Are you ready to become an entrepreneur? This has been your life’s dream, leaving your 9-5 and becoming a business owner or entrepreneur. You know that the journey, the endless hours and sacrifices will be worth your time because, in the end, it is all about financial freedom.
But with entrepreneurship comes risk. Most businesses don’t reach the 5-year mark. Why? Because of mistakes that have caused them to fail.
Today I am going to show you the 10 biggest mistakes new entrepreneurs and business owners make and how to avoid them.
Not Doing Research
Before going into business, you have to research. Is your product needed in your current market? Do you know who your ideal audience or client is? Who is your competition? You do have one.
Make sure to research prior to spending a cent on anything else. What is the point in starting a business if no one needs your product? Create momentum for your product with your potential clients even prior to spending anything.
Not Having a Business Plan
If you don’t create a business plan with early projections and yearly projections, no bank is going to open doors. A goal without a plan is only a dream.
Not Having a Budget
Do you have money set aside in case something comes up? It always happens and you will spend more than you anticipated. Therefore, always have at least 10% extra allocated in your budget.
How about marketing? “If you build it, they will come”…yes, but only if they know about it. Therefore, make sure to create a marketing budget, too.
Putting Everything On Credit
It can be very tempting to put everything on credit. But that can take you into a downward spiral failure. Because instead of cash flow, you will have debt. Remember, not everything has to be perfect. Start small and grow big.
Not Calculating Costs and Taxes
When you open a business and start generating revenue, don’t forget that Uncle Sam is going to ask for his fair share. Make sure to take taxes into consideration when pricing your products and services.
Not Paying Yourself First
Do you reinvest everything back into the business? Make sure to pay yourself first or you will burn out! Even if it is something small at the beginning, you always should pay yourself first. In the end, the purpose of having a business is so you can enjoy freedom.
Not Having Insurance
When I’m talking about insurance, I am talking about two types of insurance.
The first one is Liability insurance. Make sure you are protected in the case of property damage or even bodily damage. Do you work from home and clients come to see you? Your current homeowners or renters insurance will not cover your business activities. If you have a brick and mortar, protect your equipment.
The other type of insurance is Life Insurance with Long Term Care in case something happens to you and you cannot work for a period of time. I know, I know, what could happen? Well, people don’t think they need it until they do. Then it is too late.
Not Having a Financial Advisor or Coach
This applies to everyone, but especially to new entrepreneurs. If you don’t have anyone guiding you, keeping you accountable or on track of your spending and expenses, this could cause a big business failure. Hire a Financial Expert who will save you time and money.
Commingling Personal and Business Expenses
Business is business and personal is personal. I see this mistake with a lot of my clients. They don’t know how to separate their business expenses from their personal expenses. This is a huge mistake, especially when tax time comes around.
If you mix business with “pleasure” you can devalue your business because you are showing too many expenses reducing your profit margin.
Not Tracking Your Spending
If you don’t know where your money is going and on what, you will not know if you are making a profit or not. The IRS doesn’t care if you don’t know how to do this; they assume it is your responsibility to know everything as a business owner.
I hope these tips help you to start your entrepreneurship journey on the right foot. And remember, financial education is the path to freedom.