6 Big Mistakes to Avoid as a Business Owner
Most of us know at least one successful business owner, and there are numerous stories about multinational corporations buying startup businesses for millions. It may sound easy, but running a business takes commitment, effort, and time. To start things off on a firm footing, avoid these six mistakes.
Failing to Plan
Before opening, it’s important to have a business plan. A good plan evaluates the current market for your services and products, as well as the level of competition you face. Such plans also evaluate your income potential and compare it to the initial investment you’ll have to make. Because business plans take hard work, many owners skip them—only to wonder later why their businesses failed.
Being Impatient
We all know that Rome wasn’t built in a single day, and a successful business won’t be, either. Many of today’s small businesses remain unprofitable for the first couple of years, and it’s common to encounter obstacles after a few initial victories. Successful company owners know how to prepare, and they have the financial wherewithal (and patience) to get through troubling times.
Spending Too Much
Most small business owners find themselves in trouble because they don’t set a budget. It’s best to curtail your spending until your business becomes and remains profitable. Watch out for line items such as office or retail space, extra employees, and fancy equipment. Don’t take on more debt than you can afford to repay. As a new small business owner, you’ll likely have to sign personal guarantees on any loans you take out, and you’ll still be responsible for those debts even if the business fails.
Choosing the Wrong Business Entity
In the excitement of starting a company, new owners sometimes put off setting up a business entity. Or, they’ll quickly form an LLC (limited liability company) because they’ve heard that’s the easiest path to take.
However, choosing the wrong entity—or not choosing one at all—can have serious tax and legal consequences. Get some advice from a legal or financial expert, if needed, to ensure that you’re structuring the company in a way that will help you save while avoiding liability.
Not Getting Insurance
Though setting up a legal entity limits a business owner’s liability for the company’s obligations, it won’t protect you if there’s an accident or a lawsuit. Legal claims are often devastating to an owner’s personal and business finances. Consult a local insurance agent and get the right coverage.
Not Protecting Your Intellectual Property
If your new business produces software, music, or art, your creations may be eligible for patent or copyright protection. Additionally, the company’s logo and name may be eligible for federal and/or state trademark and copyright protection. The most successful business owners protect their IP (intellectual property) by registering it and monitoring its use by competing companies.
Closing Thoughts
It’s exciting to start a new business, but it’s important not to rush the process. If you want the company to succeed, take some time to form a business plan, and learn how to protect yourself. From there, all you’ll need is time, hard work, and patience.