Being involved in a startup can be very exciting, as they are often full of energy and fresh ideas. However, there are some pitfalls that can hamper the momentum of a new business. This article goes over some of the most common ones so that you can avoid them.
Pitfall 1: Not Using Contracts
In the early, busy days of a startup, it can be tempting to skip the use of contracts to save time and conserve energy. Don’t make this mistake. A contract protects you from issues like clients trying to change the terms of your agreement down the road. You should also use firm, written agreements when working with other businesses in joint ventures.
Pitfall 2: Not Understanding Payment Schedules
It is essential to have a firm handle on payment schedules, which contracts can help with. Many entrepreneurs mistakenly assume clients will pay on time without prodding. Some clients will, but for others, you may need to pursue payment with the contract in hand.
Pitfall 3: Lowballing Cost Estimates
Another common startup error is underestimating how much cash the business needs to have on hand at its launch, according to Entrepreneur.com contributor Cindy Yang. To avoid this, Yang advises aggressively overestimating your business’s expenses.
Pitfall 4: Ignoring Information Control
Information control is something your new company can’t afford to ignore. You should have non-disclosure agreements at the ready, and you should also be judicious about sharing information with contractors and employees.
Pitfall 5: Misunderstanding Taxes
Taxes can lead to some rude surprises for young businesses. For example, full-time employees and independent contractors are treated very differently when it comes to taxes. An accountant can be massively helpful in this area; however, if you can’t afford one, at least obtain tax-preparation software to help you in the process.
Good luck with your startup, and be sure to check out Commercial Capital Partners’ other blog posts for more helpful information!