Very often entrepreneurs find the amount of legal and administrative obligations required to start up a business daunting. Some hurry to get their business up and running to be able to care for these expenses which can lead to making serious errors in the process.
In this section, we will help you to avoid making many of the common mistakes by identifying some essential steps, which will save you time and money in the future.
Not having a business plan
A business plan is like the road map of a business. Sure, things are not going to turn out exactly as planned, but it is also true that there is “no favorable wind for he who doesn’t know where he is heading to”. Knowing where we are planning to go is essential to make the right investments, not wasting funds in irrelevant pursuits,…
Among the things we should know are:
- Who is my client?
- What needs of my clients can I meet, differently or better than my competitors?
- How do I plan to reach my market and let them know that I exist?
- Can I provide my solution at a cost that leaves a margin to have a surplus?
- Is my business sustainable?
- Will I need to work nearly 24/7 to get some profit? For how long?
- What services will I outsource?
Answering these questions realistically can keep our feet on the ground and help us to reduce or minimize the lies that we inevitably tell to ourselves when we start a business.
Moreover, If we are going to need external capital, from banks or private investors, we will need to answer many questions about ourselves, our business, our plans and abilities to achieve our goal. Putting all this in a document is a must.
Obtaining capital.
1. Registering too soon.
If currently you are being paid unemployment, you can receive 60% of the total amount pending of payment as capital to help you start. To receive this, however, you need to apply before you register the new business.
In any case, we acquire obligations and start incurring certain costs, like social security, from the moment we register. In some occasions it is possible to delay this, providing that we are not trading, and use this time to build up the structure of our business, like designing the website, marketing campaign, etc..
In other cases, this will not be possible. The mere application of a license will require that the business is fully registered.
2. Asking for a loan too early.
A new business needs its time to settle and find its place in the market. What happens in many cases is that the product or service we are offering changes with the market. Investing a lot of capital into the business during the early stages is uncertain can lead to “punching the air” and wasting resources. This may leave us with a heavy debt and can kill our business before it starts.
A capital injection usually works much better when there is already a well-tested product or production line. This can then be boosted and maximized.
3. Use all your debt capacity at first.
This is really a follow-up of the previous point. We have to allow for mind changing with respect the best use of funds during the first stages of our project. Using all of our debt capacity in the first loan we ask for can restrain our business and leave ourselves without room to move financially if we need to rectify anything later.
Paperwork.
1.Documents do not reflect reality.
Branding and domain registration.
1.Another regular mistake is not registering your domain first. Many do spend a lot of funds on branding just to find out that their chosen domain is already taken. This will lead to an unnecessarily long and strange domain name for our website.
2.Do not allow your webmaster to keep the passwords or ownership of your domain. If you are not very tech savvy it is likely that you will delegate to someone else the purchase of your domain. Possibly he will pay with his card before he bills it to you. On most occasions, he will register the domain in his own name. That is not a good practice. If you want to change your webmaster in the future you are unnecessarily married to the first one.
3.Most people confuse the name reserved at the Company Registry at the time of incorporation an S.L company with a Patent and Brand Registration. This is not the same, they both should be registered separately. A Brand (and Logo) registration can be done at a relatively low cost and can prevent others to make inappropriate use of your brand.
These are just some examples of the many mistakes that entrepreneurs can make at a high-cost to their business.