So, you’ve decided you want to start your own business. You’ve come up with the perfect idea for your startup, and you’re ready to get it off the ground. With a strong enough drive for success and the right approach, there’s no way you could fail, right?
Starting a business is not an easy task. If it were, everyone would do it. The most significant business hurdles are often caused by new entrepreneurs failing to recognize mistakes that could stop their startups before they even get off the ground.
With that in mind, here are five of the most common mistakes that could cost you your business and what you can do to avoid them.
1. Applying for a business loan without fixing your credit
Maintaining an excellent credit score is a vital part of starting a business. Most of the time, start-up costs will be more than what you have to spend, resulting in a need to take out a loan. Having a good or perfect credit score (700-800+) could allow you to take out more money for a loan and obtain lower interest rates.
This goal is easier said than done, however, and in many cases, new entrepreneurs could be hampered by poor credit. Fortunately, there are ways to improve your score during the initial stages of starting your business. One of the best opportunities to save yourself from poor credit is through second chance banking, which can help you come out of a challenge and work towards financial prosperity. It can also enable you to create an account with a banking service, even with poor credit, and use this chance to fix your score in the long term. Setting up a new personal banking account for yourself is a good idea too. So when you start making a profit, you can pay yourself by transferring money directly into your account.
It’s also essential to understand the different ways to pay off debt without mistakes so you don’t end up creating more problems for yourself. If you have a lot of debt that’s negatively impacting your credit score, utilizing techniques to pay off the debt will help clear it up in no time! The snowball technique is the most commonly used method, and it involves paying off the smallest debt owed first so that you have more money to pay off other, larger obligations.
Another popular technique for getting rid of debt is called the avalanche method. This process involves paying off the debt with the highest interest rate first. Paying this debt off allows you to save more money in the long run because you won’t be bogged down with high-interest rates and a ton of debt. Then you can easily move onto the other smaller debts you have.
No matter what method you utilize, you will eventually pay off your debts if you continue to use a technique. This accomplishment will not only be a great feeling; it will also improve your credit. On top of that, without the expenses of debt weighing over you, your business will be able to grow and thrive as you will be able to allocate more money and resources towards it.
2. Not establishing a budget
If you don’t know what your business budget is, at best, you’re going to feel overwhelmed, and at worst, you’re going to lose money quickly. Budgeting is time-consuming and requires you to be extremely honest with yourself about what you’re going to be spending money on.
There are many different ways to go about working on a budget, but the first step involves creating a spreadsheet that can track your expenses and total income. It’s also a good idea to get a friend or an accounting expert to help you with your business’s budget! If you’re not particularly strong in the finance department or just need a second opinion to help you be honest with yourself, having someone else work on a budget with you will help mitigate some of these issues.
3.Trying to do it all
The easiest and deadliest mindset you can fall into as a new business owner is thinking that you need to handle everything yourself. Unfortunately, it’s an extremely common mistake for fledgling entrepreneurs. That’s why you need to know how to prevent this type of thinking before it even starts.
It makes sense that many people try to avoid working with others when first getting started. Overhead and management costs in the initial startup phase can be costly, ranging from $2,000-$7,000, depending on the business’s size. Initially, it may seem like a good idea to avoid hiring anyone that would significantly increase costs.
However, it is essential to remember that getting help does not always mean hiring new people. Support can come in the form of business mentors or freelancers who can help you with your business. You can even ask around your circle of friends, and you’d be surprised how many people have experience with running a business. The more connections you make, the more insight you’ll gain before implementing your strategies into the business plans.
It is also important to remember that hiring is not a liability. In the short term, it may increase your costs, but in the long run, the network of employees you build will help strengthen your business and bring in more assets.
4. Failing to conduct research
If you’re creating a new business, never start it on an impulse idea. There are so many different factors to consider when beginning the entrepreneurial process that you shouldn’t ignore. Understanding your industry is one of the most critical aspects of your success. Going that extra step to analyze what you’re up against and taking a deep dive into the market you want to thrive in can help you even more.
For instance, It would help if you also considered buying a business with the help of an expert business broker to avoid making costly mistakes when starting a business. You can avoid common pitfalls, such as underestimating the work required or failing to evaluate the competition adequately.
If you begin your startup without knowing your competitors’ history and mission, it could result in your business’s failure. Here are some important questions to research before you start a business. Keep in mind that these are guidelines and that there’s a lot more you’re going to need to research before starting.
- Who is my competition? What are they doing that I need to do?
- What’s the market like? Is it highly saturated with high barriers to entry? Or will I be getting a head start in a young industry? Chances are it’s the former, but you should optimize your strategy for whatever market you’re planning to enter.
- What am I offering my customers that other companies can’t provide? Understanding your unique selling point early in the game will put you a cut above the rest; you will know what your strengths are and will be able to utilize those to your advantage.
- How are businesses in this industry marketed? Knowing the competition’s marketing strategy is vital to your success.
- What are they doing that I should be doing to market my business? What are they doing that’s holding them back from success?
5. Skipping over your vision/mission statement
Your company’s mission statement and vision can be easily overlooked when starting your business. After all, you’re not running a 5,000-person firm that needs a mission to motivate employees and drive your business to the next level. In truth, do not ignore your personal vision and how you define success. Think of your statement as a way to highlight the larger goals for your business. Where do you see the business in ten years? What will you do to achieve that?
By setting goals for your business, you’re setting important objectives for yourself, which comes with holding yourself accountable and setting high standards. After all, a company is a long-term investment; therefore, you need to treat it like a project that consistently challenges and motivates you. When times are tough, and you feel that success is too far out of reach, you can look to your mission statement to remind you why the struggle is worth it.
Not to mention, creating a mission statement and vision early on means that when you do inevitably grow your business, you won’t need to worry about presenting a mission statement to your investors and employees, since you will already have one made.
Remember, at the start, your business may not be making the profits you hoped for. In these initial stages, you will need to reduce spending in your personal life as much as possible to prepare for the high initial costs of a long-term investment. It will also require plenty of hard work and dedication to making your business successful.