Q: Dr. Essex, I owned a business once and it did not go well. I would like to try again, but this time I want to avoid making stupid mistakes. I know what I did wrong, but are there some typical mistakes that new entrepreneurs should especially try to avoid?
A: There certainly is both good news and bad news when it comes to being an entrepreneur. On one side it's fun, exciting, creative, and interesting. On the other, it can also be exhausting, frustrating, perplexing, and mundane.
A: There certainly is both good news and bad news when it comes to being an entrepreneur. On one side it's fun, exciting, creative, and interesting. On the other, it can also be exhausting, frustrating, perplexing, and mundane.
You are right to be concerned about the potential business pitfalls because, if you miss them, they can, well, trip you up. Here then are my Top 5 Avoidable Small Business Mistakes.
1. Incorrect Business Form: Every business should be incorporated in some form. Owning your business as a sole proprietorship or general partnership is a no-no because those business structures (and they are very common by the way) put your personal assets at risk since there is no legal separation between you and the business. If something goes wrong, your home, assets, etc. are at risk.
However, when your business is an S or C corporation, or an LLC, there is a bright legal line between you personally and the business. If something goes wrong, your personal assets are generally protected.
2. Money Mistakes: This problem can take several forms:
- Undercapitalization: Not having enough money to properly start your business puts you behind the eight ball from the start and that is tough spot from which to get out.
- Excessive debt: The opposite problem of the one above, taking on too much debt, or not having a plan to pay loans back as interest accumulates, can become a huge problem.
- Excess overhead: Excessive overhead can kill even the best business. It drains cash flow and limits options. Keep your overhead low.
3. Marketing Myopia: I have said it before and I will probably say it again -- marketing the same way again and again, or marketing too little, is maybe the biggest mistake a business can make.
The point of marketing is to expose new people to your business. But if you continue to market the same way, only the same eyeballs will see your ad. By trying some new tricks, by adopting some low cost shoestring marketing techniques, you ensure that new people will learn about your business.
4. Technology Terror: A main reason that this is the golden age of small business is that technology empowers us to do more -- better, faster, and cheaper -- than ever before.
Not only do you need to take advantage of the software, websites, computers, and other tools that are available, but you simply must stay up to date with technological progress. Yes, it is time consuming, and yes it can be expensive. Too bad. The upsides of this technology / Internet / computer revolution far outweigh the detriments.
5. The Superman Syndrome: You know what that is, right? The Superman (or woman) entrepreneur thinks he knows it all and can do it all. She can leap tall buildings, balance the books, and get to FedEx by 5:00 -- all on her own!
Mistake, that. Get some help. Hire an assistant. Bring in an intern. Recruit a board of advisors.
Even Superman had a Legion of Superheroes to help him sometimes.
1. Incorrect Business Form: Every business should be incorporated in some form. Owning your business as a sole proprietorship or general partnership is a no-no because those business structures (and they are very common by the way) put your personal assets at risk since there is no legal separation between you and the business. If something goes wrong, your home, assets, etc. are at risk.
However, when your business is an S or C corporation, or an LLC, there is a bright legal line between you personally and the business. If something goes wrong, your personal assets are generally protected.
2. Money Mistakes: This problem can take several forms:
- Undercapitalization: Not having enough money to properly start your business puts you behind the eight ball from the start and that is tough spot from which to get out.
- Excessive debt: The opposite problem of the one above, taking on too much debt, or not having a plan to pay loans back as interest accumulates, can become a huge problem.
- Excess overhead: Excessive overhead can kill even the best business. It drains cash flow and limits options. Keep your overhead low.
3. Marketing Myopia: I have said it before and I will probably say it again -- marketing the same way again and again, or marketing too little, is maybe the biggest mistake a business can make.
The point of marketing is to expose new people to your business. But if you continue to market the same way, only the same eyeballs will see your ad. By trying some new tricks, by adopting some low cost shoestring marketing techniques, you ensure that new people will learn about your business.
4. Technology Terror: A main reason that this is the golden age of small business is that technology empowers us to do more -- better, faster, and cheaper -- than ever before.
Not only do you need to take advantage of the software, websites, computers, and other tools that are available, but you simply must stay up to date with technological progress. Yes, it is time consuming, and yes it can be expensive. Too bad. The upsides of this technology / Internet / computer revolution far outweigh the detriments.
5. The Superman Syndrome: You know what that is, right? The Superman (or woman) entrepreneur thinks he knows it all and can do it all. She can leap tall buildings, balance the books, and get to FedEx by 5:00 -- all on her own!
Mistake, that. Get some help. Hire an assistant. Bring in an intern. Recruit a board of advisors.
Even Superman had a Legion of Superheroes to help him sometimes.
