Starting a small business can be one of the most exciting and rewarding experiences of your life. It can also be one of the most disastrous decisions you can ever make. These are the biggest pitfalls that most entrepreneurs face—and how to avoid them.
Mistake #1: Expecting Overnight Success
Starting your own business requires an immense amount of patience. There’s no such thing as a get-rich-quick scheme that actually works. Instead, you should focus on building a strong foundation for future success. As business coach Luis E. Romero writes for Forbes, “What most people call overnight success is actually the market suddenly realizing the value of a great product or service that had been kept in obscurity for too long while its creators refused to give up.”
Be patient, persevere, and constantly revise and refine your business strategy. You might not be successful right out of the gate, but if your idea is solid—and you haven’t made any of the other mistakes on this list—you’ll reach your goals eventually.
Mistake #2: Not Doing Your Homework
Congratulations on your great idea—now make sure nobody else has already had it. I’m always amazed by the number of people who decide to start a business without doing any market research first. For starters, make sure that you can claim the name you’ve chosen for your business. If you’re going to register your new company with state or county government agencies, you’ll find out quickly if someone else already nabbed that name. But beyond registering your business, you need to ensure that the website domain and social media handles are available.
For example, if you wanted to start a business called Linda’s Cakes but someone three states over already claimed the Facebook page and the Instagram handle, as well as the domain lindascakes.com, then you’re out of luck. That Linda might not be direct competition for your local bakery, but it’ll be very difficult to grow your brand and direct traffic to your business online. The fix might be as easy as rewording your name—Cakes by Linda, for instance—or you might have to start from scratch.
Mistake #3: Failing to Set Boundaries
Work-life boundaries are hard enough to maintain when you’re working for someone else. Millions of former office dwellers found that out the hard way over the last two years of remote work. When you work for yourself, it’s even harder. Many new entrepreneurs work themselves to exhaustion, especially in the early days of establishing the business.
While you might need to work overtime occasionally, remember that having time to rest and recharge is also important. Burnout is increasingly recognized as a serious problem that can have an effect on your health. Be a good boss and give yourself reasonable work hours and plenty of time off.
Mistake #4: Selling Yourself Short
For every small business owner who prices their products or services appropriately for the market, there are a dozen who lowball themselves. Okay, there are also one or two folks who try to charge triple the going rate, but it’s much more likely that you are undervaluing your work. Usually, this comes down to two fundamental issues:
- You didn’t do the appropriate market research and have no clue what to charge.
- You don’t feel confident in your abilities and are unwilling to ask for a fair price.
The first issue is an easy fix. Check out what competitors in your area are charging. If you can join a professional organization for your industry, that’s a great place to get a sense of what’s fair. Don’t trust your instincts or base your pricing on what you’d pay; instead, charge what the market will bear.
The second issue requires a little more work on your part. Specifically, work on yourself. You might need to take a class or get a certification to feel more confident. Some business coaches may tell you to take a few low-paying jobs for the experience but be wary of getting stuck with bargain-basement prices forever. As you establish a client or customer base, they’ll expect your prices to stay fairly consistent. If you start off undercharging, you might find it difficult to raise your rates later.
Mistake #5: Not Asking for Help
Even seasoned small business owners sometimes need to be reminded that they can’t do everything themselves. Often, entrepreneurs start businesses on a shoestring budget. There simply isn’t money to hire people to help out, and then they get used to doing things themselves. At a certain point, however, wearing all the hats stops being a money-saving measure. You’ll probably end up burned out if you don’t get help.
Beyond the struggle of trying to do everything yourself, there’s also the problem of ability. Sure, maybe you are an accountant, web engineer, graphic designer, supply-chain expert, social media maven, and sales rep all rolled into one. In that case, go for it. But for the rest of us mere mortals, there comes a time when you need to outsource the tasks that don’t play to your strengths. Thanks to the gig economy and the rising number of freelancers and side-hustlers, you can find skilled people to pick up your slack without taking on full-time employees. Best of all, the money you pay them is a business expense, which can ease your tax burden.
Read More: 15 Lucrative Side Hustles For Women
Mistake #6: Ignoring Your Taxes
Speaking of taxes, they can be the bane of any self-employed person or small business owner. Taxes are a lot different when you work for yourself. When you work for an employer, taxes are automatically deducted. You don’t have to think about income tax until April each year—and you don’t even have to think about withholding Social Security since your employer does that for you.
Now things are different. Most small business owners will need to file quarterly estimated taxes, which can be a real headache. In addition, you’ll need to keep good records of income and expenditures in case of an audit. I would strongly recommend that you hire an accountant who specializes in small business owners to help set up a filing system and handle your taxes. It’s worth the expense to avoid an audit—plus, they can help you take advantage of tax breaks that you might not know about.
Mistake #7: Not Keeping Records
Let’s talk a little more about records. I’ve met entrepreneurs whose idea of recordkeeping started and stopped with a paper bag full of receipts. That’s not exactly an organized approach to running a business.
Without carefully kept records, you won’t know whether you are turning a profit or losing money. You’ll struggle to file your taxes. You might even have trouble reordering supplies if you don’t maintain a list of vendors, part numbers, and prices.
According to Certified Public Accountant Rebecca Freedman, “In the world of accounting software, a small business is one that can use out-of-the-box software without requiring extensive customizations. As a business grows, its accounting needs become more complex, and a custom enterprise resource planning (ERP) system is often needed.” She offers an overview of the best accounting software programs for small businesses, which you can check out on Investopedia.
Mistake #8: Expanding Too Fast
Starting a small business is a little bit like gambling: don’t invest more than you can stand to lose. While I certainly hope that your business succeeds, part of success is building a company that can be scaled as it grows. If you’re starting off at your kitchen table, that’s nothing to be ashamed of. In fact, you may be in a better position than someone who rents a warehouse or an office space before the business can support the expense.
The name of the game in the early stages of your business is minimizing overhead. If you planned to make teapots, for example, then you might start off with a small pottery studio in your garage or rent space at a craft co-op. You probably shouldn’t spend thousands of dollars on a top-of-the-line kiln before you’ve sold your first teapot. Make a few pots, sell them at a local farmer’s market or on Instagram, then invest that money in the materials to make more pots or hire a graphic designer to do your business cards. Keep growing incrementally, reinvesting your profits into the business.
While businesses that provide a service, you might not have as much overhead to worry about. However, you can still run the risk of spreading yourself too thin. Don’t go after accounts that you can’t handle. If you bite off more than you can chew, you run the risk of generating bad word-of-mouth for your new business. Slow, steady, thoughtful growth is always the way to go.