6 Common Mistakes People Make When Starting A Business

Starting a business can be a time of great excitement. It can feel like you’ve got a clear path in front of you – but as anyone working in business knows, that clear road is often fraught with hidden risks.

In the hurry to jump right in to getting products or services to customers, business owners can neglect to take care of deceptively important things. While some are minor annoyances, others can quickly spiral into bigger problems that can seriously impact a business’ long term growth.

Nobody wants to run a failing business – so it makes sense to look at where others have got it wrong in the past. In this post, we’ll be going through 6 of the most common mistakes people make when starting a business, and how you can ensure that you avoid them.

Mistake 1: Not Making A Business Plan

Though the quote’s been attributed to many, it was originally Reverend H. K. Williams who said, “If you fail to prepare, you are preparing to fail.” That’s certainly true when you’re starting a business – and a business plan should be key to that preparation.

A business plan is a document that lays out a business’ goals in the short, medium and long-term. It describes a business’ offering, its place in the market, and what it’s planning to do in order to achieve its goals.

This includes things like:

•     How the company will be structured and managed
•     Marketing and sales strategy
•     Funding requirements
•     Financial projections for the next 3-5 years.

Yes, it’s a big document – and it can take a while to put together – but having this means you have a clear roadmap to refer back to if you ever get uncertain about where you’re supposed to be going (which, let’s face it, happens a lot in the early years!).

Mistake 2: Ignoring Financial Management

No matter what industry they’re in, all of the most successful businesses have one thing in common: they manage their money well.

In the excitement of wanting to get their business off the ground, founders may underestimate how much their business needs – whether that’s in terms of capital, or or other financial considerations like how much your product or service is worth.

You don’t need to be a financial guru to know that if a business is underfunded, or doesn’t make enough sales to reinvest, it doesn’t bode well for their future chances. There are lots of ways you can make sure your business has the money it needs to succeed – from loans to grants or even crowdfunding – but whatever route you choose, the best advice is to be realistic. Use that business plan you’ve prepared to plan to set out projected finances for at least the next 12 months – and make sure to factor in extra to deal with any unforeseen problems.

Mistake 3: Poor Business Record Keeping

Record-keeping is easy enough in the beginning. You’ve not got that much to deal with, so the pile is manageable. But fast forward a few months – the pile is more of a tower, HMRC is calling, and you can’t find that one invoice you need.

Keeping your records in shape is something you should get into the habit of doing early. Being on top of it not only means you’re less likely to be saddled with penalties for late or non-payments, but you can also take full advantage of what the government puts in place to let organisations like yours get reimbursed for the things they do everyday. In other words – it literally pays to keep good business records.

Mistake 4: Overlooking Legal Compliance

Like record keeping, the legal side of starting a business is in no one’s top tasks. But though the starting process is time-consuming, you could potentially lose even more time – and money – if you fail to get it right.

There are three main legal things that every business needs to take care of as soon as possible after setting up:

• Registering the business
• Picking the right business entity (partnership, sole proprietor, LLC…)
• Protecting intellectual property.

A business that hasn’t taken care of the above is like a house that’s been built on unstable ground. It might seem fine at first, but without a solid foundation, it’s only a matter of time before problems arise.

Mistake 5: No Physical Contracts

Speaking of things that seem fine at first – your agreements with clients. Unless you’re agreeing to the sale of land or property, a contract doesn’t have to be written to be enforceable – you just have to agree to provide services for the client in exchange for something of value.

Which is all well and good. But what happens if you and your client disagree on the terms of a verbally agreed contract?

Put simply, it turns into a game of “he said, she said” – with much higher stakes.

To be on the safe side, you should think about drafting a written client agreement that gets used whenever you enter into a contract. 

Mistake 6: Doing It All Yourself

It’s in the name – small businesses start small. This can be with one person, or a small group, but whatever their structure, there’s always a risk of one person taking on too much. On top of the mental exhaustion, we’ve already established that a lot of the important areas of setting up a business, like bookkeeping and legal compliance, are complicated.

There’s no shame in looking for extra support to share the load. They’ll be able to focus on the accounts, or the marketing, or anything else – leaving you free to focus on what you likely wanted from the start: to work on growing your business.

By being proactive and leveraging tools and support where possible, you have every chance of starting your business journey on the right foot.

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