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Starting A Small Business: 7 Deadly Sins
Posted By Nellie Akalp On December 24, 2012 @ 11:00 am In Startup | 8 Comments
A small business owner’s life can be a real roller coaster. There’s no road map, and pitfalls lurk around every corner. While making mistakes may be a great way to learn, it’s a lot better to avoid them in the first place.
Having started a few businesses in my career, and having helped thousands of small businesses launch across the country, I thought it would be useful to highlight some of the hard-won experience I’ve learned throughout the process. Below are 7 deadly sins for starting a small business:
1. Don’t Underestimate a Business Plan
If you’re launching a small business and aren’t planning on pitching investors, it’s tempting to skip the step of writing a formal business plan. However, taking the time to write out your business plan, forecasts, and marketing strategy can be a particularly effective way to hone your vision.
Your planning should center around a few essential questions:
In addition, don’t overlook your exit strategy at the beginning. Do you want your children to take over the company? Do you want to sell it? It’s critical to think about these questions from the start, as the building blocks of your company (such as legal structure) should vary depending on your preferred final outcome.
2. Don’t Incorporate as the Wrong Business Entity
Your business’ legal structure affects the amount of taxes you pay, the employee benefits you can offer, the amount of paperwork you deal with, and more. In the U.S., the three most common business structures are:
All three entities protect the personal assets of the owners from the liability of the company, yet differ when it comes to tax treatment and more.
Here are some common mistakes made by small business owners. You may want to consult a tax advisor or CPA on what structure would be best for your particular situation:
Of course, the biggest mistake a small business owner can make is failing to create a legal business entity at all.
3. Don’t Pick Delaware or Nevada for the State of Incorporation if you Don’t Live There
Many business owners think they should choose among Delaware, Wyoming, or Nevada when incorporating or forming an LLC. And yes, these are popular states for incorporation in the U.S. because of low filing fees and pro-business statutes.
However, these two states aren’t necessarily the best choices for every business. For the small business (defined here as one with less than five shareholders), it’s better to incorporate in the state where there’s a physical presence, meaning where you live or have an office. Otherwise, there can be too many hassles associated with operating ‘out of state.’ These include:
4. Don’t Underestimate the Importance of a Business Name
A business begins with a name. It’s the cornerstone of company identity and shapes all that follows. Think about what’s important to you and your business. What’s the first thing you want a customer to think about with regard to your business?
For example, a young company breaking into the financial advising field may be more concerned about credibility and thus forgo the edgy, attention-grabbing name.
It’s smart to check that a business name is available to use before you order your business cards, as you don’t want to be on the wrong end of a trademark dispute. In most cases, you don’t need an attorney to check if your name is available; you can perform these easy steps on your own:
5. Don’t Fall Into a Discount Trap
At the beginning, too many young companies feel the pressure to heavily discount their prices in order to win business. While customer acquisition is important, attracting customers at unsustainable price levels will just result in a race to the bottom. I’ve learned that you’re better off in the long run focusing on how to bring more value to customers, rather than simply slashing your prices.
6. Don’t Go Against Your Intuition
Intuition is a critical part of the decision making process, and it’s just as important in business as it is in other areas of your life. Business deals depend on relationships, whether it’s with partners, employees, vendors, or clients. You need to get a read on other people you’re involved with – and then trust your gut (even if the numbers are telling you otherwise).
7. Don’t Be Afraid to Fail
Lastly, if you’re scared of failing, you’re probably playing it too safe as a business owner. Failure is practically a rite of passage for successful entrepreneurs. Valuable lessons can be learned through the experience…lessons which you would never learn from a business class.
Soccer coach Sven-Goran Eriksson  once said:
“The greatest barrier to success is the fear of failure.”
If you find yourself nervous about what might happen, think about all the opportunities and possibilities you leave behind by not ever trying. Trying (no matter what the outcome is) is your first step toward success.
Seven  Photo via Shutterstock
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URL to article: http://smallbiztrends.com/2012/12/deadly-sins-starting-small-business.html
URLs in this post:
 Sven-Goran Eriksson: http://en.wikipedia.org/wiki/Sven-G%C3%B6ran_Eriksson
 Seven: http://www.shutterstock.com/pic-82486918/stock-photo-fire-number-quot-quot.html