Making sure you make the right moves when starting a business is crucial to your long-term success. Did you know that 20% of businesses fail within the first year, and 50% fail with the first five?1 There are many reasons, but one factor seems common – lack of preparation.
Listed below are some of the biggest money mistakes entrepreneurs make while starting a new business. Learn what they are to help increase the likelihood of your business thriving long-term.
Before you can register your business with the province, you’ll need to select a business structure, which may be unincorporated (like a sole proprietorship) or incorporated (like a corporation). Choosing a business structure affects how you pay taxes, the paperwork you need to file, and your personal liability.
There are pros and cons to any form of organization you choose, so it’s important to speak with knowledgeable professionals to understand which structure is right for you.
Businesses exist to solve problems, and they earn a profit by selling their solutions to an eager public. Unfortunately, many startups enter the market without properly identifying the problems their customers face — and how their solutions can help. If you can’t map this out on paper, you may be throwing money at a solution no one wants or needs.
It’s not enough to come up with a problem and solution. You also need to determine who is facing the issues you’re trying to solve (and where they are).
If you can’t find these people, then you don’t have a market yet, and it will be tough to get your business off the ground.
Even if demand does exist, you may lose money advertising in places where your target market isn’t looking. You could have a brilliant business idea and still run out of money before making your first sale.
One of the costliest mistakes some entrepreneurs may make involves trying to launch with a perfect, feature-rich product. In fact, many business owners invest oodles of time and money developing their ideas in secret — without ever soliciting feedback from potential buyers. This may not be the best route.
Instead, consider developing a minimum viable product (MVP) that offers the bare essentials. Doing so allows you to test market demand before investing more resources.
For example, imagine that you’re developing the world’s first car. The essentials might include tires, gears, a steering wheel, and a chassis to hold everything together. Your first prototypes won’t be pretty, but they’ll instantly appeal to anyone who wants to go from point A to point B.
If the demand is there, you can then add fog lights, cup holders, Bluetooth radios, and countless other bells and whistles. You may even be able to use your early sales revenue to help finance these future improvements — instead of paying for all development costs entirely out of pocket.
Hiring the wrong person for the job could be expensive. Letting go of an employee may be difficult once they’re on your payroll. It is a good practice to be cautious about whom you bring onboard. Even hiring full-time qualified candidates can be costly, unless the need is there. Instead, consider staying lean and outsourcing as many projects to freelancers as you can.
The same goes for office space, tools, and equipment — all of which are easily accessible in today’s sharing economy. Consider staying lean and only “rent” what you need — when you need it.
From Facebook to Target to Equifax, we read about major data breaches all the time.
But, you’rejust a small business. Fraudsters won’t come after you, right? Wrong.
Because the majority of startups lack the IT know-how to protect themselves from cyberattacks, they represent some of the easiest and most attractive targets for criminals. According to some estimates, one in four small businesses is hit with fraud every year, with annual losses exceeding $25 billion.2
The good news is you don’t have to be an IT expert to protect yourself. By partnering with a PCI-compliant payment processor that specializes in advanced fraud protection, you benefit from:
At Clover, we can help level the playing field a bit and help make success more attainable. When it comes to reducing payment fraud, we have the tools and resources to help safeguard your payment environment — whether you run a brick-and-mortar business or an online store.
To learn more, schedule a free consultation with a Clover specialist today.
Disclaimer: This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.1 “The True Failure Rate of Small Businesses,” Entrepreneur, 3 January 2021
2 “Small Business Fraud Prevention Tips (from Experts),” Chargeback, 18 May 2018
United States (English)