Posted on Apr 5, 2018

Pitfalls to Avoid With Your New Business

I remember my first year in business over 30 years ago. I was 22, arrogant and thought I knew everything there is to know about owning a business.  

Those thoughts faded very quickly as I soon realized I had so much more to learn about owning a business.  With no experienced person guiding me along in the early days, I made just about every mistake you could think of.

Most new businesses do – so don’t feel too bad if you’ve made a few mistakes of your own.

Today, I consider myself the elder statesman of startups, and I try to offer others the advice that I never had the luxury of getting.

There are many errors and traps for startups that can easily be avoided if you only take a moment to think them through. But the problem is that we often can’t see the trees through the forest because we have so much riding on that first year of business. Our attentions are concentrated on simply getting through the day to day operations of being a business owner.

I’m going to try to help you along here by discussing some of the mistakes that typical startups make.

Not Fully Committing – Letting Others Run the Show

You can’t rely solely on employees to run your startup.
This is a pitfall of many startups.

Many business start with a plan to keep the day job until the business is on financially solid ground. In theory this makes perfect sense because you have likely invested every dime into the business and need to keep a cash flow coming in just so you can survive. This could work if you start small with a ‘side hustle’. But if you are ready to take the plunge on a full-time business, it is probably best to be available on a full time basis to ensure your interests and values are protected every step of the way.

Even if you get help from the beginning, you can’t run a startup part time and rely on an employee to run your new business. This is a recipe that could spell disaster even before you open the door for the very first time.

An employee does not have the vested interest that you do. They might have different business priorities, and likely won’t invest the same amount of effort,  as you – the actual owner will.

A new business is a commitment, and a huge gamble.

As a business owner it is you who must put all your energy and all of your time into this. You can’t comfortably rely on an employee to do it for you. If you’re committed to operating a business, it is going to take 100% of your effort. You can’t afford to divide your energy or your time on a full time outside job and a full-time business.

You can’t have the cake and eat it too.

Too Much Too Soon

Avoid committing yourself to expensive equipment payments.

When I began my contracting business like many other new business owners I had some preconceived notions of what it will take.  I thought a landscaper needed a Kubota tractor, a skid loader and tons of accessories to go along with it.

I couldn’t afford to go out and buy all this equipment, so I decided to make a rental commitment to the tune of $3,000 a month. By doing this, I placed myself in a position that I had to use that equipment enough just to earn back the rental amount each month.

That was a mistake – because – I didn’t.

That first month I used a skid loader on one job for about twenty minutes while the Kubota sat in the driveway collecting dust. During the second month I never used either one of them or any of the other equipment I was renting.

The reality is, all you really need if you’re starting as a landscaper is a shovel, rake, wheelbarrow, and a truck.

A startup does not want to be buried in monthly payments, or long-term contracts, and you are far better off renting equipment on a per-job basis, only when it is needed.

Be careful about over inventorying.

Another error that is typical of a startup is massively over inventorying. Before a startup even opens for business they can find themselves financially strapped by purchasing inventory that may or may not even sell.

None of this inventory profits you while its sitting on the store room shelves for months. The best policy for a startup is to fill your shelves, having only a small backup of the items you know are going to be popular and order new inventory frequently.

Be careful not to commit to monthly or quarterly inventory delivery. It may take time to build up demand for your products, yet. Don’t tie yourself up with tons of inventory.

Granted, you’ll likely pay a little more by ordering smaller quantities, but in the end, you’re not tying your seed money up with valuable stock that may not even sell.

Failure to Negotiate

Don’t just settle in with the first supplier you come across.

It is too easy for the startup to Google suppliers for your industry and settle in to just buying from them. This is fine when you’re only looking for enough stock to be able to open your door but learn to explore all the options.

The road to profit is getting to be the person who knew a person.

For example, when I built my first garden ponds I was paying over $2.00 a square foot for pond rubber. But I soon noticed that rubber I was buying still had the label on it from my supplier’s wholesaler.

I called them and saved a full 50% right off the bat.

But I didn’t settle for this, either. Instead, I thought about who may manufacture the rubber to begin with. There were two that quickly came to mind-Goodyear and Firestone, and I called them to see if they would wholesale to me directly.

They would if I purchased in a large enough quantity. That would be no problem because by this time, I actually had demand for the supplies because I was building garden ponds almost every day. So by buying direct I ended up paying only .49 cents a square foot!

Not only did this huge savings give me the competitive edge over everyone else by allowing me to lower my customer’s price by a third, the savings were so much that I still profited even more than I did before.

I developed this skill for all my materials and supplies and the result was that I was able to outbid my competitors for most jobs, and I still cleared far more profit then they did.

Bad Employee Management

Don’t add employees too soon.

Let’s face it, the new business owner wants to succeed so bad that they tend to panic over things with too much haste. The result of this is that they can often start adding employees before their business is strong enough to make this big commitment.

Just because you may land one big contract or have one booming holiday sales season doesn’t mean you’re ready for full-time employees. It’s hard work to get through these peaks, but it’s in your best interests to grind it out, and add new hires only after these things become continued, repeated events.

Remember, you need to be sensitive to an employee’s own needs as well as your business’s. When you commit to an employee you have to keep in mind that they need the hours to pay their own rent and monthly bills and are counting on you to provide them regularly.

Don’t add an employee until you are certain your business can sustain their needs as well as your own.  It isn’t fair to them and it doesn’t help your business or your reputation as an employer.

When I owned a floral shop my first busy season I had grandma at the register, my sister making bows and Uncle Pete delivering.  I knew that at that point my business could not sustain employees for very long and they were all happy to help.

Your first year in business you will find that family and friends have no problem putting in a day or a few hours here and there just to help you out. These people care about you and want to see you succeed and are usually more than honored to help make your dreams of a successful business become a reality.

The bottom line is, business is all about turning a profit and everyday the startup owner must remain open minded to other options by asking themselves; “Is this the very best I can do?”

Most often it is not.

About the author: James Wendland is a political sociologist and well seasoned investigative journalist with thirty years experience. He was previously the owner of a successful family-run landscaping business.