Many entrepreneurs follow the Phil Knight (of Nike, Inc.) philosophy of “Just Do It” when they begin new business ventures. While much can be said about the “courageous risk taker” approach to starting a business, some risk aversion is helpful. In reviewing Top 10 lists from a number of sources, we compiled the following as a “top ten” of the top ten:
- Not having a business plan. While lots of successful businesses begin without a business plan, there are even more that fail because they lack any plan. Sitting down with a consultant, lender, or relying on self-help books and even online resources (like those available on the Small Business Administration’s website) can help. To learn more visit here. The bottom line is, you need to plan, on paper, a business direction with contingencies for where it is you’d like to go with your ideas and how you plan to get there.
- Not having enough money to sustain the business in the first few years. Everyone can always use more money, but creating a realistic contingency plan for how you will financially sustain a business is a contingency you cannot afford to overlook. Many start-up businesses do not see profits in the first couple years. Many business owners opt to not draw a salary or to maintain other sources of revenue until it is evident that the business can sustain itself.
- Borrowing too much money. Relying mostly on borrowed funds to sustain a business can be a recipe for overwhelming pressure and stress on a new business owner. When the choice exists, rely on savings rather than credit lines and bank loans to fund your new business.
- Spending too much money. One direct consequence of operating without a plan is spending too much money on starting up the business. If you begin your business spending conservatively, you will maximize a ‘shoe string’ budget and manage unexpected fluctuations that all new businesses face in the start-up years.
- Hiring employees you don’t need. Few fail to anticipate all of the costs involved with hiring employees. Payroll taxes, wages and overtime costs, workers’ compensation insurance, sick and vacation leave, healthcare benefits, managing workplace claims, and providing incentives to make sure employees feel just as invested in the business goals and objectives as much as you do, can figuratively and literally break a new business. Outsourcing can, of course, help with managing costs and limit risks inherent to complying with local and federal laws. Also, hiring slow and smart will make sure that your employees take ownership in the success of the business versus just collecting a paycheck.
- Renting space you don’t need. Consider your business needs carefully. Operating out of your home, relying on virtual office space, or sharing an office could be the way to go initially. If these options won’t work, you may find turn-key office solutions work well for new businesses.
- Not reserving enough money to market your business. A business that no one knows about is doomed to fail. Therefore you have to set aside money to market and advertise your wares or services. Working with a marketing consultant to identify a marketing plan is ideal, but email/fax blasts, newspaper ads, window signs, business networking, cold calls, and developing business affiliates often hold the key to success for new business owners.
- Not knowing how to collect for your services or product. Some entrepreneurs are really good at rainmaking but lousy at getting paid. Collecting pay in a systematic way that assures consistency and limits the possibility of going without pay requires skills, confidence, and devotion to making sure that this part of your business does not falter. Outsourcing collections can prove comfortable for new owners, but when new customer/client relationships are being formed, you cannot afford to overlook supervising how money is collected by your business.
- Not protecting personal assets. Lacking proper insurance coverage, commingling business and personal funds, and generally underestimating the self-discipline required to manage your business as a separate entity can result in a merging of your business identity and personal life legally and practically speaking. If you decide to limit outside expertise in your initial business start-up, evaluating how you should protect your personal assets and business identity is not an area you should skimp on. Frankly, you can manage this aspect of organizing a new business by meeting with a good business insurance broker like PALM Assurance and Reliance Company. To learn more visit here.
- Having the wrong business structure. Deciding on whether to organize your business as a general partnership, corporation, limited liability partnership, or other business structure is an important step that requires guidance. While you may be able to form a business without a law degree, you may not be able to enjoy the full long-term protections and benefits afforded to different business structures without meeting with a legal and/or tax professional.
We at MMC specialize in partnering with start-up businesses and invite you to discuss your concerns and questions, free of charge, with our friendly business development specialists. Call today to schedule an appointment at (800) 899-MMCI (6624) to learn how our turn-key options can help ensure the success of your new venture.