Starting a new business is exciting. It can be a dream comes true for many people, but a just a few mistakes can sink a business before it even gets a chance to succeed. Whether you’re opening a new French bakery or launching a elevator installation firm, knowing what to avoid will help you build your business into a successful reality.
Forgetting to Create a Business Plan
Assuming that you can just “wing” it when you start your business is a huge mistake. Create a business plan before you start your business to help ensure that you stay focused on what you need to do. Your plan needs to include a financial analysis that has a break-even point and a profit/loss forecast.
Borrowing a Lot of Money
In the best case scenario, you can start your business with very little capital. If you do need financing, borrow the smallest amount of money you can. It may seem like a good idea to get extra money, just in case, but in reality, having huge payments each month will add pressure on you to make a large profit immediately. After several months, you may not be seeing the profit you need and your business could close. A better option is to save as much money as possible before you start your business and use that savings instead of borrowed money.
Planning on Huge Profits Immediately
Another big mistake new business owners make is to assume their business will be profitable immediately. Of course, if this happens, it is wonderful, but most new businesses do not make a profit the first few years. Plan on using your savings or have another source of income until your business really takes off.
Hiring People you Don’t Need
It may seem like a great idea to have several employees so you do not have to work as much. But, having too many employees when your business is not turning a profit is a quick way to sink your business. You will have to pay unemployment taxes, withhold income taxes and make sure your business is up to code regarding safety regulations for employees. If you can start your business alone, adding employees only when absolutely necessary and as income increases, you will save yourself resources and stress.
Not Collecting Money You’re Owed
You need to be prepared to collect money that you are owed. It may sound simple, but there are people who will not pay what they owe you and you need to have a plan on how to collect your money. You may have to send reminder statements to them or even contact them personally. If you are a person who hates conflict, you definitely need to have a plan in place. Your business will not survive if you are not confident enough to demand the money you are owed.
Starting a new business can be scary and stressful. However, if you are careful, have a plan and avoid spending too much money at the start, you are well on your way to having a successful business.