QUESTION: I am in the process of setting up a new business. Can you alert me to the key things I should do to avoid costly mistakes?
ANSWER: To begin, you should check out Virginia Business1Stop, an online portal that will guide you through the start-up process.
In addition to the wealth of information provided by Business1Stop, you should try to avoid these five costly small-business mistakes:
- Not incorporating: Failure to incorporate or form a limited liability company can expose your personal assets in a case where you are sued for alleged negligence in your business dealings. By creating a corporate entity, you create a buffer that can protect your personal assets.
Be sure to set up a business checking account and never commingle business with personal expenses.
- Not developing a business plan: Your written business plan is the well thought-out document that describes your mission, your marketing strategy, your competitive advantages and the capital required to fund your startup and ongoing expenses until you reach break even.
SCORE provides a template for these that can be accessed online at https://tinyurl.com/jmnlqs8
- Not diversifying: Avoid having all your eggs in one basket, as in one large account.
Have multiple profit centers or products and services that make money. Track the profitability of each to determine where you should focus your energy and advertising dollars.
- Not controlling receivables and overhead: Age your receivables and, wherever possible, collect money owed to you at the point of sale.
Also resist the urge to overstock inventory and negotiate both price and terms on any big ticket expense items.
- Not asking for help: Most small-business owners try to wear too many hats.
Determine your strengths and weaknesses. Focus your energy on tasks that make money and outsource or delegate the rest to capable employees.
SCORE counselors can work closely with you and help you avoid these and other costly mistakes.
Remember, there is no such thing as a dumb question if you do not know the answer. SCORE’s help is available for the asking.