A Business is defined as the activity of making money by buying and selling goods and services. There are mainly 4 types of business organizations. They are
- Sole proprietorship
- Limited Liability Company
- Private Limited
Sole Proprietorship: The simplest form of business is sole proprietorship. Solo proprietorship is a business started and run by someone for their own sake. The business decisions are completely taken by the owner. In sole proprietorship the profits are concerned to the owner. There is total flexibility in this type of business and less requirements to start a business.
Partnership: There are two types of partnership, general and limited. In general partnership both investors are responsible for all the debt and it do not require any agreement. Partners invest their money, property etc.. to the business and both have equal rights over the business. In limited partnership the investors will have liability based on the portion of their investment. Limited partnership requires a formal agreement between the investors.
Corporation: Corporation business is for tax purposes. The profits earned by a corporation are termed as “personal income” of the company. Then the total income of the company is divided among the share holders.
Limited Liability Company(LLC): Limited liability company provides limited liability to the owners along with income advantages of a partnership. The profits earned by the company are shared by the partners without double-taxation.
An enterpreneur who is starting a new business may not be familiar with how to start a business. So he may commit some business mistakes while starting a business.
Private Limited: Private limited company is a business run by a group of members called share holders. It is limited to 50 share holders and it doesn’t publicly trade shares.
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Common Mistakes an Enterpreneur should avoid when starting a business
- Starting a business without an entity
- Insufficient capitalization
- Planning only for success
- Afraid of failure
- Business planning
- Get organized
- Understand your market and target audience
- Don’t try to do all work yourself
- Choosing wrong business partners
- Don’t avoid legal document contracts
- Hiring employees soon
- Giving yourself a wrong salary
- Don’t underestimate your services
- Launching business too early
- Expanding business soon
- Hiring wrong people
- Overpromising to the customers
Starting a business without an entity
A secured license is required to start a business organization. You have to register for liability corporation, so that the partners in the business are liable for anything happened with the business activities.
For example, if two persons A and B started a business of selling some food products. If any of the customer experiences food poisoning from the products sold by A and B, that person can appeal for A and B’s personal assets for the damages caused. LLC (Limited liability corporation) is the common form of registered entity in all states because of low cost.
In any business capital investment or money is the main resource. Capital is the money invested by the share holders or partners in exchange for ownership of business. Some business are capital intensive and some are capital efficient. But in most of the businesses lack of money is the main reason for failure.
Planning only for success
Every entrepreneur always think about achieving success. But to be successful in a business, the business should remain flexible in all processes and should be easily understandable to the customers.
Afraid of failure
Every new business man will have some kind of fear while starting a business. The biggest mistake of an enterpreneur is thinking about failure. Failure is always the key to success, the way how take it matters. Failure is a way to learn more to achieve success.
Many businesses start without a plan which leads to failure. An enterpreneur should make a plan with aspects like what is the business about? how much doest it cost to setup? who are the customers? marketing the products or services etc…A proper planning of a business always helps to achieve success
In a business lot of things at once. So it is good to have to do list for everyday based on the priority. Planning the work earlier makes it easy to complete within a time limit and increases production.
Understand your market and target audience
A business has to focus mainly on the target customers, manufacturing a good product doesn’t matter if you are not communicating with the customers to know their requirements. So in order to be successful, you should mainly focus on the customers.
Don’t try to do all work yourself
One of the common mistake an enterpreneur make is doing all the work alone. Take experts advice and hire truthful advisors to talk about your business ideas, plans, challenges etc…Try to receive continuous feedback to avoid mistakes.
Choosing wrong business partners
Before starting a business an enterpreneur should know that investors are more than financial backers. So choosing right share holders is a challenging task in a business. Intercating with the investors about the business makes sense.
Don’t avoid legal document contracts
An enterpreneur should make sure to implement a legal document contract with the partners irrespective of the relationship with the investors. You may have to face problems if agreements are not properly done.
Hiring employees soon
A mistake that a startup does is hiring employees too early. Hiring a full-time employee when a part-timer can make the same job. Its very easy to maintain a small business with part-time workers.
Giving yourself a wrong salary
Being the owner of the business taking yourself a high salary or less salary is a mistake. Its easier to decide a new employees salary rather than owners salary. So keep in practice to pay yourself a percentage of the revenue earned.
Don’t underestimate your services
Many enterprenuers fail to value their servies properly. Don’t price too high or too low to gain market share. Prcie your products according to the quality. Be careful about doing things freely for charities, communities etc..as your business shouldn’t be recognized as a free entity.
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Launching business too early
Don’t ever rush to launch your business without getting completely ready in the backend. Once the business is public, you should be ready to handle the clients, manage the systems and processes properly and maintain marketing.
Expanding business soon
Once you start to see success in your business don’t expand your business without planning anything. You assume that things keep on moving as it is but once the business expands, you might not be able to manage more number of employees which may lead to no results and no revenue.
Hiring wrong people
Different skills are reqired for different positions in a business organization. Make sure you hire a person who is hard-working and can perform well according to the business needs. Look for specialized persons for roles you offer to get the work done earlier.
Overpromising to the customers
Don’t over praise yourself infront of customers. It is better to tell your customers what can be achieved with their project, this will save you from failing to meet the promises.
A successful business is not built by a single person, it requires experts to avoid mistakes in startup. In order to be a successful enterpreneur, try to avoid the above mentioned mistakes and learn from your mistakes, so that you never repeat them again. Take continuous feedback from the customers and try to fulfill cutomers demands.