Many businesses fail in the first year by making common mistakes. The biggest mistake is not having a good business plan. Other common mistakes include lack of business insurance, not incorporating, and not get an EIN number or a fictitious name for your business. Expanding too fast or not having enough employees to do the work can lead to total disaster. This is where planning can help. Capital is also a concern. You need enough money not only as a start-up, but to ensure your business survives until it begins to turn a profit. Don’t be another start-up statistic.
A lack of a good business plan can be disastrous. Business plans evaluate the demographics where you will be selling your product or offering your service. They also evaluate the market and see if niche-marketing and target marketing are right for your new business. When compiling information for your business plan, you’ll be able to evaluate if your new business can turn a profit in the area you choose to run your business. It will evaluate the amount of capital you have, your expenses, your potential profit and expansion opportunities when the time comes. If your business requires applying for funding, you will need a traditional business plan. The traditional business plan is usually 100 pages, and it is written so that you can submit your plan for funding. If you don’t plan on applying for business grant, loans, and other funding, then you probably won’t need anything more complicated than a simple business plan. Most small start-ups will only require a simple business plan, evaluating the demographics and profit potential.
Be certain to have suppliers in place before beginning a new business. You want to have your supply accounts set-up and ready to go when you spring into action. Good suppliers will not only offer you wholesale prices, but quality parts or services that can help your new business run smoothly and stay within your spending limits.
Make sure to declare whether your new business will be a sole proprietorship, partnership, limited partnership, corporation, limited liability company, non-profit or a cooperative. A sole proprietorship is a good choice for the individual small business owner. You use your social security number instead of an EIN number, but you can apply for an EIN number if you choose to. The downside to a sole proprietorship is that you could be responsible for your business debts on a personal level. This is why most sole proprietors incorporate. By incorporating, you divide your personal assets from your business assets. When running a business, it is advisable to keep your business and personal assets separate. I would always recommend incorporating. If you are not using your name in your business, make sure to apply for a fictitious business name.
Look at what you need for insurance. Most business insurance is not expensive and will be exactly what you need to keep your business moving forward in the event of any kind of disaster. You don’t want to be left holding the bag if something unforeseen event happens and leaves your business in tatters. With good business insurance and a low deductible, you can be back on your feet in no time flat.
Money for start-up and investing is always a concern. Make sure you have enough padding to cover all of your costs including rent, utilities, employee payroll, insurance, supplies, advertising, and other expenses you will need to run your business. If you find that you are lacking in capital, you can always approach investors. Investors are always looking for fresh ideas and start-ups with good potential.
Don’t expand too fast when you do not have enough personnel to cover the work that needs performed. Not having enough manpower can be a real disaster. It usually leads to poor quality of goods and services that will be the ultimate end of your business dream. Take your time and don’t expect huge profits at first as you assess the costs and profit potential in real-time. Expansion will happen when you have enough capital to cover your costs plus enough savings for the expansion. Any expansion ends up costing more than planned, so plan on it.
Don’t let your great idea get inundated with debt due to lack of planning and lack of the necessary credentials to run the business you want. Remember, most start-ups fail within the first year. Don’t be another small business statistic. Do your business planning, your research, and get your business fully insured and legal before starting. Have a business nest egg for unforeseen expenses. Be prepared to work more than a traditional job. Long hours and hard work are all part of a good business plan. Get rich quick schemes are not business plans. Plan well, plan to work hard, and enjoy the fruits of your labor.