Choosing to start a business can be considered taking a leap of faith. While it provides many upsides, such as the possibility of financial independence and the opportunity to follow your passion, it also includes the downsides of financial difficulties, stress, and increased responsibility in all aspects of life. But don’t fret, because if you’re a budding entrepreneur roaring to start a small business, this article by the Johns Creek Chamber of Commerce is here to help with an in-depth guide on how to avoid common mistakes when setting up a new company.
1. Failing to Make a Business Plan
When starting a business, it’s important to have a clear vision of what you want the business to achieve. That could be becoming a market leader in a new niche, disrupting a current industry, or simply securing a small chunk of a large market, allowing you to be profitable for the foreseeable future.
However, simply thinking about a goal is not enough. It needs to be put down into writing in the form of a business plan. Here are the various aspects your plan should include:
Your Mission: what impact do you want the business to have on the industry and your customers?
Your Product Offering: what goods or services will you sell, to whom, and at what prices? Additionally, how will it be manufactured and sold?
Market Research: in-depth information regarding current and future market trends. Include customer demand to capitalize on, competitor weaknesses, and opportunities that provide your business a chance to be competitive.
2. Overlooking the Need for Financial Planning
Having a strong financial foundation allows businesses to weather any uncertainty that comes their way. However, one of the most common mistakes new entrepreneurs make is not having enough financial preparation and resources to sustain the business long-term.
Hence, one of your first projects should be to create a sound financial plan that covers the following topics:
The cost of manufacturing and selling the product. Ascertain whether it can be made at home or you require an investment in equipment and labor.
The type(s) of funding avenues you’ll consider - i.e., will you be able to bootstrap the business, take out a business loan, or sell equity to a venture capitalist?
Forecasts of future costs and revenue for at least the first 12 months. According to the Business Plan Shop, this will provide a clear idea of areas that require the most investment and those that will bring in revenue.
If you decide to take out a personal loan to fund your business, know that the lender will run your credit first, so make sure you are in good financial standing before applying. You’ll also want to look for loans with low interest rates to keep your payments small.
3. Selecting the Wrong Business Structure
For new small business owners, establishing a limited liability company should be the go-to business structure. Compared to a sole proprietorship, an LLC protects your personal assets from business-related debt and litigation. Additionally, it allows entrepreneurs to reduce their costs by claiming business expenses as tax write-offs. Business registration can be tedious to manage alone, but it becomes extremely easy when working with a formation service.
4. Not Having a Business Degree
While a business degree is not a prerequisite for becoming a successful entrepreneur, it does help individuals develop the skill set and business acumen required to manage the day-to-day functions of a business. Additionally, this may be a good option for entrepreneurs making the switch to self-employment, as a business degree will help them learn about accounting, marketing, supply management, and all other key areas of the business.
5. Overlooking the Importance of Marketing
Even if you have a great product, no one will buy it unless they know about it. So while marketing is an expense whose ROI is often hard to calculate, especially in terms of brand awareness, its impact on the success of a business is undeniable.
Blogs, social media, and influencer marketing are some of the must-haves in any marketing strategy (which is a part of your business plan), as they will help your business connect with thousands, if not millions, of potential customers, educate them on your products, and make consistent sales. Make sure to have a few good free tools on hand for your marketing. You can find templates for Instagram Stories, Facebook banners, and much more online. Plus, you’ll want a tool to help make your PDFs smaller so that you can still use high quality files and images in your social media posts, but you won’t risk your file size being over the limit. This may help if you need to reduce the size of any of your PDF files.
Pursue Your Entrepreneurial Dream
Starting a small business is no easy feat, but it is definitely achievable by avoiding the five mistakes mentioned above. From pursuing a business degree to establishing an LLC, be mindful of these common pitfalls and make a conscious effort toward avoiding them. And be wise about how you fund your startup so that you don’t end up in more debt than you can handle.
Join the Johns Creek Chamber of Commerce to take advantage of all the resources we offer our community’s entrepreneurs!