5 mistakes new business owners should avoid

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Beware of these expensive pitfalls.

Key points

• There are a lot of steps involved in running a successful business, so it’s only natural that some new business owners make mistakes when they’re just starting out.
• To help your business thrive, make sure you have a business plan, money for start-up costs and knowledge of tax requirements.

When starting a new business, there are many things to consider. You want to make sure you set your business up for success, which means trying to avoid mistakes that could cost you money or make it difficult for your small business to thrive.

Since many new business owners are unaware of some of the common pitfalls that can derail their efforts, here is a list of the top five mistakes you want to avoid.

1. You don’t have 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’s goals, and map out a path to achieving them. Without a business plan, it will be much more difficult to make cohesive decisions that will help you move toward a common goal. Your business plan could also be crucial in helping you secure funding if you won’t be fully funding your initial operations yourself.

2. You don’t know who your target audience is

You need to be strategic about trying to reach potential customers when you’re just starting out — especially since you may not have a large advertising budget right from the start. If you don’t know who your audience is, it will be impossible to make sure they find you. And if your customers don’t know you exist and can meet their needs, it doesn’t matter how good your business idea is — it won’t succeed.

3. You don’t have a financial cushion before you start

It may take some time for the business to become profitable. If you have absolutely no money and you’re relying on your company to start providing you with income right away, that’s going to be a problem. Your business could fail (and your personal finances could suffer along with it) just because you don’t have enough cash to tide you over until you start making money.

4. Trying to grow too fast

While your goal may eventually be to expand your business and start a chain of stores or serve thousands of customers, it will be very difficult to do so from the very beginning. You don’t want to buy tens of thousands of dollars in products you can’t sell, commit to providing services you don’t have time to provide, or hire a bunch of people with no clients to serve.

It’s often best to start small and work your way up to the massive conglomerate you dream of.

5. Does not take care of tax issues

Finally, you need to understand that tax issues can be different for businesses and individuals. You may need to file quarterly tax payments with the IRS, and if you employ people to work for you, you may need to withhold money from their paychecks to send to the IRS and also pay some employment taxes.

If you don’t understand the small business tax issues involved in running your business, 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 difficult once you’re aware of these common pitfalls and can take steps to make sure they don’t hurt your company’s future prospects.