- Posted July 17, 2014 by
This iReport is part of an assignment:
The maker movement
How to make your new business a success - #1
With some studies showing that one in ten new businesses fail, avoiding some of the pitfall mistakes commonly made by new businesses may increase your businesses chances for success. This is part one of a ten part series on ways to help make that venture a success.
Successful entrepreneurs and investors alike say the same thing: The product or idea itself is secondary. What matters most is the person behind the business. It isn’t how smart the person is, how much experience he or she has, how much money is saved and poured into the startup, or how many great ideas that person has. What makes the difference between failure and success is the entrepreneur spirit. Do you have the energy, drive, passion and hunger to make the business a success?
If you’re passionate about your new business venture, your drive will cause you to learn many of the things you need to become successful as you go along. We're here to help you avoid the mistakes that most entrepreneurs make one, two or more times before finding success.
Here are two common mistakes made by people with a corporate background attempting to start a new business.
Treating your new business as a hobby rather than a real company
Treating the business as a project or hobby rather than a real company is a big mistake. The IRS treats something a person does for three years or more without making a profit as a hobby.
Unless you’re happy with a new hobby, treat the business as a real company, one with an actual impact if it fails, and acquire customers as quickly as possible.
This little test will help determine whether you’re running your business as a hobby:
Is there a separate bank account in the name of the business or are you using your own personal account? A business would operate out of its own bank accounts, while a hobby would be managed from your own personal accounts. Even if you have no profits or income coming in, open that business account now.
Do you have a .gmail, .aol, .me, .yahoo or other type of mail account for your business? Any business related email accounts should use the businesses domain name, such as firstname.lastname@example.org.
Did you create an LLC, LLP or corporation for the business? If not, get that done immediately.
Are you using your home or personal cell phone as the main number for the business? This is extremely unprofessional and a turn off for many customers, unless of course, this is your hobby.
And the final test, profits. If you haven’t generated any profits in three years or more, you probably should face the fact that you have an expensive hobby. It is time to move on and find another business that can generate profits. If you can afford to, and enjoy your hobby, then by all means, keep at it.
There are other things that make your business seem more like a hobby and may discourage customers. Look in the mirror and ask yourself, would you be a customer of this business? Think long and hard before answering, and if you can honestly answer ‘yes’, then you’re on the right track.
The second mistake is acting like you’re running a large corporation rather than a hungry startup
A successful corporate approach is not appropriate for small business startups. A startup is in a fight for survival. Acting as if you’re part of a management committee making executive decisions doesn’t work in a startup environment.
The management committee in a startup is everyone who works there, not a select group of entitled individuals. Don’t try to run your startup as a small version of a large corporate enterprise. A startup requires a completely different management approach.
In addition to developing the business, startups need to develop world-class marketing, promotion, sales and support services. Normal corporate strategy, such as trying to increase sales by ten percent, doesn’t work for a startup. To begin with, a startup needs to think in terms of increasing sales by hundreds of percentage points each year, quarter or even each month.
This is part one of a ten part series. The source for this series is the new ebook, Startups and Entrepreneurs: Mistakes to Avoid For Success, by an entrepreneur who prefers to remain anonymous and goes by the pseudonym Atticus Aristotle.