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Top 9 Mistakes New Business Owners Make

New business owners are a special breed of people. Motivated, idea-driven and entrepreneurial, they enjoy a challenge and are not afraid to step outside of their comfort zone. Yet with around a 40% chance of a business with five or fewer employees surviving the first four years, the statistics are against them.

Here at MBP, we’re focused on helping our clients last the distance and push through any barriers they may face. One of the many ways to do this is by arming you with the knowledge of good business practices. So, we’re sharing nine common mistakes new business owners make, so you can avoid making them too!

9 Common Mistakes New Business Owners Make

Forewarned is forearmed and in business, there’s nothing better than learning from the mistakes of others. Of course, you’ll still make mistakes: we all do! However, if you go into your decision making with as much knowledge as possible, starting up a business may not be as challenging as it seems.

For that reason, we’ve collated a list of the top nine mistakes start-up business owners make in the hope we can prevent you from making them too.

  1. Failing to research a business idea
  2. Mixing personal and business finances together
  3. Not setting any goals
  4. Failing to save for future tax payments
  5. Having no budget
  6. Not identifying their target market
  7. Expanding too quickly
  8. Making expensive purchases early on
  9. Trying to do it all

Now you’ve read this list, go back and read it again. We’ll explain the reasons why these are mistakes you won’t want to make, and how you can avoid them next.

Business Mistake 1: Not Researching Your Business Idea

There’s no denying that people who start up a business do so because they have an idea. They’ve thought of a product or service, or a way of doing something, which they believe will be successful. The key thing here though, is that they believe it will be successful. When you run a business, you must remember that you are not the one who will be buying your products or services. You may love your idea and think it will be a huge success, but your target audience may hate it.

Take the time to do some market research regarding your idea. Find out if people would pay for what you offer, what features they would like it to have, how much they would pay and their suggestions on how it could be improved.

New Business Mistake 2: Using One Bank Account

When you run a business, it must have separate bank accounts from your personal accounts. Yes, we know that you are the business owner, and that using the same account makes sense. The problem is, it’s almost impossible to keep accurate tabs on what you personally are spending and receiving, and what your business is spending and receiving. In other words, combining finances makes a huge mess and one which will cost you more in time and money to fix.

Separate accounts let your bookkeeping and accounts team see exactly where your business sits financially. There is no confusion about whether a purchase was made for personal or business usage. It also ensures you don’t pay more tax than you need to.

New Business Mistake 3: Not Setting Goals

When you set goals, you know what you’re aiming to achieve. Goals keep you on task and motivated. They help guide your business decisions and focus you on what’s important. Goals also save you money, because you spend wisely as you know what you’re working for, avoiding paying money on time wasting resources and opportunities.

When setting goals, SMART goals are important. This means you need to make each goal Specific, Measurable, Attainable, Relevant and Time-based.

New Business Mistake 4: Not Saving for Tax

It’s a fallacy that you do not have to pay tax in your first year of business. What’s true is that you won’t pay tax until you file a tax return at the end of the financial year. Money can be tight when starting a business, with income quickly being used to pay wages, buy stock and pay the never-ending stream of business expenses. That’s one of the reasons why new business owners ‘forget’ to put money aside for their tax obligations.

We say ‘forget’ because some do genuinely believe they won’t have to pay any tax in their first year of business. Others think they won’t be making a profit, so don’t need to save for tax. Then there’s those who have no idea that they could potentially be facing a bill come to the end of the financial year. It’s best here if you chat with us, and we’ll help you identify how much money you should be putting aside for your tax.

New Business Mistake 5: No Budget

A budget ensures you don’t spend more than you earn. Yes, we appreciate that as a start-up business, you don’t really know what income you’ll receive during your first year. However, what you should be doing is creating a realistic budget which estimates both the income and expenses you’ll be facing.

By allocating money through your budget, you know how much you have left. This lets you prioritise how it will be spent, and help you make a profit! Once again, we can help you create a workable budget.

New Business Mistake 6: Not Having a Clear Target Market

Your products or services won’t suit everyone. By trying to please everyone, you are in a sense-pleasing no one. Being indiscriminate about your customers may sound like a good idea, but it won’t bring you any rewards.

Be concise about the exact type of person you are targeting. Their gender, age, likes, dislikes and financial circumstances are all things you need to nail down. You also need to identify the ways in which they’ll best engage with you and your business, be it via social media, phone or email.

New Business Mistake 7: Growing Too Fast

Just like you, we want your business to grow! We want it to become so successful that you have many employees doing the work, tons of new leads every day and a huge profit. But now is not the time to force it to happen.

During your first year, move slowly in growing your business. Avoid making decisions which will cost you large amounts of money when you haven’t got that money coming in. This means not taking on employees until you know that their wages will be fully covered and then some. It means not expanding out by taking on new loans to purchase equipment, unless you’ve already received orders for it and your existing machinery doesn’t meet your requirements anymore. It also means not moving to larger premises unless you know you can continually meet the increased rent.

Just sit tight and wait. We’d be happy to chat with you about your plans for expansion, and help you identify exactly when the right time is to take that next step.

New Business Mistake 8: Spending Big Early On

It would be awesome to buy a new car for your business. Likewise that new vinyl cutting machine and heat press! Surely, you must get some unique artwork for your office walls to impress your clients?

Making large and unnecessary purchases when you are setting up your business are usually unnecessary. We’re not saying that you won’t need to buy things, but we are saying you should consider choosing lower cost items.

A good rule to follow is that if something you buy isn’t going to pay for itself and continually make you a profit, then look for something cheaper which will. Going into debt isn’t the way to move forward and create a successful business. Saving up and then paying cash for necessary items is.

New Business Mistake 9: Doing Everything

New business owners are great multi-taskers. Sometimes you have to be, as you can’t afford to pay anyone to do something for you. The issue with this is that you’re not necessarily good at doing everything that has to be done.

When you do outsource some of your tasks though, you free up your time to do the things which you are good at and bring you income.

The team at MBP are here to make a real difference to your business. Our business planning, performance and coaching services are ideal for both start-up and existing businesses. We welcome new clients and look forward to hearing from you shortly.

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