One of the things I love most about what I do is getting to see so many new businesses, all with fantastic ideas, just waiting for an opportunity to flourish. However on the flip side I get to see some pretty regular mistakes that a lot of people make which can cause real problems with achieving success. Today I’m going to run through 5 of the more common mistakes you should try to avoid.
1. Over complicating your structure
Once your business is generating profits then maybe you need that more complicated limited company set up. When you are in the very early stages it is often better to start off as a sole trader – the requirements are easier to understand, you are less likely to get in serious trouble if you get it wrong. Business structure is definitely something you should look at, but don’t get too complicated if your business model doesn’t demand it.
2. Not drawing up a business plan
I don’t come across that many businesses than have taken the time and effort to draw up a business plan. If you are not trying to get funding then you may think you don’t need one, but the main benefit of a business plan is the clarity it brings to what you are trying to do. If you don’t know how much it costs to make your product, then how can you figure out a sales price, if you haven’t researched your market then how can you market effectively.
3. Not keeping adequate books and records
It still surprises me how few business owners understand their numbers. Despite many years of the Dragons Den ramming home than you must understand your numbers to understand your business, the lesson still hasn’t really been learned. If you don’t have adequate books and records, then you don’t have a chance of understanding those numbers, and at the end of the day you are not helping your business.
4. Sticking your head in the sand
If you know you are doing something wrong, or you are worried that you don’t know what you are missing, then don’t just ignore it and hope it’ll get better on its own. Do some research, or ask someone – be it through a business forum, a mentor, a professional. The longer you leave a problem the worse it is likely to get.
5. Not keeping receipts
This is a really basic one, but it still catches people out. You need to retain invoices and receipts for at least 5 years after the 31 January submission deadline of the relevant tax year. All of them. Scanning them and storing them electronically is OK, but if you don’t have your receipts then you can’t prove that your purchases and expenses were tax deductible in nature. Its even worse if you are VAT registered – if you don’t have a valid VAT receipt or invoice, then you can’t reclaim input VAT.
What other mistakes did you make in the early days? We all do it!