Steer Clear of These 7 Blunders Typically Regretted by Novice Entrepreneurs First-Time Around
Where's the fun in starting a business if you don't have a generous serving of excitement mixed with a healthy dose of "Oops, I wish I knew this earlier?" That's right - the entrepreneurial life is a mix of a thrill ride and a trial by fire. But hey, some mistakes are part of the learning curve. There are others, though, that are entirely avoidable with a bit of know-how.
Let's dive into the seven most common blunders new entrepreneurs commit and learn how to steer clear of them from the get-go.
Table of Contents:
- 1. Procrastinating on Legitimizing Your Business
- Why It Matters:
- 2. Commingling Your Personal and Business Finances
- What Can Go Wrong:
- 3. Neglecting a Basic Business Plan
- Key Questions Your Plan Should Answer:
- 4. Undervaluing Your Services or Products
- The Cost of Undervaluing:
- 5. Striving to Do it All Alone
- Where to Get Help Early:
- 6. Igno(r)ing Legal and Financial Responsibilities
- Common First-Timer Mistakes:
- 7. Focusing On the Wrong Things
- What Deserves Your Attention Early On:
- Bonus Tip: Don't Delay Forming Your LLC
1. Putting Off Legitimizing Your Business
Starting your business casually, collecting payments through personal PayPal, using your name instead of a brand, claiming you'll "figure it out later"? Bad idea. The "later" often turns into "never" once something goes wrong.
Why It Matters:
- You may be held personally accountable if a client sues, doesn't pay, or causes damages.
- Clean records are necessary for claiming business deductions to minimize taxes.
- Potential clients may view you as unreliable or unprofessional without a business name or official presence.
Smart Move: Create a Limited Liability Company (LLC) early on. It not only offers legal protection but also helps maintain a clear line between your personal and business life. You can easily create an LLC through affordable services designed even for beginners.
2. Combining Personal and Business Funds
Mixing your personal and business funds often starts innocuously with using your debit card for a business expense "just this once." However, over time, your records become an unmanageable, confusing mess even an accountant would struggle with.
What Can Go Wrong:
- You can't track expenses accurately, leading to poor financial decisions.
- Risking piercing your corporate veil as an LLC - personal assets may be put at risk.
- Overlooking tax deductions, leading to higher taxes.
Fix It Now: Open a dedicated business checking account and credit card early on. Keep everything separate to maintain clear financial records essential for stability and growth.
3. Skipping a Basic Business Plan
You don't need a thick, comprehensive business plan – you need a simple, clear one. Having a plan provides guidance, direction, and focus when distractions occur, helping you make informed decisions.
Key Questions Your Plan Should Answer:
- Who are you helping?
- What problem are you solving?
- How will you make profits?
- What will success look like in 3, 6, and 12 months?
While a one-page summary may suffice, a plan brings clarity, focus, and direction to your entrepreneurial journey.
4. Selling Yourself Short
"I'll start low and raise prices later." Sounds familiar? Many first-time business owners undervalue their service or product to gain initial customers. However, setting prices too low can undermine credibility, make price increases difficult, and strain your resources.
The Cost of Undervaluing:
- You work harder for less money.
- Clients expect bargain-basement rates, making it difficult to raise prices later.
- Poor quality perception, even if your service outperforms competitors.
Winning Strategy: Research your market, calculate your costs, and base your prices on value instead of insecurity. Be fair from the beginning, and adjust prices strategically based on demand.
5. Trying to Do Everything Alone
Being self-reliant is great. But taking on too much can lead to burnout, lowered productivity, and subpar results. First-time business owners often hesitate to delegate or seek help, but doing everything on your own slows you down.
Where to Get Help Early:
- Hire a virtual assistant for admin tasks.
- Use LLC formation services to handle legal paperwork.
- Outsource branding, legal templates, or web design.
- Join business communities for feedback, advice, and support.
Pro Tip: Don't think you're saving money by doing everything yourself. You might be spending more time and energy than necessary on minor tasks.
6. Ignoring Legal and Financial Responsibilities
There's a tendency for new entrepreneurs to push aside the "official" stuff like legal requirements and financial planning. But these tasks don't disappear with delay – they pile up and create unnecessary risks.
Common First-Timer Mistakes:
- Not obtaining an Employer Identification Number (EIN).
- Missing tax deadlines.
- Using unclear or nonexistent contracts.
- Failing to collect and report sales tax (when applicable).
Strategic Start: Get your business legal basics in place early. Filing annual reports and staying compliant are part of the package when you form an LLC. Establish these routines to minimize future headaches.
7. Focusing on Non-Critical Tasks
Time optimization is crucial for new business owners. It is tempting to spend weeks designing the perfect logo, tweaking your website layout, or exploring different software options. While these activities might feel productive, they delay the actual work of establishing and growing your business.
What Deserves Your Attention Early On:
- Engaging with potential customers, testing ideas, and iterating based on feedback.
- Creating and delivering your product or service.
- Focusing on areas that will generate revenue and drive growth.
The Bottom Line: Progress beats perfection. Prioritize core tasks that drive results and let things evolve over time.
Bonus Tip: Don't Delay Forming Your LLC
Forming your LLC early in the game gives numerous advantages:
- Protecting personal assets from lawsuits, financial losses, or other liabilities.
- Granting you a more professional image to clients, lenders, and vendors.
- Allowing you to open a business bank account.
- Streamlining bookkeeping and tax reporting from the outset.
- Establishing your business as legitimate so you can focus on growth.
It's a simple, low-cost step that can make a significant impact on your business's long-term success. Avoid half of these mistakes by establishing your LLC early and setting your business up for a solid foundation.
Starting smart means avoiding the common mistakes new entrepreneurs make to set your business up for success. Don't regret missing out on fundamental knowledge – make the right moves from the beginning, learn, adjust, and grow.
- In pursuing entrepreneurship, it's crucial to avoid commingling personal and business funds, as doing so could lead to poor financial decisions, risking piercing your corporate veil, and overlooking tax deductions.
- Procrastinating on legitimizing your small-business can have severe consequences, such as holding personal accountability in case of lawsuits, missed business deductions, and poor impression on potential clients.
- Crafting a basic business plan provides guidance, clarity, and direction, helping make informed decisions and setting realistic goals for your home-and-garden business or personal-finance career.
- Undervaluing your services or products can undermine credibility, make price increases difficult, and strain your resources, affecting your personal-growth and business success.
- Seeking help early in your business journey, whether through hiring assistants, outsourcing, joining communities, or using LLC formation services, can prevent burnout, improve productivity, and facilitate business growth.
- Ignoring legal and financial responsibilities, like not obtaining an Employer Identification Number (EIN), missing tax deadlines, or using unclear contracts, can create unnecessary risks and complications for your small-business, careers, and personal-finance endeavors.
- Focusing on non-critical tasks, such as design, software exploration, or endless tweaking, can delay the actual work of establishing and growing your small-business or side-business, leading to subpar results and hindered progress.
- Establishing your limited liability company (LLC) early on offers legal protection, a more professional image, the ability to open a business bank account, and streamlined bookkeeping and tax reporting, contributing to your business's long-term success.
