Businesses of all types and in all industries face challenges as startups. While some obstacles are out of a business owner’s control, others are avoidable. In the spirit of football season, let’s discuss some of the most common “fumbles” startups face and how to tackle them before they set back your end game.
1. Failure to choose the right business entity type
Sole proprietor, limited liability company (aka LLC), corporation—the structure you choose for your business will affect you from a legal perspective, financially, and in other ways, as well. Selecting the one that’s not a good match for your company could put your personal assets at risk, result in paying higher tax rates, or create other disadvantages.
Carefully review your options before deciding on your business structure. I recommend enlisting the guidance of an attorney, accountant, tax advisor, and/or other qualified professionals to ensure you understand the pros and cons of each business entity type.
2. Trying to do everything on your own
New business owners often wear many hats (sales, operations, marketing, accounting, etc.) when launching their startups, but that doesn’t mean they’re all a good fit! While it can be tempting to undertake every aspect of your business, you might end up doing more harm than good if you perform tasks that you don’t have the expertise or time to do well. Although you might save money at face value, you could cost your business more in the long run if you make mistakes.
Carefully assess your skills and proficiencies, and be honest about your deficits. For example, if you’re not overly detail oriented or comfortable with using accounting software, you might save yourself time and headaches by outsourcing your bookkeeping activities to a trusted professional.
3. Not having a strategy for achieving your goals
In business, as in the game of football, it’s not enough to recognize the goal line; you must also have a plan for getting there. Starting a business requires something akin to a football team’s playbook—you need to lay out “who” will have “what” responsibilities and “how” they will work together to score. Writing a business plan—even one that isn’t overly extensive—will help you chart your course.
4. Not having any funds to fall back on
The pressures of starting a business can feel extra heavy when entrepreneurs need to worry about whether they’ll have enough money to keep the doors open from one day to the next.
You can help avoid putting yourself in this uncomfortable position by carefully projecting your company’s financials and seeking funding, if necessary, to ensure you have enough working capital to support your day-to-day operations and backup capital to cover you in leaner-than-usual periods or unexpected emergencies. It could be advantageous to ask a business financial consultant or accountant to assist you with working through your projections, and SCORE offers a Financial Projections Template you might find helpful.
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5. Trying to make your business be everything to everyone
This is especially relevant to service-based startups. It’s terrifying to launch a company and not immediately have a full slate of customers on board to bring in revenue. However, when you take on any clients that come your way, without vetting whether they’re a good match for you, the results can be disastrous.
Clients that don’t fit your criteria for the “right client” will demand a disproportionate amount of your time and energy. When their needs aren’t well-served by your company’s established systems and processes, you may find yourself giving them far more attention, and giving your ideal customers less. Moreover, all the time you spend on the wrong customers will prevent you from having the freedom to look for more of the clients that are a desirable match for your business.
I suggest establishing the ideal characteristics you will look for in your clients. For example, a B2B software implementation company might set client criteria according to the vertical market, number of users, annual revenue, number of locations, types of systems that would need integration, etc.
Having a checklist of the required traits, and evaluating opportunities accordingly, may help you stick to your guns and turn less than desirable customers away.
6. Not paying attention to your business compliance obligations
If you have formed an LLC or incorporated your business, there will be ongoing compliance requirements for keeping your company in good standing with the state where your business is registered. Companies that fail to fulfill those obligations or don’t take care of them by their deadlines may face fines, other penalties, or even dissolution of the business.
Don’t let that happen to you! Find out what local, state, and federal compliance requirements apply to your business and track when you must accomplish them. Some of the many possible examples include:
- Renewing business licenses and permits
- Maintaining a registered agent
- Filing an annual report
- Paying quarterly taxes
When in doubt, contact the appropriate government offices and consider seeking the expertise of a business attorney, accountant, or another qualified professional who can offer insight. Also, an online business document filing service can help you complete and submit your compliance filings on time.
Kick off your business on the offense
As you launch your startup, I encourage you to play a clean, offensive game from the start—i.e., take action to avoid the common fumbles I have shared. It will reduce the amount of defensive effort you’ll need to put forth, and will better position your business for the win.
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