Common Mistakes That Could Cost Your Business (and How to Avoid Them)
Story by Sam Email: firstname.lastname@example.org
Owning and operating a small business comes with a significant learning curve, and there are some mistakes that can throw you far off course and that may prove disastrous for your budding business. Check out these common and costly entrepreneurial mistakes and what you can do to avoid falling victim to them.
Failing to Plan
To paraphrase Benjamin Franklin, when you fail to plan, you plan to fail. Yes, creating a business plan is not the most exciting task, and not every entrepreneur understands the value of one, but the truth is that a business plan can serve as an essential guide and tool at every stage of business development. A well-written business plan can help you:
- Obtain much-needed funding in the early days of your business
- Remain objective when at a crossroads
- Develop a roadmap for how to structure, manage, and grow your business
Starting a business plan is not that hard. In fact, with the right resources, you can come up with a sound proposal in just 30 minutes.
Choosing the Wrong Business Structure
There are nine types of business entities
you can form, each having distinct advantages and disadvantages. Many entrepreneurs make the mistake of choosing a structure at random and without doing their due diligence. This mistake can have costly tax and liability consequences.
While you should not automatically go with the first structure recommended to you, seriously consider the benefits of forming a limited liability company. As its name implies, an LLC protects you from assuming personal liability for any debts or judgments your business acquires. It also has several tax advantages and is easy to form. You can form an LLC online through a formation service such as Zenbusiness and avoid hefty lawyer fees. Before you structure your business, though, check with local laws and regulations to make sure your business meets the legal criteria.
Undervaluing Your Products or Services
Whether due to lack of confidence or fear of competition, it is a common issue among startups to underprice
their goods and services. There are several reasons you should be careful not to do this.
First and foremost, pricing is a sign of value. Low prices can give the impression that the quality of the goods or services is also low.
Second, low prices can give you false hope. If your prices are far under fair market value, of course you’re going to make sales. However, such sales are a false indicator of your success, as they do not tell you how well your offerings will perform once priced at competitive rates.
Third, selling at low prices is not a sustainable way to run a business. While undervaluing your offerings can net quick sales, those sales may prove disastrous in the long run if you are not making a profit or are even selling at a loss.
Attempting to do everything alone is a mistake entrepreneurs make time and again. Whether help comes in the form of a consultant and mentor like Chris Edwards, lawyer, employee, or willing volunteer, take time to identify your needs now and to build up a team to set your brand up for success in the future.
Don’t become a small business failure statistic. Avoid these costly mistakes now and as your company heads into the future.