Common mistakes when starting a business

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Starting a business is a big step and it's easy to make mistakes. To avoid these mistakes, we have compiled a list of the most common ones that people make when starting their own business.

Many businesses begin with a lot of flair and enthusiasm, yet fail due to various reasons. According to research, almost every business failure is associated with some common mistakes entrepreneurs make when starting. You find yourself falling into the same trap. However, your business can grow and thrive if you avoid such errors.

With so many reasons for business failure, it is only wise to ensure you do not make the same mistakes that cost other new business owners. If you're wondering what are the most common mistakes first-time entrepreneurs make so you can avoid them then read on.  Avoiding these pitfalls will help you to start and grow a sustainable business in the current environment.

Common mistakes when starting a business

Avoid these common mistakes when starting a business

Many mistakes can happen when starting a business. However, some of the mistakes are more common than others and new small business owners should be careful to avoid them. Some of the most common mistakes business owners make include:

  • Not treating your business like a business from the offset
  • Thinking it will be easy
  • Skipping a business plan
  • Overcomplicating the business plan
  • Choosing a bad partner
  • Inadequate financial preparations
  • Not doing enough research
  • Duplicating ideas
  • Ignoring your competition
  • Not focusing on your target audience
  • Not providing customer satisfaction
  • Foregoing marketing
  • Ignoring record keeping
  • Overlooking the administrative side of business
  • Forgetting to get a business license
  • Using a personal bank account for business
  • Not taking the time to ask for help
  • Setting unrealistic expectations

Read on as we discuss these in more detail so you can avoid these new business mistakes.

Not treating your business like a business from the offset

The biggest mistake you could make is not taking your business seriously, especially if you are starting out at home or in your spare time alongside a full-time job. Many people begin a home business, but they think of it as a hobby and nothing more. If you treat your small business as if it is a hobby, then this is all it will ever be. It will never be anything more than this, so be mindful and make sure that this is not the case with your venture. 

Thinking it will be easy

You should never underestimate how hard it is to start a business. It takes a lot more than just an idea and some money to get started in this industry.

The biggest mistake that people make when they start their own business is not being aware of all the risks involved with doing so. They don’t realise how much work it will take or what they will have to sacrifice in order to keep their company afloat and successful - like time with family, sleep, or even their personal finances.

Underestimating the demands of business is probably one of the biggest mistakes all entrepreneurs and wannabe-business-owners make!  As I once heard someone say at a business networking event "I always thought I'd worked hard, until I ran my own business!"

Not having a plan for how your business will generate revenue

To help your small business grow and get off on the right foot, you need to first treat it as a proper business.  It can be exciting coming up with a business name and logo, but there's a lot more to running a business and you need to have a plan in place.  

The business plan is a document that outlines the strategy for a company and is often used to describe the company’s mission, goals, and objectives and how the company will achieve these.  The first step in creating a successful business plan is to identify the mission of the company. Once you know what you want your company to do, you can create a roadmap that will take your company in that direction.

It is very important to have a plan for how your business will generate enough revenue to be profitable. It might seem like you're just starting your business, but it's never too early to think about this.  If you don't have a plan for how your business will generate profitable revenue, then you might be making one of the most common mistakes that entrepreneurs make. This is a big mistake that could lead to your business failing before it even starts.

This plan should outline the different ways you will make money and the risks associated with each. Without a plan, it can be difficult to know what direction to take your business in and how much time and resources to invest in various areas of the company.  If you don't know where to begin, you'll be able to find a business plan template and pointers online. 

You need to realise if your plan is feasible. There’s no point in planning to open a pound store on eBay if you’ll be at a loss once you factor in shipping costs, eBay fees, payment processing fees and the cost of the item.

It's so important to have a business plan from the offset which covers exactly how you will be profitable, among other business ideas.  Without a plan in place, you will have no idea what your business is about or where it's going. You need to know who your customers are and what their needs are before you can create something for them.  Not having a business plan may leave you susceptible to random ideas, which are not suitable for the business or costly mistakes.

Overcomplicating the business plan

Although a business plan is important, a new business owner should not overcomplicate their business plan.

Some startups spend too long on these starting tasks instead of just getting the business up and running. Just start with the basics, create. a solid foundation and build up from there.

A simple and straightforward business plan is best because it's easier to keep track of and it's easier to make adjustments. A plan that is based on the future, not just the present. A plan that is flexible and can adapt to changes in the market or economy.

Choosing a bad partner

The first thing you need to know is that you do not need a partner to get started. However, sometimes you may need a partner, depending on the company's size you want to start. This comes with a lot of pressure, especially on decision-making, financing, organisation, and other aspects determining how the business is run.

Your business partner should be someone that shares the same vision and passion as you. You need a partner you can strategize with and make changes without a fight. However, remember that disagreements are normal in a partnership. You just need to find an amicable solution to solve your issues. You should ensure you choose your business partner very carefully. Find someone who is intellectually competent to help you make sound business decisions.

And always make sure you have a signed written agreement with your partner!

Inadequate financial preparations

It is common for a start-up to ignore vital financial planning and how much capital is needed to start and run the business. This may lead to inadequate financial resources you need to achieve your business objectives. Some uncertainties may require emergency financing. Failure to have this in mind may lead to business closure.

To avoid this problem, you have to ensure you are financially prepared by outlining all your projections for the first year and five years. This will also help you secure investment if raising capital is required to get your business dreams off the ground. Once you have your finances sorted out, you may need a company formation strategy, depending on the planned structure of your business (LLC: limited liability company, PLC: public liability company, self-employed, sole trader/sole proprietorship, freelancer, limited company, partnership, charity, non-profit), and platforms like 1st Formations will help you get started.

Not doing enough research

You may be under the impression that you are setting up the best business ever, but you have to remember that sometimes, there just isn’t the market for it. You can’t make the kind of money you want to make. If you want to avoid this, then you have to put in the work and do market research to make sure your business is a sustainable idea before you get too involved investing time and money.

Duplicating ideas

Have you seen another business doing well, and you feel you can also start a similar business successfully? Think again. Most start-ups fail because they copy what other people do in the business environment.

Authenticity is vital if you want to grow and survive in the competitive business environment. As much as the environment is saturated, you can always find a gap and fill it. Therefore, you do not have to copy what your competition is doing. Brainstorm to find unique ideas. You can do market research to determine what clients want and how you can provide something more than the competition. Such business gaps should give you a unique business idea and a competitive edge.

Ignoring your competition

Another mistake many start-ups make is to ignore the competition. This is one of the fatal business mistakes you can make. The business environment is already saturated. And the chances are that what you want to do is already in the market. The pie is only big enough. Because the market is already saturated, you need to research competition to determine if you can survive.

Researching your competition is essential if you want to gain a competitive edge in the business environment. Find out what your competition is not doing right and capitalise on it. Additionally, you can start a customer survey to determine what clients love and are missing in the market. This way, you can tailor your products and services to meet unique demands. 

Not focusing on your target audience

This is a huge mistake, to say the least. When you are just starting your company, you may feel as though everything is about you, your brand, your business.

It's not all about you.  It is about your audience as well and it is your job to make sure that you are able to provide them with the services and products that they need. You need to know their pain points and how your business can help solve their problems.  You may know why your new business is great, but let your customers know why it is great for them.

You also have to build a relationship with your customers so they know they can trust you. If you can get to this point, then you will be able to really benefit yourself. If you can take the time to understand their needs, then this will help you to cater for them much more efficiently.

Not providing customer satisfaction

As well as knowing and understanding your customers and your ideal target audience, you also need to listen to their wants and needs when it comes to your business and how you serve them.

For example, maybe you run a beauty salon from home and you want your customers to pay in cash.  In this day and age, most people don’t carry cash around with them.  It can be an inconvenience to have to visit a cashpoint to use your business.

If you know that your customers like to pay on card, then now would be the time for you to get your own credit card reader.  Or if they want to pay by bank transfer then let them do this.

The same goes for communication.  People are busy and often distracted and need a way to contact you that is suitable at what particular moment.  If they have a hectic houseful with noisy children then ringing might not be their preferred option, instead, they may prefer email or messages.  Or if they’re rushing between appointments and out and about a lot, they might prefer the convenience of a quick call.  Offer a variety of solutions for contacting your business from messaging, phone, email or social media.  And definitely avoid chatbots!  Make your contact messages clear and accessible.

Foregoing marketing

Starting a business and hoping that customers will walk through the doors is a grave mistake you cannot afford to make. Why would they even come if you do not attract them with offers and campaigns? That is where marketing comes in.

Many start-ups and small businesses do not invest in marketing, which becomes the beginning of their failure. A marketing plan is essential if you want your business to grow. Therefore, you need a marketing strategy that works for your company. Set up online marketing campaigns that draw customers to your business.

Ignoring record keeping

Starting a business is not a walk in the park. Expect long hours, moments of self-doubt, and mental breakdowns as you strive to get deals over the line. That is not to say multitasking to complete tasks within the set deadlines. Therefore, many entrepreneurs decide to put off various tasks, such as record keeping and budgeting. This is a business mistake you should never make when getting started or at any stage of running the business. Financial record keeping is a vital business requirement if you want to grow and survive.

You will always need a point of reference when you want to make business decisions. The added complexities that come with the need for financial reporting and accounting make it even more important to keep proper records. Additionally, financial records can help you get financing and attract investments.

Overlooking the administrative side of business

To be successful in business, it is important to understand the importance of the administrative side of things. This includes everything from managing paperwork and contracts, receiving and sending emails, hiring and managing employees, updating accounts and bookkeeping, and even maintaining your company’s social media presence.

A business owner should not overlook the administrative side of their business. They should have a plan for the day-to-day tasks and delegate them to employees, freelancers or contractors if available, or ensure these tasks are scheduled at an appropriate time so they are not forgotten.

Overlooking the administrative side of their business can lead to several issues including: not being able to keep up with paperwork or contracts, not responding to customers/clients quickly enough, not posting enough on social media accounts and not staying on top of business tax records and finance.

Forgetting to get a business license

In different locations there are different rules for different types of industries. For example, if you want to set up a business at home then you will need to check if you have permission to run a business at home.

Next, you’ll want to see if your business type requires a business licence. Some industries require you to apply and pay for a business licence BEFORE you start practising.

Forgetting to get a business license can lead to fines and other penalties. Your local government or council website will advise on whether you need a licence for your industry and how to apply.

Using a personal bank account for business

It's not uncommon for new business owners to use a personal bank account for their business. It's a mistake because it can be difficult to separate personal finances from professional ones, which can lead to money management mistakes and tax issues.

It is always a good idea to start a new business with a separate account. This will help you keep your personal and business life separate and will also be easier to manage your expenses.

Not taking the time to ask for help

It’s really difficult to do everything by yourself when starting up a new business venture, especially as it grows and the workload increases. You might need help with different aspects of your company like finances or marketing strategies which is why it’s important to plan ahead and establish the right connections.

Hiring an accountant to deal with the financial side of your business, a marketing team to increase awareness of your brand and a virtual assistant to handle emails (once your company can afford this) can allow you to concentrate on the areas of the business you prefer for better business growth.

You can research why businesses choose to outsource certain tasks and whether this is the right strategy for you.

Setting unrealistic expectations

When you start up a new business, it’s important not to set too high of expectations so that you don't get discouraged if you can't meet them. It’s great to have an aim and aspiration, but ensure it’s realistic. Making your first million within a year is a pretty unlikely goal and most people won’t achieve this!

The bottom line on common business mistakes to avoid as a startup

Although it's not rocket science, starting a business is not always as easy as it seems. There are so many things to consider before you even start. You have to have a plan for how your business will generate revenue, what type of customers you want to attract, and what your marketing strategy will be, just to name a few.

These are a few common mistakes startups make. Now that you know what not to do when starting a business, you can ensure you avoid making some of the biggest mistakes and instead put your best foot forward for startup success

However, don’t let any mistakes put you off, simply learn from them and grow.  Entrepreneur mistakes and failures are a part of the journey.  No business is ever 100% perfect from the get-go.

To round up, the common mistakes to avoid when starting a new business are:

  • Not treating your business like a business from the offset
  • Thinking it will be easy
  • Skipping a business plan
  • Overcomplicating the business plan
  • Choosing a bad partner
  • Inadequate financial preparations
  • Not doing enough research
  • Duplicating ideas
  • Ignoring your competition
  • Not focusing on your target audience
  • Not providing customer satisfaction
  • Foregoing marketing
  • Ignoring record keeping
  • Overlooking the administrative side of business
  • Forgetting to get a business license
  • Using a personal bank account for business
  • Not taking the time to ask for help
  • Setting unrealistic expectations

 

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