Preparing to Launch

11 Common Startup Mistakes That Hurt New Businesses

Starting a business is an exciting undertaking. Being the boss and blazing your own trail can be invigorating. Even more enjoyable is running a successful business that you've worked hard to create.

To have the most successful experience possible with your business, it helps to avoid common startup mistakes. Knowing what to watch out for can save you precious time and money. Here are 11 common but easy-to-avoid mistakes to help give your business the best start possible.

1. Failing to do market research

Good ideas don't necessarily result in successful companies. Friends and family may think your brainchild is incredible, but that doesn't mean it's a marketable idea. Before putting time and energy into any business idea, do some market research.

Identify your market and determine if that market would be interested in purchasing your product. This can include conducting focus groups, surveys, and giving out sample products.

Market research will give you valuable information that can help you run a successful startup. In addition to discovering if your idea is saleable, the research may give you ideas for additional products.

2. Skipping planning

Having a solid business plan is crucial to the success of a company. When you skip the planning stage, you open your new business to failure. Planning creates a roadmap for your business and its success. Without a plan, you could easily get steered off course and end up somewhere you don't wish to be.

Planning also informs you of what you need to make your business run smoothly. The most important plans to create during the planning phase are a business plan, a marketing plan, and a financial plan. If you decide to seek funding at any point, many lenders will ask you for these plans. They see them as an indication that you're taking your business seriously and know what you're doing.

3. Choosing the wrong type of business structure

Selecting the wrong type of business structure when you begin a business is a decision you will come to regret. Take the time to consider your options. Deciding on a business entity without understanding the ramifications of what you're doing can make it difficult to apply for funding and opens you up to legal risks.

When deciding on a business entity, you'll likely want to choose from one of the following.

Sole proprietorship

sole proprietorship is a business entity owned by a single person. No legal distinction exists between the person and the business. As sole proprietor, you get all the profits and are responsible for all the bills and liabilities.

This business setup gives you less protection than other types of business structures. No set up is required, but you do need to obtain necessary permits and licenses to operate. It's not possible to have a sole proprietorship if you have a partner.

Limited Liability Company (LLC)

This popular business structure is ideal for small companies and partnerships, which most startups tend to be. An LLC protects your personal assets and the assets of your partner(s). You are also shielded from being personally liable for any business debts incurred.

You can still form your business as an LLC if you are the only owner. There are various types of LLCs. Swyft Filings can help you determine which type is best for you.


When you think of a big company, a corporation is likely what crosses your mind. However, for most small startups, a corporation is not the ideal first choice. While incorporating can protect your personal assets and provide tax benefits, there are many requirements that most small businesses are not yet ready to meet.

4. Overspending during set up and beyond

You don't always need to spend a great deal of money when starting a business, but many new business owners get caught up in the moment and spend more than they should on unnecessary items. Of course, you want the best equipment to run your business, but that's not always feasible. It may take some time before you're earning enough for some expenses to make sense.

Avoid running out of operating expenses by keeping spending in check. A business budget is an excellent tool to keep you on track.

5. Underspending

The expression, "it takes money to make money," does apply when you're building your new business. While you do want to spend wisely, it's necessary to do some spending to grow your business. Expenses like marketing are crucial to success. Without spreading the word about your company, your business isn't going to do well.

6. Failing to market your business effectively

Many new business owners find the marketing aspects of building a business intimidating. As a result, they may not do an effective job of spreading the word about their businesses.

Keep in mind there are many forms of marketing. Try them out until you find a style that resonates with you. You may discover that word-of-mouth advertising works well for your business, or perhaps internet advertising and marketing is the secret. The only way to know is to try.

7. Having no website

In this day and age, a website is a necessity, yet many startups fail to create one. Consider that the first thing many potential customers do is look at a company website. If you fail to have a site, you lose out on the opportunity to show clients what you do.

Professional businesses should have professional-looking websites. Investing time and money into a quality website pays back many times over.

8. Avoiding accounting and bookkeeping

Many business owners are idea people. They want to create and implement new products and services. But the lifeblood of a business is the money coming in and going out. That means it's critical to keep a close eye on your accounting. This is especially important as your business grows.

While it might be tempting to hand over control of the finances to someone else if it's not your area of specialty, that can be a dangerous decision. If you ignore accounting issues, you put the company at risk for cash flow issues, and you could even leave your business open to embezzlement. The cash in the business is your hard-earned money, so keep a close eye on your funds.

9. Skipping agreements in writing

There is a good reason lawyers insist on drawing up contracts and having people sign them. When you get a new client or vendor, it's often a good idea to put expectations in writing. By stipulating conditions in writing and having everyone read and sign the contract, you ensure that all participants are on the same page. This can help ensure clients are satisfied and avoid any potential lawsuits.

10. Setting insufficient margins

Most people go into business with the intent of making money. Setting your profit margin too low in order to make sales will create more problems later when you're trying to earn a profit. A small profit margin now may give customers good prices, but they aren't going to be pleased later when you're forced to substantially raise prices to stay afloat.

To come up with reasonable margins, take a look at your company's operating funds, production costs, and competitor pricing. This will allow you to set an attainable profit margin.

11. Refusing to get help

Trying to go it alone is a common scenario for many business owners, including those in partnerships. While taking care of everything yourself may initially be a good option to save money while building your business, not asking for help once you've become established can slow your business down.

The busier you become, the more likely it is that you require some assistance. Delegating via employees or subcontractors is often necessary to take your business to the next level.

Running a business can be one of the most satisfying experiences you'll ever have. Help ensure your venture is as successful as possible by avoiding these common startup mistakes. If you have questions about forming a business structure for your startup, Swyft Filings can help.

Originally published on October 24, 2022, and last edited on October 24, 2022.

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