There’s a lot that goes into starting a business. It’s not as simple as just having a brilliant idea. Because of the complicated nature of entrepreneurship, there are numerous mistakes aspiring entrepreneurs make when starting a business. But there are five mistakes that are extremely common and equally critical.
Knowing and understanding these mistakes can help aspiring entrepreneurs better avoid some of these common pitfalls. We’ll talk about the first three mistakes today.
MISTAKE #1: Insufficient Start-Up Capital
Even the best ideas require cash. I know you hear success stories on Shark Tank about “bootstrapping the business with $600.” Still, the reality is that those who achieve success that way are the exception, not the rule.
It’s essential to keep in mind that there will always be more money going out than coming in in the beginning. This is even true with businesses that don’t require a lot of start-up costs.
Many aspiring entrepreneurs underestimate the start-up costs and overestimate how fast they will start making money. With all businesses, you will inevitably have expenses pop up that you never saw coming.
And the worst part of this crummy situation is that when you are cash-strapped, you make poor decisions because all of those decisions are driven by poor cash flow.
MISTAKE #2: Improper Business Organization
Creating a proper business foundation is vital when starting a new business. I’ve seen this too many times – people take shortcuts with the business set up.
Many aspiring entrepreneurs will take a DIY approach, follow a friend or family member’s advice, or utilize a cheap online filing service. This is relatively common for new business owners because they are trying to cut costs likely because they underestimated start-up costs – see mistake number one.
Typically, they fail to see the importance because they don’t understand it and don’t recognize the importance of protecting themselves. This mistake can be costly for the business owner.
If the business isn’t structured correctly, it can result in added expense, failure to realize tax savings, increased liability, and be problematic for a future exit.
MISTAKE #3: Failure to Create a Strategic Plan
Creating a strategic plan helps a business prepare for any roadblocks or obstacles that may come in the way. I know if talked about this in other blog posts and videos but it’s worth repeating because it is that important.
So many new businesses fail. When you don’t take the time to identify your definition of success, acknowledge the hurdles to achieving your goals, and create a strategy to overcome them, you will struggle.
If success is the ultimate destination, you must have a roadmap to get you there.
I’ll let you sit on these first three small business pitfalls. My goal as a small business consultant is to help you avoid these common mistakes. It takes a lot of balance and requires discipline, focus, execution, and support. If you have any questions or would like to discuss how I can help you build a successful business, please reach out to me today at kent@kentgustafson.com.
Schedule a one-on-one call with Kent to create a financial plan with lasting impact.
