5 Crucial Mistakes to Avoid When Launching A Business
Updated on July 2, 2021 | by Austin
Launching a business from scratch isn’t all fun and games. To prove this statement, a study by the BLS shows that almost 20 percent of businesses end up failing during the first two years of opening up, while around half completely close up shop after the fifth year. What are the reasons that these startups fail to survive?
How can you successfully launch and run your business with an iron fist for the years to come? If you’re ready to learn from your mistakes and avoid them at all costs, there is nothing that can stop your business from becoming the powerhouse you want it to become. Here are the mistakes you should avoid when launching a business.
1. Insufficient Startup Funds
Do you know the single biggest reason why businesses experience failure early on? Insufficient funds. Some businesses, such as a restaurant, require tons of money to get up off the ground. While others, such as a freelance writing business, can do fine without any startup cash at all. The amount of cash you’ll require at the start entirely depends on your business’s nature and the resources required to run operations effectively. While obtaining financing can be extremely challenging for new businesses, there are various ways to acquire funding. These include business loans, credit or debit cards, crowdfunding, personal savings, etc. So, consider hiring an expert manager or enroll yourself in a helpful course, like an AACSB online MBA no GMAT degree program to have first-hand education of business management while running the business at the same time.
2. Incomplete Planning
It is a common mistake to launch a business without completing the plans for it. Without a long and short-term plan that contains measurable objectives, goals, and deadlines, your business will have a difficult time finding success. A business with insufficient planning may not even consider growth, employees, vendors, inventory management, cash flow needs, and much more. All those are necessary elements of success. When you sit down and create a plan, it will force you to address such areas of your business. Furthermore, a business plan will allow you to present a case compelling enough to attract tons of investors.
3. Not Filing For Proper Business Registration and Legal Structure
Some entrepreneurs launch a small business and start by selling a few products to the public. They don’t think about organizing their business legally and avoid taking steps towards forming a legal business entity. In such a case, these businesses end up as sole proprietorships if owned by a single person or partnerships if owned by more than one.
While partnerships and sole proprietorships have their advantages, they do have a few drawbacks. For example, when you’re a partner or sole proprietor, you are liable for any and every debt your business incurs. Meaning, you’ll also be directly liable for business related-lawsuits. Plus, anyone who files a lawsuit against your business can go after your equipment and bank accounts. To avoid that, it is wise to form an LLC (limited liability company). Ultimately, for most startups, the entity of choice is usually an LLC, as it’s less difficult to form and run and gives great flexibility when paying business-related taxes.
4. Not Acquiring The Right Insurance
Insurance can be expensive if you don’t choose the right one. However, insurance will come in handy if something goes wrong with your business. Imagine if somebody gets hurt on your business premises, or your equipment gets stolen. If you have liability insurance, you’ll remain protected from lawsuits, while business property insurance will protect you from equipment theft or damage. That said, which insurance should you go for? Well, that depends on your business’s activities. However, you can rest assured that there is an insurance plan for every type of business out there. If you don’t know which insurance type you should apply for, get in touch with an insurance broker who can give you the right answers.
5. Not Separating Personal and Business Bank Accounts
When you form a corporation, partnership, or LLC, it is best to set up a standalone bank account for your startup. If you’re a sole proprietor, all your business profits will be automatically yours. You don’t legally require a separate business bank account, but it’s best to keep the business-related money separate from your personal money. When you open up a separate business account, you can deposit your income into it and make business-related purchases from it as well, saving you from mixing up any expenditures. Doing so will avoid any tax issues and allow you to keep track of all your expenses.
These are some mistakes that most entrepreneurs need to avoid if they want their business to survive. And now that you’re aware of them, you have to take them as lessons, avoid them at all costs, and take smart steps for your business.