If you’ve ever told anyone about your plans to go into business for yourself, it’s a pretty safe bet someone has replied, in no uncertain terms, that you’re doomed to failure.
Then you nod and smile and keep walking your path. As well you should.
The problem is, the doomsdayers aren’t all wrong.
Self-employed, freelancers and home-based business owners have a disturbing pattern of falling flat on their faces. Or even worse, never really getting off the ground.
Here are six of the most common mistakes I’ve seen micro-business owners make over and over and over. I’ve even made a few of them myself (okay, most of them).
So, read on and save yourself some heartache and tears and time and money.
Messy break ups are inevitable.
Burying your head in the sand will not make the world go away.
Partnerships sour. Collaborations fall through. Clients get upset….and sometimes sue you. Customers conveniently forget to pay you or claim you didn’t do the work you did.
There are ways you can protect yourself against these things.
You can start with solid contractual agreements. The uninitiated (meaning, those who have not been burned 15 times) often choose to skip this step because they’re afraid it’ll scare away potential clients or they don’t take their work seriously enough to thing a contract is necessary.
But that’s not you, right? If you’re ready to do this thing right, Our Deal is an amazing resource for creating, sending and signing all kinds of contracts with just a few keystrokes.
A well-thought out legal structure for your business will help too. You can ask your attorney friends what might be the right legal structure for you. There are a whole host of tempting legal shortcuts like LegalZoom, but according to the incredibly smart & beautiful Rachel Rodgers, they don’t account for the unique nuances inherent in every business.
Rachel recommends you do the work yourself so you actually understand the process. If that’s not something you want to do, she says virtual law offices are good way to hire affordable attorneys. Just google “[your state] virtual law office” or “online law office” to find a VLO in your state. I’d suggest checking out Rachel’s entrepreneur services as well.
Insurance is another safety net for when relationships sour. I won’t pretend to know anything about what insurance is right for who. You could always try talking to your car or home insurance agent…but in my experience, they don’t have a clue. They maybe be able to steer you in the right direction. Luckily, the smart folks over at Solo PR Pro just posted a fantastic overview of business insurance.
Finally…and probably the most likely relationship to sour…are your personal relationships. Starting a business is stressful. That stress will have affect your relationships & your business.
So, go in with your eyes wide open. No wait. Better yet, make sure everyone is going in with their eyes wide open. Talk to your loved ones about your ideas & expectations and your ups & downs. Collaborate with them (if they’re interested). Ask for their buy in and they’re support.
Punching a clock is still punching a clock.
Let me start by saying almost every service-based small business has to start here. But that does not make it sustainable.
If you’re selling your time by the hour, you aren’t a business owner.
You might be able to get away with calling yourself self-employed. “Employed” as in still a wage slave.
Sure you might have a slightly cooler boss. And you’re probably charging a bit more than your earned as an employee. And you may have a little more flexiblity with your time than you did as an employee. …but only a little more.
Taking time off for illness or for fun or for your family means you don’t get paid. There’s no vacation time. No bennies. No health care plan. If you aren’t working, you aren’t earning money.
Sure, start here if you need to…with a well thought out plan to evolve past this point.
This cannot be your long term income plan. You’ll kill yourself trying to sustain it.
This is also known as getting too big for your britches.
We see this happen all the time in movies.
Just imagine the scenario:
The hero programmer struggles in the beginning. He works tirelessly and makes countless sacrifices to bring his robot software to market. When he does, he’s a star. An overnight sensation (that took 20 years of struggle to achieve).
All of a sudden, money isn’t so tight anymore, people start recognize him, experts want his opinion. And he starts acting the part, times infinity. He buys new clothes, fancy office furniture, the right car, joins the “right” clubs, eats at the “right” restaurants, gets seen at the right parties. All the while, he’s alienating the family and friends who supported him all along. And alienating his work.
It turns out the software isn’t so great and disaster is just around the corner. The robots are conspiring against us. Our cocky, over confident hero falls and falls hard.
Okay, maybe this is a bit sensationalized, but the story happens every day.
Don’t stop running the race as soon as you start to get ahead.
If you experience success (and you want it to last), pat yourself on the back and then get over yourself and get back to work.
This is such a huge challenge for new business owners.
You work so hard for that first big sale. You finally get paid…and quickly spend all of that money on household expenses like housing, food or lights.
Yes, the money is yours to spend. You earned it. But there’s a funny gray area there that suggests there should be NO GRAY AREA between your businesses accounts and your personal accounts.
First, get a bank account for your business.
You can do this with the same bank as your personal accounts to make transfers easier. Make sure every penny you earn or spend for your business goes through that account. Don’t pay personal bills with this account.
Pay yourself…by transferring money to your personal account or writing a check to yourself if you like to go analog. And then pay your personal bills with that money from your personal account.
This is the best practice.
It’s easy to do, if you do it from the start. But once you have your accounts intermingled…it’s really, really, really hard to stop and change your behavior.
Second, don’t pay yourself every cent you earn.
Keep some money in reserves. You have expenses to cover now. Take care of the business expenses first or the business will die. And remember that you will have to pay the tax man some of that money.
If you honestly aren’t making enough money to leave some in the bank, then your business isn’t self-sustainable yet. Don’t be discouraged though. Just keep learning and applying what you’re learning to your business and growing.
You know what you’re good at. So, do that. Period.
Look at the menu in the picture. It is awesomely perfectly simple. They’re good at seafood. So that’s what they do.
They didn’t add burgers to please the non-fish-eaters. They didn’t add desserts. They didn’t add chicken. It’s seafood. Period. And it’s probably AWESOME seafood. Because they’re specialists at it.
Let’s say the owner gets the brilliant idea to add burgers to the menu.
That’s going to take the kitchen’s focus from the seafood. They have to retool the kitchen. They have to change their processes completely. And they aren’t as good at making burgers as they are seafood, so their overall quality of their menu would go down. The quality of their seafood will go down too…because they’re distracted by the struggle going on with the stupid burgers.
The whole thing would fall apart.
So….keep it simple. Know your specialty.
This isn’t going to happen overnight.
I’m sorry if that’s a shock. Most likely, it isn’t.
But we do live in a world of instant messages, drive in lattes and streaming movies. We tend to get impatient when things don’t just fall in place.
That isn’t gonna happen here. There will be boulders to push up hills. The first products you make…no matter who you are…they’re gonna suck.
No one is great when they’re just starting out.
Let’s say, instead of starting a business, you decided you wanted to play the cello in the symphony. So, you buy a cello, take a few lessons from a few different teachers and audition.
Would you be surprised if you didn’t get in? No. Because, unless you’re some kind of freakish prodigy, you’re not going to be good at this right away. Period.
Do you know how you get past that? By being bad at it. Often. Loudly and proudly. Every time, you’ll be a little less bad until you’re good.
That’s not easy to do, but I am 99.75% certain you can do it.
Let’s talk about this!
What business mistakes did I leave out?
I’d love to know your experience with these mistakes. Have you made them? Have you seen others make them?
Let’s talk about it in the comments.