Published on July 8th, 2015 | by Millennium Magazine Staff0
3 Mistakes to Avoid when Setting up your Business
Starting a business can be exciting and challenging at the same time. It often gives excitement to people who are eager to offer a new product or service that they think will meet the needs of their target audience. But it is also a challenging process because of the work involved before the launch and during the period you are sustaining the business moving forward. This applies to any type of enterprise regardless of size.
Unfortunately, not all people who set up a business become successful. This is due to certain mistakes they have made that resulted in the closing down of their enterprise after only a short period of time. “These business blunders can include partnering with the wrong person, failure to reach sales goals and accomplish the legal requirements as well as being victimized by fraudulent people, among others,” said criminal lawyer Daniel Perlman.
Bloomberg reports that eight out of 10 entrepreneurs who start businesses do not success within the first 18 months. It added that the main reason these enterprises fail is they run out of cash.
Here are some of the most common mistakes business owners make that provide valuable lessons.
Partnering with the Wrong People
Teaming with the wrong people is considered a major mistake. It is also the costliest error entrepreneurs can make that leads to lost income and time as well as low morale, according to the Martin Trust Center for MIT Entrepreneurship managing director.
Some people are quick to get their friends as partners for their startup but this does not always work out right. Instead, entrepreneurs should choose wisely and carefully the people they want to be part of their team. After all, what you are doing is serious business and not simply engage in leisure.
When selecting team members, it’s best to choose those with different skills. This way, they can help you in the various aspects of your business. Also, pick those who share common values with you and are sure to trust you even in tough times.
Failure to Accomplish Legal Requirements
In starting a business, one of the first important steps to take is to accomplish the legal requirements. Any business owner should always strive to create a legal enterprise and submitting all the necessary documents as well as paying all legal fees are vital. Failure to do so can lead to penalties and even a jail term.
Hiring the right lawyer knowledgeable about your business will help you protect your enterprise onwards. An attorney will not only assist you in writing legal documents such as in creating partnership agreements but will also provide legal advice such as concerning copyright and trademark issues.
For business owners with partners, it is highly important to have a clear agreement particularly when it comes to dividing ownership interests. Everything has to be in writing so that when the time comes that one wants to retire or sell his share, legal problems will be avoided.
Not Enough Funds
Running a business requires funds on a constant basis. An entrepreneur would need them for operating costs such as for paying suppliers, staff and overhead. Future expansion would also require additional funds. It is not enough that you have the initial capital in starting your business because onwards, even though you are making sales, you will still need extra financing to sustain your enterprise.
Owners can turn to lending institutions or investors to borrow money but experts warn against giving in to demands from lenders that will force you to pay high interest and give them significant ownership control.