The exact reasons why vary from startup to startup.
Below are six of the biggest money mistakes entrepreneurs make when trying to get their new businesses off the ground.
Avoid these pitfalls, and you could dramatically increase your chances of long-term success.
1. Not Defining a Problem and Solution
Businesses exist to solve problems, and they earn a profit by selling their solutions to an eager public.
Unfortunately, many startups enter the market without properly identifying the problems their users face — and how their solutions can help.
If you can’t map this out on paper, don’t bother launching a business. You’ll simply be throwing money at a solution no one wants or needs.
2. Not Defining Your Target Market
It’s not enough to come up with a problem and solution. You also need to determine who is facing the issues you’re trying to solve (and where they are).
If you can’t find these people, then you don’t have a market yet, and your business is almost guaranteed to fail.
Even if demand does exist, you’ll waste a fortune advertising in places where your target market isn’t looking. You could have a brilliant business idea and still run out of money before making your first sale.
3. Not Developing a Minimum Viable Product
One of the costliest mistakes entrepreneurs make involves trying to launch with a perfect, feature-rich product. In fact, many business owners invest oodles of time and money developing their ideas in secret — without ever soliciting feedback from potential buyers.
Don’t go this route.
Instead, develop a minimum viable product (MVP) that offers the bare essentials. Doing so allows you to test market demand before investing more resources.
For example, imagine that you’re developing the world’s first car. The essentials might include tires, gears, a steering wheel and a chassis to hold everything together.
Your first prototypes won’t be pretty, but they’ll instantly appeal to anyone who wants to go from point A to point B.
If the demand is there, you can then add fog lights, cup holders, Bluetooth radios, and countless other bells and whistles. In fact, you can use your early sales to finance these future improvements — instead of paying for all development costs entirely out of pocket.
4. Not Incorporating Your Business
Incorporating your business too early is a mistake. You should definitely wait until there is measurable interest in what you have to sell before going through the motions.
Not incorporating is also a costly error for two reasons:
- Incorporating helps to reduce your exposure and liability. Your personal finances remain separate from those of your business, which better limits how much you can lose.
- Incorporating allows you to claim numerous tax benefits — especially under the revised IRS code. Why leave money on the table when you can qualify for generous deductions and pass-through benefits?
5. Not Staying Lean
Hiring the wrong person for the job is expensive. Getting rid of dead weight is extremely difficult once they’re on your payroll.
You should be extra cautious about whom you bring on board.
Even with qualified candidates, it’s often a bad idea to hire workers full time. Instead, stay lean and outsource as many projects to freelancers as you can.
The same goes for office space, tools and equipment — all of which are easily accessible in today’s sharing economy.
Stay lean and only “rent” what you need — when you need it.
This is great advice even as your organization continues to grow.
6. Ignoring Payment Data Security
From Facebook to Target to Equifax, we read about major data breaches all the time.
But you’re just a small player. Hackers won’t come after you, right?
Because the majority of startups lack the IT savvy to protect themselves from cyberattacks, they represent some of the easiest and most attractive targets for criminals. According to some estimates, one in four small businesses get hit with fraud every year, with annual losses exceeding $25 billion.
This staggering number doesn’t include the legal fees, penalties, and lost business that typically accompany payment fraud and data breaches.
The good news is, you don’t have to be an IT wiz to protect yourself. By partnering with a PCI-compliant payment processor that specializes in advanced fraud protection, you benefit from:
Let Us Help Your Business Succeed
There are a million and one reasons why your startup might fail. This isn’t breaking news. That’s simply the nature of starting a business.
At BluePay, we can help level the playing field a bit and make success more attainable.
You’re on your own when it comes to developing new business ideas or finding a market. Yet, when it comes to reducing payment fraud, we have the tools and resources to safeguard your payment environment — whether you run a brick-and-mortar business or an online store.
To learn how our PCI-compliant processing solutions can help, schedule a free consultation with our merchant services team today.