To succeed in business you need to have a passion for what you do, failures cannot defeat you, and you must be determined, optimistic and patient. Yet even with all these attributes some business owners still fail because they do not learn from the mistake of others. Below is a list of the top 10 mistakes made by business owners of small businesses and how to avoid them.
1) Wrong Business Entity Choice. Which to choose? An LLC? A Corporation? An S-Corp? Choosing the right type of business entity can affect everything from management and ownership voting to taxes and personal liability. Consult an experienced business attorney to determine which type of entity is best for your company.
2) Under Capitalization. Most new businesses are underfunded because the business owners underestimate the cost of start-up and running the business and have unrealistic expectations of revenues from sales. Most businesses take 1-2 years to turn a profit. A business owner should expect to invest double what he originally anticipates. SBA loans are a great resource for start-ups and other small businesses.
3) Lack of an Effective Business Plan. Starting a business without a business plan is like starting a trip without a map. If you do not know where you are going, you will never get there. You can purchase inexpensive business planning software from most business supply stores.
4) Failure to Market Effectively. Many small businesses waste money with ineffective marketing techniques. Be creative and utilize the internet and other forms of media. Make sure you have a good website that can be found. A marketing consultant may be beneficial as your business grows.
5) Lack of Necessary Agreements. An operating agreement, bylaws, employment agreements and buy sell agreements are essential to your business. In addition, many business owners are victimized by having their brilliant ideas and business concepts stolen by employees, independent contractors and even business partners. If you have employees, partners or consultants, these agreements are a must.
6) Over-expansion. Do not confuse success with rapid expansion. Focus on slow and steady growth. Grow regionally first, build your brand identity and then expand out.
7) Owners Lack Basic Accounting Skills. Educate yourself on how to balance your books. Well kept accounting is essential to any business. There are many self-help resources available and many competent accounts that can help.
8) Under Insured. Businesses often fail because they lack the proper insurance. Insuring a business is less costly than most people think. Obtaining proper insurance needs to be a priority.
9) Businesses Try to Do It All by Themselves. Most businesses do not take advantage of outsourcing. Being a jack of all trades and master of none can keep your business from getting off the ground. Know what you do well and seek help in the areas where you need it.
10) Wrong Choice of Professional Help. Many small businesses think attorneys are an unnecessary expense. However, many law firms offer special rates for small and start-up businesses. In addition, an experienced business attorney can help a business owner avoid many of the problems that it has seen other businesses make. Investing in legal advice upfront starts a business off on the right foot and protects against costly legal trouble in the future.