According to the U.S. Bureau of Labor Statistics, nearly 1 in 5 businesses fail within the first year, and more than 55% of all businesses don’t survive past the fifth year. So how do you successfully launch and run your startup?
We have helped hundreds of small business owners start and grow their businesses over the years. Based upon our experience, we’ve compiled five of the biggest mistakes startups and early-stage businesses make so you can avoid them when starting your own business.
1. Not Making a Business Plan
Too many businesses start with an idea but without a written business plan. If you fail to plan, you are planning to fail. A startup should map out a business plan, even if it is just a few pages. Your business plan should serve as a blueprint or a roadmap for your business, detailing what the business concept is, what is expected for the business in terms of goals and objectives, and – most importantly – specifically how you will achieve those goals and objectives.
Check out: Guide to Writing a Business Plan
2. Not Filing For the Proper Legal Structure
Among the biggest mistakes startups make are not picking the right business entity or registering their business. The way your business is set up directly impacts its taxes, its ability to protect your personal assets from business claims and operational flexibility. If you fail to register your business, you might not even be legal to operate your business. These two steps are crucial to a business starting on the right footing, where, if not done properly, will cost valuable time and money to correct.
3. Trying To Do Everything Yourself
A big mistake entrepreneurs make is thinking they are all alone, and they try to operate independently without surrounding themselves with wise counsel. Don’t try to run a new business by yourself. You cannot know everything necessary to start and grow your business. The time and energy expended trying to figure it all out on your own is both exhausting and takes valuable time away from working on your business. Find and onboard trustworthy seasoned advisors to discuss your business ideas, strategy, challenges and progress. Focus on three key relationships first: an attorney, an accountant and a lender. They can help you avoid crippling mistakes.
4. Partnering with the Wrong Investors
Entering into a business with investors or partners can be a terrific way to combine the talents and skills needed to build a successful company. But if the partners cannot effectively work together or have different ideas about how to run the business, it can lead to damaged relationships or a failed business. If you’re thinking about taking on investors or partners, you should ask yourself if you really want a partner, what are your expectations for a partner’s contribution to the business, is your partner able to invest cash into the business and are they willing to commit in writing?
5. Skipping Over the Use of Business Contracts
One of the biggest mistakes an entrepreneur can make when starting a business is the failure to implement contracts. No matter how good relationships may be, whether with customers, vendors or employees, they can come to a screeching halt when systems and agreements are not put in place. For some businesses such as home improvement contractors, the law requires that you have a written contract that contains certain terms. Contracts are also a useful tool for protecting a business’s intellectual property.
Other benefits of contracts include:
To ensure all parties understand what they’re agreeing to and that there’s no room for misinterpretation.
Signing a contract demonstrates your commitment to the agreement and shows you are trustworthy, which helps in building strong relationships.
Producing contracts shows that you are professional and responsible.
Contracts are used as a reference if either party wants to check the terms at any point for guidance concerning a dispute.
Contracts offer legal protection in the event of a dispute and can be used in a court of law if necessary to enforce rights and protect your interests.
A clearly written agreement can help you avoid drawn-out disputes or even going to court at all, saving your business time and money.