I’m celebrating the fourth anniversary of starting my own business. As part of my end of fiscal year evaluation, I’m taking a look at those things that didn’t work or were mistakes, so that I can avoid repeating them, change course or simply act as a beacon of “what not to do” for my consulting clients. Here’s a list of the top 5 biggest mistakes I made as a start-up.
Clearly seeing our mistakes is as important to business growth as celebrating our successes.
1. Unemployment: I didn’t file for unemployment right away. Shock over being downsized and my “fight or flight” instincts kicking in caused me to accept a series of freelance consulting jobs before I’d done my homework. My state was offering a job transition program for newly downsized executives who wanted to start their own businesses that would have allowed me to collect unemployment for a period of time while I set up my new company and even while I got on my feet with my first few clients. But because I didn’t consult with unemployment, I missed the window for this program and wasn’t able to avail myself of that financial cushion. The first year was very hard financially and if there are any programs in your state, they are worth checking out. Call your local unemployment office or check with the Small Business Association to see if there are programs that can help you with start up costs.
2. Legal Advice: Deciding whether to become an LLC, an S-Corp or simply to be a single person consultancy are all decisions that have tax implications. Consult both a lawyer and an accountant so you can make an informed decision. In the early days of starting my business, I asked everyone BUT those professionals for advice and ended up starting as an LLC, transferring two years later to an S-Corp, filing to change the name of my corporation and dissolving a smaller, second LLC I created. The chaos, extra money and tax challenges I created for myself all came from not being clear about my business end game and from not spending the money, upfront, on professional advice.
3. Accounting: Keeping the books for a business is different than balancing your checkbook. If you’re good with details and filing and your new business is straightforward, you can use accounting software. However, if tax law and deductions are not your area of expertise, I highly recommend forming a close business association with a good accountant. First, because you’re life and business will run more smoothly. Secondly, because you should be focusing on creating and promotion and selling your products or services and not on managing your finances. I did not do this in my early business years. Instead I filed for tax extensions, kept my receipts in a box and worried, every single day about when I’d find the time to get my financial house in order. In addition to the stress of bookkeeping, I wasn’t able to professionally forcast cash flow, expenses and business growth; all important metrics for taking a business from an expensive hobby to a fully functional corporation.
4. Board of Advisors: This is a trick I finally learned from a great mentor. Instead of asking every person you meet how they manage their business, gather together an elite group of highly successful business people you admire and who each have the experience and business gifts you need to succeed. Ask them to serve on your Board of Advisors. Hold monthly or quarterly meetings and present your state of the business address to them. Share your goals, challenges and needs. Ask for, and listen to, their sage advice. I finally started doing this and my business is growing exponentially based on my willingness to head the advice I sought from those who are further down the entrepreneurial road than I am.
5. Forecast: In any corporation, forecasting for the next 1-5 years is an annual exercise. It needs to be in your small business as well. Taking an honest, unvarnished look at where you are, where you want to be, what’s working, what’s not, evaluating your products and pricing and making tough decisions is the only way to take your business from here to there. I did not do this in year one because I felt I was “dancing as fast as I can.” Therefore, year two was slow and a struggle. I had not projected for or made a plan to acquire new business and when current client’s jobs were complete, I was in a very slow and very scary place. Do not do this. Spend a percentage of your time planning new products, prospecting for new clients, promoting your business brand and expanding your circle of influence and your business offerings.
So there’s my humiliating story of being downsized, panicking, making a lot of mistakes and learning valuable entrepreneurial lessons. Ultimately, I persevered and my business survived and is thriving. I suspect I’ll make more mistakes along the way and I promise I’ll share those with you here.
I’d love to hear about your entrepreneurial journey. When we share our stories, we support the entrepreneurial community at large and that’s good for all of us. Is there one piece of advice you’d give to new business owners? Please share it here or on my Facebook wall and let’s see how we can help one another celebrate more business anniversaries.
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