5 Common Mistakes Made By Startups | Your Business Coaching Club

5 Mistakes Start-ups Make When Getting Off The Ground

In this guest post, Walt Capel talks about some of the common mistakes made by small business start-ups, and in particular, the need to spend some time getting your insurance needs correct.

People who are brave enough to start their own business generally have different personality traits from other people.  Confidence is usually one of those traits, and it is this confidence that enables entrepreneurs to find success where so many others find failure.

While confidence is definitely a virtue for small business entrepreneurs, it can also be a trait that ultimately causes the business to fail. It is important that all startups think carefully before executing business decisions and not just rush in blindly.

There are lots of mistakes start-ups often make that can lead the business towards failure.  Here are five common mistakes to watch out for.

Choosing the wrong location. 

A common statement among people in the real estate industry is; Location, Location, Location.  Picking the right location is also immensely important for any business, no matter what industry you operate in.

There are obviously industries where a location that is convenient for your customers is more important than for other industries. If you have large deliveries and need room for storing product then a warehouse setting in the suburbs might be the best location. If you are running a restaurant or retail store than you need to be somewhere with lots of foot traffic.

Carefully choosing the location you are going to open your business in can be one of the key factors that ultimately determines the success or failure of your business.

Launching at the wrong time.

The timing of your opening is crucial to the initial success of your business.

Getting cash-flow coming in quickly can be a huge determining factor in your business making it through the first year of operation, but opening before you are properly prepared can spell disaster.

Ensuring your networks are all up to date and operating properly has to be done before opening up to the public.  This goes for setting up your internal phone systems and internal email. It also includes creating proper hiring procedures, determining compensation for your employees, how you will train those employees and how you will evaluate those employees. All of this needs to be planned out far ahead of your grand opening.  If your business has a busy season there needs to be proper time to get all of these new employees trained and ready for this season.

Many businesses start with a soft opening and have their official grand opening a month or six weeks later. This gives the business time to properly work out the kinks before promoting your business to the masses.

First impressions are important in business.  It is more important for your business to delay opening in an attempt to put its best foot forward, as opposed to figuring it out as you go.

Not ensuring your business is classified properly for Commercial Insurance.

General Liability  and Workman’s Comp Insurance  are required by law in nearly every state. It is nearly impossible to run a small business without these coverages.

The industry you operate in can drastically change what you pay in premium. This is because, it is far less risky for an insurance carrier to insure a law office compared to a roofing company.  The price you pay in premium is directly proportional to the amount of risk your business takes. Moving forward, your claims history and the industry you operate in will begin to impact your rate on premium.

One key mistake many start-ups make is rushing through the quoting process for commercial insurance.  This is understandable because there are so many things an entrepreneur must do in order to get the business launched, but it is well worth your time to spend a few extra minutes speaking with your insurance agent about what your business will and will not do.

Some industries have more than one classification code for several similar businesses.  If you rush through the quoting process, the agent may assume your business takes on more risk than it actually does. This will result in a higher rate of premium.

A good example of this difference is in the commercial and residential cleaning industry. Residential cleaning companies tend to drive to two or more houses throughout the workday.  The time that they are driving between houses is covered by liability and workman’s comp.  This driving risk adds to the frequency and severity of claims residential cleaning companies typically have compared to a commercial cleaning company.  A commercial cleaning company usually has employees who come to one location like a mall.  While at this location the might clean two or more businesses.  Because there is no driving risk their claims are lower on average and their rate of premium is reflected.

Spending extra time speaking with your independent insurance agent can prevent your business from over or underpaying on premium from being misclassified.

Not knowing what you do best.

 Many businesses make a major mistake before they ever open the doors. That mistake is not knowing what you are good at and what you are not.

It is always best for your business to spend the majority of operating hours focusing on what your business is best at doing and what is most profitable. If there are other tasks that consume time and can be done by another business then it is wise for you to find another business to do this service for you so you can focus on your core business.

This can be as simple as hiring a payroll company to perform this process instead of your employees doing it. If you own a construction company it may be in your best interest to hire an electrician to perform this work as opposed to having an electrician on staff.

Knowing what you know and knowing what you do not know can have an immense impact on the ultimate outcome of your business.

 Sticking too much to a plan. 

 Having a business plan is crucial and it is important not to venture away from that plan too much.

At the same time, it is important in the first few months and years of your business for you to stay agile.

If you find some portion of your business is working better than originally planned do not hesitate to put more focus on this aspect.  Make sure that portion of the business is profitable and worth the time you are investing in to it, but never run away from paying customers.  Especially customers that are buying the products and services that are most profitable for your business.

 

Bio

Walt Capell is the President/Owner of Workers Compensation Shop. Workers Compensation Shop is a rapidly growing national insurance agency with a strong reputation for forward-thinking, out-of-the-box products and solutions for business owners.

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