Every entrepreneur makes mistakes in their business. These mistakes help you learn a thing or two and teach how to do things differently. They also help you stir your business ahead. That said, some mistakes can be detrimental in that they can affect the operation of your business altogether.
According to the U.S Bureau of Labor Statistics, 20% of new businesses fail in their first year of operation. Well, half of all the new businesses opened at the same time fail before the fifth year after opening. The primary factor that contributes to the failure of these businesses is the mistakes they make. As an entrepreneur, you must avoid mistakes as much as possible. Let us take a look at some mistakes that you should avoid as a new entrepreneur in business.
Not having a business plan
If you set up a business without a plan, then you are planning to fail. A business plan is a road map that should guide you in the daily operation of your business. It helps you increase your business’s success rate as you can make plans, make important decisions, secure your finances, etc. Further, having a plan ensures that you are on the right path, and this can go a long way in attracting investors as they see your business as a venture worth putting money into.
Choosing the wrong business structure
Starting up a business requires that you select the business structure you want to operate under. The business structure you choose determines your liability, fundraising ability, hiring ability, and the amount of tax you are subjected to. The best options that you should go for as an entrepreneur are a Limited Liability Company or a Corporation.
This is to avoid high taxes and liability that could otherwise deter the growth of your business. Your liability being separate from that of your business boosts its growth as investors can invest in your business comfortably. Choose these business structures as you launch your business. Conversion from maybe from a sole proprietorship to Limited Liability Company is such a long process. It will cost you more cash as well in future.
Making costly tax mistakes
As an entrepreneur, you should be wary of taxes. Making tax mistakes attract hefty fines and penalties that can affect the continuity of your business. Some of the tax issues that you need to avoid include things like making errors in reporting income. If the IRS conducts an audit in your business and finds that you have been misreporting your income, you may be charged with fraud that could attract hefty penalties and fines. Therefore, ensure that you balance your invoices and keep records of your income to avoid mistakes in income reporting. Additionally, ensure that you calculate your employees’ payroll correctly to make the necessary tax deduction. Pay all taxes that your business is subjected to.
Moreover, ensure that you do not make a mistake while deducting the allowable tax deductions as over deduction could lead you into trouble with the taxman. In a nutshell, pay and file your required tax on time to avoid attracting fines and penalties. Some tax issues are complicated. It is recommended that you work with highly qualified tax attorneys if you are struggling with IRS issues. They will particularly help you with legal IRS tax issues to avoid penalties and hefty fines from the IRS. Don’t wait to make the mistakes, though. Engage an attorney right from when you are getting to business.
Ignoring matters Intellectual property
As an entrepreneur, you need intellectual property protection for your product, technology, or service. Have patents for your new product to prevent others from selling or producing them as theirs. Further, ensure that you have a copyright that states the original work is yours, and no one should make copies of it for financial gain. Also, have a trademark for your business that distinguishes you from other traders. Come up with a non-disclosure agreement to assure your customers that their information will remain confidential. Ensure you avoid infringing the intellectual property of other entrepreneurs as this could lead you into trouble.
Having a poor cash flow
Failure to have a financial plan can lead to inappropriate use of money. To avoid this, ensure you have a laid plan on how to spend your money. Only spend your finances of projects that you had earlier planned for. Have a separate business and personal accounts to make it easy to determine cash flow. When it comes to hiring, getting too many employees at a go could strain your business. Hire the right people and consider outsourcing services from the right provider as it could be cheaper than having permanent employees.
Making mistakes as an entrepreneur can lead to financial constraints, legal liabilities, and even worse, business closure! Try to avoid costly mistakes by following some of the tips we have covered. Always learn from every mistake you or any of your competitors make.