agreement
If you’re not starting your business alone but going into business with a friend, family member, or acquaintance, do not think that a simple handshake agreement is going to be enough. Without a clear founders’ agreement, conflicts can derail your venture. Outline each founder’s roles, equity, responsibilities, decision-making powers, and what happens if someone wants to leave. You don’t want someone able to leave the business with 50% of the equity, effectively freezing the other person’s ability to make decisions with the business.
Not Registering Your Business Properly
You have to be sure that you take every necessary step to get your business registered properly, as failing to do so can lead to hefty fines. You can also be denied the permits you need to operate and even be forcibly closed. Too many business owners skip researching what local or nationwide registrations they need to do, thinking it a time and money-saving shortcut, only to find themselves in hot water should anyone ever question their legitimacy. Depending on your structure, you may need an EIN, a business license, or state-level registrations. If you operate in multiple states, you may need to file as a foreign entity in each one. Without these registrations, you may not be able to legally hire people, collect payments, or even offer your goods and services.
Not Keeping Up With Regulatory Compliance
Regardless of what kind of business you’re running, in what sector, there are regulations that you’re going to have to follow. Registration isn’t the only step you need to take to make sure that you’re operating legally; you should take a look at any special licenses, zoning approvals, or health inspections you need to apply for, as well as other regulations that might apply to your business. You should put together a compliance plan as it’s not a one-time task. After all, renewals and new regulations happen regularly. A business lawyer or compliance expert can help you map out requirements relevant to your niche.
Not Safeguarding Your IP
Your intellectual property, including your business name, logo, slogan, as well as the processes and product/software designs you use, are all vitally important to your business. They can be major contributors to your success, but if you don’t protect them, someone else can steal and make use of them. Too many founders assume that registering a domain name is enough. It’s not. You need to protect IP through trademarks, copyrights, or patents, depending on the asset. Failing to do so could lead to lawsuits or losing your branding after investing time and money. Of course, it’s also important to do your own research and make sure that you’re not accidentally infringing on any IPs on your own as well, to avoid legal trouble down the road.
Failing To Plan Out Your Finances
Cash is the lifeblood that keeps your business running and the lights on, so it might be surprising to hear that many startups fail simply by running out of money, but it may be a lot easier to fall into that trap than you think. It’s not always due to sales, but just as often a cause of poor money management. Many founders fail to forecast expenses, underestimate startup costs, or neglect emergency funds. Without a budget, you can overspend on marketing, software, or staffing and be left scrambling for funds. Take the time to set up your accounting systems and use simple, even free, accounting software that can help you better track your cash flow and project your financial future based on your current spending and earnings.
Skipping Your HR Setup
If you want to welcome employees into your business and really get things up and running, then you should make sure that you are keenly prepared for the responsibility. Not having an understanding of employment law or the provisions you need to ensure for your team can lead to labor law issues down the line. This includes the need for a clear contract. Without clear terms, employees may claim unpaid wages, benefits, or wrongful termination. Also, failing to understand workplace rights can expose you to discrimination or harassment claims. Get your employment framework in mind before you start looking for new team members, meaning you need contracts, payroll systems, onboarding policies, and HR processes to address any issues.
Having Not Marketing Or Branding Plans
It’s not always as simple as “build it and they will come.” In an increasingly busy online business landscape where people have their attention tugged in a dozen different ways, it’s important you put some work into standing out amongst the rest. Even having a truly unique product or service that speaks to a real need in the market isn’t enough; you need to shout out about that fact as well. Relying only on word-of-mouth or a few social posts limits your reach. Start by identifying your ideal customer, crafting a clear brand message, and choosing the right channels, such as email, content marketing, SEO, and social media. Working with a digital marketing agency can help you get a working plan in order to hit these markets effectively, much quicker.
Not Building A Support Network
You may have the guts, skills, and willingness to build a business alone, but paving your way to success is going to be a lot harder without the right support, as well. A lot of founders tend to isolate themselves, locking into the grind without advisors, mentors, or other supporters, but this more often than not limits their growth. Building a support network means connecting with other entrepreneurs, finding industry mentors, and possibly joining incubators or online communities. These networks can offer advice, partnerships, funding leads, and encouragement during tough times. It doesn’t take away from your achievements to get a little help on the way up. Network and make connections.
Going Ahead Without A Business Lawyer
Above all else, you want to avoid any legal missteps your business might make along the way, and they can be numerous and varied. Whether it’s with your formation, drafting contracts, securing IP, or employing people, doing so with the help of a business lawyer can make sure that you’re not making any mistakes that could come back to bite you in the bank balance later. They can also act as a sounding board for decisions with legal consequences. Having a legal partner doesn’t mean you expect lawsuits, it means that you’re not leaving yourself totally defenseless and ignorant of the legal risks out there.
The fear of making mistakes or even the fear of failure should not stop you from going ahead with your business idea. However, a little extra prep and awareness of the potential mistakes out there can make that path at least a little smoother.