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5 Mistakes New Business Owners Need to Avoid

small business checking account

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Beware of these costly pitfalls.

Key points

  • There’s a lot of steps involved in running a successful business, so it’s natural that some new business owners make mistakes when first getting started.
  • To help your business thrive, ensure you have a business plan, money for start-up costs, and knowledge of tax requirements.

When you’re starting a new business, there’s a lot to consider. You want to make sure you set your company up for success, which means trying to avoid mistakes that could cost you money or make it harder for your small business to thrive.

Since many new business owners don’t know about some of the common pitfalls that could derail their efforts, here’s a list of five top errors you want to avoid.

1. Not having a solid business plan

Your business plan should be the roadmap to your company’s success. It should outline your mission statement, identify your company goals, and chart a path to achieving them. Without a business plan, it will be much harder to make cohesive decisions that help you move toward a common goal. Your business plan could also be crucial to help you secure financing if you won’t be fully funding your start-up operations on your own.

2. Not knowing who your target audience is

You need to be strategic in trying to reach potential customers when you’re first getting started — especially since you may not have a large advertising budget from the get-go. If you don’t know who your audience is, it will be impossible for you to make sure they’re finding you. And, if your customers don’t know you exist and can meet their needs, it doesn’t matter how great your business idea is — it won’t be a success.

3. Not having a financial cushion before you start

It can take some time for a business to become profitable. If you have absolutely no money going in and are relying on your company to begin providing you with income right away, that’s going to be a problem for you. Your business could go under (and your personal finances could suffer along with it) just because you don’t have enough of a cash cushion to see you through until you start making money.

4. Trying to grow too fast

While your goal may eventually be to scale up your business and run a chain of stores or provide services to thousands of customers, it’s going to be really hard to do that right from the start. You don’t want to buy tens of thousands of dollars of products you can’t sell, commit to providing services you don’t have time to offer, or hire tons of people without clients to service.

It’s often best if you start small and work up to becoming the massive conglomerate you are dreaming of.

5. Not taking care of tax issues

Finally, you need to understand that tax issues can be different for businesses versus individuals. You may need to submit quarterly tax payments to the IRS and if you’re hiring people to work for you, may need to withhold money from their checks to send to the IRS and also pay some employment taxes.

If you don’t understand the small business tax issues associated with running your company, you should get help with them before you end up owing the IRS a fortune.

Fortunately, avoiding these five mistakes doesn’t have to be hard once you’re aware of these common pitfalls and can take steps to make sure they don’t hurt your company’s future prospects.

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