Starting a business is difficult, but there are many areas you can focus on to ensure your business survives and continues to succeed beyond the first year. We asked several small business owners and executives to share the 20 mistakes new business owners should avoid when getting their companies up and running.
20 mistakes to avoid when starting a business
According to the U.S. Bureau of Labor Statistics, more than 18% of new businesses fail within the first two years of operation, and more than 55% of all businesses fail to survive beyond the fifth year. So how do you get your startup up and running successfully?
We reached out to hundreds of small business owners, growth strategists, financial advisors, legal experts, and business consultants to compile the 20 biggest mistakes startups make. That way you can avoid them when starting your own business.
1. Fear of failure
“The biggest mistake you make is being afraid of failure. Failure is the key to success, and jumping into fear is very positive for your future business. How you bounce back from failure and learn from it is what will lead to great success.” is the key to.” – Audrey Darrow, CEO of Earth Source Organics
2. Not having a business plan
“Too many businesses start without a master plan. If you don't have a plan, you're essentially planning to fail. You need to develop a business plan. It should include how much it will cost to operate, how much revenue you expect to generate, who will buy your product and why.” – Deacon Hayes, Founder of Well Kept Wallet
“It's important to be organized. Running a small business is like being the ringmaster of a circus. It's normal to have dozens of things happening at once. So I keep a daily task list. , which means I list the things I need to get done in order of priority. It may seem simple, but it's effective and will greatly increase your productivity.” – Tara Langdale Schmidt, Founder, VuVatech
4. Not defining the market and target audience
“A common mistake in startups is not taking the time to understand the market and customers they're building for. For technical founders, writing code may seem easier than talking to customers. But unless you receive constant feedback from your current or future customers, you have no way of knowing if you're on the right track. Even if you build a great product, business success often falls short. It is important to realize that there is no connection. Many companies find themselves focusing on a market that is too small to build a large business.” – George Deglin, OneSignal Co-Founder and CEO
5. Not applying for appropriate legal structure
“The biggest mistakes startups make are not registering their business, choosing the right business entity, and not protecting their intellectual property. These three areas are critical to starting your business correctly. , if not done properly, it will cost valuable time and money to fix.” – Heather Green Miller, owner of HGM Law Offices
We have a step-by-step guide to choosing the best legal structure for your business and registering your business trademark.
6. Trying to do everything yourself
“A big mistake entrepreneurs make is believing they are alone and trying to operate independently without relying on wise advice. Don't try to run your new business alone. Trust Find and hire experienced advisors to discuss your business ideas, strategies, challenges, and progress. Wisdom and power resides in a large number of advisors. Continue to reduce the likelihood of mistakes. We encourage four people to join the company as advisors to get their feedback.” – James Zimbardi, CEO of Rental Items
7. Partner with the wrong investors
“An important piece of advice that entrepreneurs should know before starting a business is that investors are more than just financial backers. The success of a company depends on the initial investors. , confident in the potential of the business without being presented with a proof of concept. Once a company completes seed funding, it will interact with investors who will look at the growth and sustainability of the business. ” – Krish Subramanian, Co-Founder and CEO, Chargebee
To successfully present your business idea to investors, remember that you're telling a story. You want to tell a story that sets a problem and explains how your startup will solve it.
8. Avoid contracts
“One of the biggest mistakes business owners and entrepreneurs make when starting a business is not honoring their contracts. Even the best relationships can be strained if there are no systems and agreements in place. It may make a noise and stop.” – Michelle Colon-Johnson, Founder of 2 Dream Productions
9. Hiring too soon
“So far, the biggest mistake startups can make is hiring employees too early. For example, hiring full-time workers when part-time makes more sense, or hiring subcontractors. It is very easy to run a small business using the services of part-time workers, subcontractors, and other professionals.” – Dixon Keenahan CEO Joseph C. Kuntz Jr.
10. Underestimating capital requirements
“Most entrepreneurs think they can get further forward at less cost. In their efforts to minimize equity dilution, they forget to factor in the unknowns, challenges, and delays along the way. Startup leaders tend to plan for best-case scenarios, which rarely come to fruition. This mentality can be attributed to leaders' aggressiveness and drinking their own Kool-Aid. But when it comes to capital, positivity is key. As a result, we often have to go back to the well for less-than-ideal raises.” – Wayne Schepens, Founder and Managing Director, LaunchTech Communications
11. Waste of money
“For a startup company with limited access to capital, mishandling money or being irresponsible with cash flow is a death sentence. I've made the mistake of spending money to fill the top of the funnel without having a clearly defined process to manage the bottom of the funnel. Instead of misusing good money and focusing on a niche. , trying to be everything to everyone is a surefire way to waste precious time and money, which is the lifeblood of a startup.” – Thomas Aronica, Founder and CEO of Biller Genie
12. Giving yourself the wrong salary
“Paying yourself too little or too much [is a mistake]. It is often easier to determine a new employee's salary than it is to determine an owner's or partner's salary. Consider paying yourself a percentage of your earnings. Whichever option you choose, make understanding your and your partner's salaries a practice and foundation for healthy expectations for your management team. ” – Diana Santaguida, Founder of Agency Andan
13. Underestimating your product or service
“You can't price too high just to gain market share, but you can't price too low either. If you're good, price like it! Many entrepreneurs start with good intentions. , give away things for free or do something for free to raise charity, community, or awareness. Be very careful about this, as you don't want to be known as the giver of giveaways. Please call the cashier first.” – James Chittenden, Founder, OneClickAdvisor
14. Booting up too fast
“One of the biggest mistakes startups make is launching before they're ready. The adage 'better done than perfect' is sound advice. However, to be “done” we need to make sure we can handle new clients. Once you open to the public and start acquiring customers, make sure you have systems and processes in place, including payment terms and processes, contracts, and communications, while maintaining your marketing strategy. Your backend processes must be waterproof before you start accepting clients. Otherwise, the cracks will be noticeable and look unprofessional. ” – Gems Collins, Business Coach, Gems Collins LLC
15. Expanding too quickly
“Once you start seeing success, it's easy to assume that growth will continue, but the best way to make the most of it is to copy and paste the formula you actually use. Expanding too quickly can have disastrous consequences. You may find that your period of growth is only temporary and you end up hiring a bunch of new staff but have no work to cover them. You may find yourself in a situation where you don't have the funds. That's why it's important to take a slow and steady approach to expansion and never try to get better results.” – Mark Webster, Authority Hacker Co-Founder
16. Not having proper bookkeeping processes in place
“Many startup founders start their businesses without a bookkeeping process in place. Good bookkeeping habits help them make smarter business decisions, identify opportunities early, and avoid unmanageable problems.” It helps you avoid problems before they become a problem. Understanding your finances helps you understand the financial health of your business. Also, good bookkeeping practices can help you avoid problems before they turn a good company into trouble. It also ensures that you are aware of any issues such as possible tax and insurance payments.” – Paola Garcia, Vice President of Pursuits
17. Not having a marketing plan in place
“Once you have successfully validated your startup problem, market, and idea, you need to develop a plan for how to get your first user, first 10 users, first 100 users, etc. You will need a detailed marketing strategy to acquire initial users, convert those users into paying customers, and make those customers very happy with your product to help you acquire more users (reviews, word-of-mouth , through referrals), etc.). – Sam Shepard, Cabana Co-Founder
18. Hiring the wrong people
“Each position you want to fill requires a different skill set and background. When you start, make sure you have a hard-working, well-rounded generalist who can do everything you need. [do]. As you begin to grow, consider hiring specialized talent for roles that require specialists. Don't hire a generalist when you need a specialist. Also, why not hire a specialist when you can hire a generalist? ” – Devin Miller, Founder of Miller Intellectual Property Law
19. Over-promise or under-promise.
“Don't overdo it in pursuit of revenue. For example, it's much more effective to tell a potential client that you can take on the project next month than to take on too much.” Not only will this avoid adding to your workload and making you miss your goals, but it will also make you look like you're in high demand. And that's always a good thing.” – Zhen Tang, Chief Operating Officer, AILaw
20. Underestimating business demands
“The biggest mistake startups make is underestimating the demand for the business. Documentaries and blogs about startups are giving people a sense of optimism because the information available doesn't explain the difficulties of starting a business. Because it glorifies the end of a successful business rather than emphasizing it. Because of this, people think that startups are easy and fun, when in fact it's quite the opposite. Startups cost most of your time and money. It can even destroy relationships.” – Esther Meyer, GroomsShop Marketing Manager
Creating a thorough business plan, hiring strategically, and taking financial responsibility are some of the most important steps to running a successful business.