Enthusiasm—it can be both a blessing and a curse for new entrepreneurs. Passion for your business can fuel your success, but it can also drive you to operational and financial ruin if you don’t take the time to think decisions through.
If you’re starting a business in this new year, I encourage you to embrace your fervor. But also keep impulsive behavior under control to avoid the following common pitfalls faced by many new entrepreneurs.
Here are eight rookie mistakes that could wreak havoc on your startup:
1. Quitting your day job and starting a business because you can’t get along with bosses or coworkers.
As a small business owner, interpersonal skills and the ability to work well with others is as important as (and often more important than) when you worked for someone else. Owning a business requires collaboration and patience.
2. Trying to do too much, too soon.
You’ll quickly burn out mentally and run through your resources too quickly if you overextend yourself. Pace yourself, and remember you’re in this for the long haul—running a business is a marathon, not a sprint.
3. Having a “build it and they will come” attitude.
So, you’ve got an exceptional product or service? That’s great, but don’t expect customers to show up at your doorstep or website in droves to buy from you. You still need to put yourself out there by networking, branding your business, and marketing your offerings.
4. Not preparing your family and friends for the lifestyle changes that come with owning a small business.
As you get your business off the ground, you may need to forgo some luxuries you took for granted before. You’ll also probably discover you’ll need to sacrifice personal time. To avoid hurt feelings and disappointment, have a heart-to-heart talk with your loved ones so they know what to expect as you start the entrepreneurial journey.
5. Not checking to see if you’re legally permitted to use your business name.
Infringing on another company’s trademark will land you in legal hot water. Don’t start using a business name on your business cards, social media, and other marketing collateral before verifying it’s not taken by someone else. I recommend performing a free search online to review business names registered with the secretary of state in the state where you’re located. You may also want to conduct a national trademark search to see if your name is available in all 50 states.
6. Choosing the wrong business structure when registering your business.
While a sole proprietorship requires less formality and administrative work, you may want to consider forming an LLC or corporation to protect your personal assets from any liability of your company. The type of business structure you choose affects certain aspects of how you conduct your business and your taxes. Do your homework and consult accounting and legal resources to help determine the best fit for your company.
7. Neglecting to set up a business bank account.
Commingling your personal and business finances leads to confusion—and it can create suspicion if ever your local or state tax bureaus or the IRS start asking questions. You’re far better off keeping personal and business monies separate for those reasons—and certain legal structures require you to do it that way. As a bonus, you’ll appear more professional and credible when writing checks from your business versus your personal account.
8. Thinking that having a plan, goals, and objectives is optional.
They’re not! Starting a business with no roadmap for direction will lead you off the course to success quickly. Document what you want and need to accomplish, and formulate a strategy and tactics for how you plan to get there. Yes, you will need to be flexible and adapt as the competitive and industry landscapes change, but you can’t sidestep planning if you want to succeed.