There are four key aspects a business needs to have if it’s going to be successful:
Precise financial knowledge
Well-thought-out business plan
The Bureau of Labor Statistics has found that 20 percent of businesses will fail before their first year is up, with another 50 percent failing by year five. No matter what kind of business you are starting, beginning and operating one is challenging all the way around. You are likely to make mistakes, but learning from them is the key to success as well.
What are some of the most common business formation mistakes you need to be aware of so you can avoid them and ensure a chance of success?
Lack Of Planning
Be sure to spend the money and develop a comprehensive business plan. You’ll want to do your homework and then come up with a business plan and budget. The plan should include one-year, five-year and 10-year expectations. Specify goals. A business coach can assist you in developing this plan.
Lack Of Research
Be sure to research the industry that you’re getting into. Is there a demand for your product/service? Who is your target audience? Use the services of a market research company to learn more about your potential customers/clients. Talk to industry leaders to get as much data as possible. You want to learn what traps to avoid, learning from their mistakes.
Avoid talking with family and friends, as they cannot be objective.
Failing To Form or Setting Up The Wrong Legal Entity
Many new business owners attempt to form their business using any one of the numerous online tools. This is a huge mistake, and you should always ask the advice of a business attorney in your state to learn what business structure you should list your company as.
Make sure you also talk with a tax advisor who can let you know about the relevant state and federal filings of each structure. Using their advice, you can find a structure your business should be formed under.
Handling All Business Matters
It would be nice if you could be a jack of all trades, but you can’t and shouldn’t. In the beginning, you might be able to do this, but as soon as you’re able, bring others in to assist you. The last thing you want to do is turn customers away because your service or product isn’t good enough. This can happen if you’re taking on too many duties and not concentrating on your service.
- Have a virtual receptionist answer and return phone calls and set up appointments.
- Use a graphic designer to design your website, logo and do the branding.
- Hire an employee to assist you soon after you’re off the ground. Make sure that you conduct a background check into their credentials and train them to ensure they understand what your brand is like and what goals you have.
Little To No Marketing or Website
Your prospective customers are going to turn to the Internet to find you. While social media pages are good to reach out to your audience, you still need a website and a sound marketing strategy to hook them. The idea is for them to find and raise brand awareness. Hire a marketing strategist to assist you with brand marketing, as this will produce leads to your business.
Make use of review forums like Facebook, Google, Yelp or the Better Business Bureau. Submit your website to the review forums, as it can help with two things:
- Bring customers to the business
- Customers can submit reviews
Do your homework on the best pricing strategy for your products/services. You don’t want to have a price that’s too high or too low. If a price is too low, the business could fail because you won’t generate adequate profit. Too high, and your scare off potential customers.
Consider the market for the product/service, and come up with the desired profit margin based on your sales or financial projections.
Businesses that do not enact proper bookkeeping practices will fail. Therefore, you need to talk with a tax advisor and learn what bookkeeping strategies to implement. With proper bookkeeping, you will keep your personal expenses and business expenses separate. You’ll also know when payments are due for taxes and insurance and understand more about the health of your business.
Lack Of Written Contracts
You should have an agreement with everybody involved with the business – employees, vendors, clients, etc. Be sure the agreement is based on terms you both can agree on. If you sell products/services online or have important website content, make sure these terms are on the website.
Ask a business lawyer to draft these agreements for you to use with all who do business or works for you. Ask a lawyer to look over any contracts vendors give you. When there is no written contract, legal problems could arise.
These are just a handful of common mistakes new business owners make when establishing their business. Learn as much as you can so you can avoid making these and other mistakes that could thwart your success. If you want to be successful, take your time and make a plan before you jump fully in. Always ask questions from those market leaders. And, most importantly, seek out the advice of a team of highly knowledgeable business attorneys.
At Pratt Law Group, we are well-versed in business law and can help you establish your new business. Call us at 972-712-1515 or 888-517-4575 to see how we can help you. We can set up a time to talk with you by phone, video conference or in-person about your business needs.