As you can imagine, there are many mistakes you can make when setting up and running a new business. However, by steering clear of these common pitfalls, you can significantly increase your chances of success. With 20% of small businesses failing in their first year, your determination to avoid these pitfalls can help you move forward and be more successful than some of your peers.
To avoid being one of the 20% of failures in the first year or even 60% in the first three years, it’s crucial to steer clear of these major mistakes. By doing so, you can take control of your business journey and empower yourself to succeed.
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Not Registering Properly
Not setting your business in the right legal entity can have disastrous consequences. Do you know the difference between a limited company and a sole proprietor? If the terms and jargon are confusing, then you need to make sure that you are using a service or getting advice that can help you register a company correctly. This knowledge will keep you informed and prepared for the legal aspects of your business.
Spending Money Too Fast
If you are burning through money faster than you can earn it, or if you are not earning any at all, this can be the beginning of the end if you don’t reign things in. While having a pot of cash to do with as you please to get operational or support your business in the early days can allow you to make purchases you didn’t think you’d be able to, being careful with finances, especially in the early days, is a prudent move.
Frivolous spending, such as investing in unnecessary office decor or extravagant business trips, and poor cash flow are the number one reasons businesses fail and are most definitely mistakes you need to avoid if longevity and success are on your game card for your new business.
Incorrect Pricing Structures
Incorrect pricing can be a massive hindrance to your ability to make money. Underpricing and overpricing can both have undesirable consequences. Pricing too high can put potential customers off, while pricing too low can eat into any profit.
From an incorrect pricing standpoint, pricing too high initially can result in lower prices, making people more tempted to purchase. However, pricing too low initially and then reviewing and putting up the price can ruffle feathers and offend returning customers, so it is important you pay attention to the correct price for what you’re selling and be fair and realistic to avoid mistakes.
Skipping Contracts
While doing deals with buddies or those you know or trust without contracts right seems favourable for both parties, it can lead to significant issues down the line. Any agreement you make should be informed and solidified via a written, comprehensive contract to protect all parties. This can reduce the risk should one or all parties go back on what was agreed, and it is also essential for you to get funding and investments if you need them, as those supplying the funds will want to see proof of any partnerships and agreements for deals you have made.
