Starting a business is a huge endeavor. For many people, starting a business is the best way to maximize their talents while also maximizing the amount of income they have the potential for. This comes at a huge risk. Far too often there are some simple mistakes that even the smartest people seem to make time and again. Here are five mistakes to be aware of if you are starting a new business.
Making sure to properly classify your business
Classifying your business is one of the first decisions entrepreneurs make. Far too often they are making these decisions without the proper knowledge or expertise to make the right decision. This is a decision that can cost your business immense problems if not done correctly. There is not one absolute way to determine if you are classified properly. Two people who run very similar businesses may classify their businesses differently and the classifications might fit their needs perfectly. Looking down the road to where your company might be in ten years can make a difference in how you want to classify your business. Here are the 6 main classifications business owners choose:
- Sole Proprietorship
- Limited Liability Corporation (LLC)
- S Corporation
Consulting with a professional before classifying your business is important to determine which is best for your business. The right professional may save your business immensely in the long run with just a thirty-minute conversation and knowing what questions to ask you.
Making sure your business is classified properly when purchasing Commercial Insurance.
Workers’ Compensation and General Liability are required by law in nearly every state in the country. It is almost impossible to operate a business without one or both of these coverages. The type of business you are in can dramatically change the price you pay for premium. From an insurance companies’ perspective, it is less risky to insure an accounting firm than it is to ensure a construction business. For that reason, they charge different amounts of premium based on the dangers your industry faces. Even within industries there are different workers compensation classification codes. Landscaping is a pretty simple example that has two separate class codes that are different in risk and in price paid for commercial insurance. If you do not clarify this with your insurance agent, you may pay for more in premium than is necessary.
Know your weaknesses
The great Chinese philosopher Confucius once said, ‘To know what you know and what you do not know, that is true knowledge’. As much as your business is your ultimate responsibility, the best business owners are the ones who successfully realize they cannot and should not do everything themselves. No one can possibly be an expert in every area of running your business. Before starting your business, it is crucial to take an honest inventory of your personal strengths and weaknesses and surround yourself with people who compliment those aspects of your business.
Failing to listen to your customers.
Many business owners and managers focus on products, but customers want to know how the product impacts them. The point of interacting with a customer is to sell them something, not to show off you know about the products you are selling or the particular industry you operate in. No matter if you work in highly technical industries like accounting, law or even workers comp insurance; technical knowledge is important. More important than technical knowledge is people skills. Highly technical information can be looked up, but helping the customer on their terms is something only the best salesman can master.
Properly back up all important information.
In order to properly understand the severity of not backing up your technological devices it is important to take a moment and think about what would happen if you lost all the information your business has stored. Imagine just the internal documents you share with partners and employees, much less the precious information of your customers. Backing up information is becoming easier and easier and it should be done on a relatively frequent basis.