Top 10 Mistakes People Make When Starting a New Business
If you have recently launched your own business, congratulate yourself. Regardless of whether your venture succeeds or fails, you have achieved far more than the countless souls who dream of starting a new business but lack the courage to do so.
You will undoubtedly experience obstacles, frustrations, disappointments and failures that no one could have possibly warned you about. However, the following top ten mistakes are ones that you should be able to avoid.
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Mistake # 1 – Not Writing a Business Plan
If you take only one thing away from this article, make it this: Your business plan is your new business’s fundamental document. It is crucial for starting a new business. You will avoid making virtually every other mistake mentioned in this article if you take a few weeks, or even months, to write a detailed business plan before you do anything else. It will be useful not only with potential investors, but also for yourself.
Mistake # 2 – Doing Inadequate Market Research
You may think your product or service is revolutionary and the world cannot live without it. However, the world might think differently. If you fail to gauge whether there is a market for what you are offering, you could end up investing lots of money in a business that provides something no one actually needs or desires.
Mistake # 3 – Not Drafting Good Terms and Conditions
It is a myth that you need to be tough to succeed in business. However, if you’re likable and good at managing people these traits will take you far. It can also help if you can see the big picture and you have that elusive quality of “gumption.” These qualities, alongside a robust, expertly drafted set of terms and conditions, will protect your interests when you are dealing with clients and suppliers. Not everyone is good at confrontation. Let your terms and conditions be assertive on your behalf.
Mistake # 4 – Writing Your Own Commercial Contracts
Commercial contracts. How hard can they be, right? Just download a sample from the internet and you’re on your way. Unfortunately, it is not that simple. Your commercial contracts will form a basis for all your dealings with outside parties. They will aid you with protecting your intellectual property and setting out how and when you will be paid. A good commercial contract will state clearly how much notice you expect when a client or supplier finds it necessary to cancel.
An experienced commercial law solicitor will take you through every scenario that could apply to your business and draft your contracts accordingly. Although arranging for a solicitor will require a financial investment, it is a worthwhile outlay. It can help you avoid the possibility of expensive disputes later.
Mistake # 5 – Hiring the Wrong People
Your business’s most important asset is its people. Take your time finding talent who have the skills and experience you need to grow, as well as fit in with your company culture and values. To protect yourself from employee grievances and lawsuits, make sure you have well drafted employment contracts and staff handbooks in place from the outset.
Mistake # 6 – Choosing the Wrong Business Structure
Although it might seem easier and less expensive to start off as a sole trader, you could find it hard to secure suppliers and finance if you are not a limited liability company. Additionally, if you are going into a partnership, you should seriously consider having a partnership agreement drawn up. If you’re in the UK and you fail to do so, you might have to rely on the terms laid out in the Partnership Act of 1890. This is an archaic piece of Victorian legislation which, among other things not suitable for 21st century business, allows any partner to dissolve the firm without notice.
Mistake # 7 – Not Getting Your Pricing Right
Getting your offering right and then pricing it correctly is crucial to generating a profit when you’re starting a new business. Do your research on how much an item will cost you to produce. If possible, enlist some professional help. It is very difficult to raise prices once you have established customers. Managing their pricing expectations from the beginning of the relationship can save you a lot of stress in the future.
Mistake # 8 – Forgetting about a Marketing Budget
Money is always incredibly tight at the beginning when you are starting a new business. But you will find yourself getting immensely frustrated if you do not have money to market your product or service. Most networking events require you to pay a fee to attend. You will also need funds to create a website, as well as for business cards and leaflets. Not having a budget to get out and promote your product will severely curtail your ability to start turning a profit.
Mistake # 9 – Not Delegating
Once you reach a certain level, you will have to start letting go of some of the business functions. You will need to trust other people to manage those things for you. Trying to do everything yourself is disastrous for growth and may even result in you losing money.
Mistake # 10 – Underestimating the Personal Cost of Entrepreneurship
Working for yourself is incredibly satisfying and comes with a lot of advantages. You get to pick your hours and your clients. Further, your income is only restricted to the amount of time and energy you are prepared to put in.
However, there is no such thing as an overnight success. Most entrepreneurs work evenings and weekends, and when they are not working, they are thinking about their business. This can take a toll on personal relationships, so you need to have the support of your family and friends before starting a new business.
By taking heed of these top ten mistakes when starting a new business, you will dramatically increase your chances of success and ensure the growth of your new business.