Launching a new business? Putting in long hours?
Now for the not so good news: You’re likely going to have a few bumps and hurdles along the way.
As an entrepreneur the possibilities for errors are endless: Like failing to file important compliance documents. Or overlooking an important tax filing deadline. How about blowing through all of your startup funding.
When these and other mishaps occur, it’s so easy to write them off as simply another case of “we didn’t know what we didn’t know.”
But here’s the good news:
Every mistake you make is a learning moment
Below are seven of the most common pitfalls startup entrepreneurs make when launching a new business.
Regardless of whether you’re a newly minted entrepreneur or have been into your business for the past 2–3 years, we invite you to capture some notes and heed the call to action on what you read below.
Pitfall #1: Too Much, Too Fast
You’ve started your business and the adrenaline is flowing. Things have reached a fever pitch. You’re feeling ambitious and on top of the world. And yes, of course, you’re expecting immediate results.
“Next week we’ll be profitable,” you tell yourself. And then you have a Chinese Bamboo Tree moment.
When you find yourself in this trap, it’s important to keep in mind that we often OVERESTIMATE what we can achieve in “Year One” while UNDERESTIMATING what we can do in say Year Five.
The lesson here:
Mistakes are going to occur. So you may as well learn from them.
Pitfall #2: Putting off Setting Up a Corporate Entity:
If you have a highly conservative accountant they will likely tell you that you can get away with simply registering with your Secretary of State as a sole proprietor. But there’s more to this story so listen up: Setting up a business entity ( LLC, S Corporation, or C Corporation) right out of the gate may be an important step for you to consider for one major reason, namely, it can serve as a form of liability and personal asset protection in the event that you’re sued.
Pitfall #3: Not Having a Good Bookkeeping System
Here’s an often overlooked fact: Having a great bookkeeping system (i.e. keeping those receipts) will not only allow you to maximize your tax writeoffs but save you a ton of headaches and extra CPA costs at tax time.
Back in the day, the modus operandi was to toss all of your lose receipts in a bag and hand them off to your bookkeeper monthly for reconciliation. Today we have great online sites and apps that can assist with digital downloads of bank statements and receipts. So there are no excuses for not having a good system in place.
Pitfall #4: A Lack of Startup Funding
It’s well documented that the number one cause of business failure is a lack of funding and working capital. Therefore it is an important piece to get a handle early on in terms of what will it take to keep your business running on a day-to-day basis. Otherwise, this disconnect could lead to funding shortfalls that might quickly put your business in peril.
Your Secret Sauce for better funding outcomes: Learn about the importance of Cap Tables.
Pitfall #5: Poor Sales Execution and Growth Mindset: As a startup, building a sales funnel can often lose importance in our list of priorities even though we are well aware of its importance. It goes without saying that this can lead to disastrous consequences.
Grant Cardone in his bestselling book entitled The 10X Rule: The Only Difference Between Success and Failure admonishes us to take massive action in the work that we do, saying that it is vital for the success of our business.
Here is a brief video of Grant discussing his 10X Growth Mindset!
Pitfall #6: Taking Shortcuts With Your Product or Service
The late inspirational speaker and thought leader Jim Rohn noted in one of his early seminars, “You get paid for bringing value to the marketplace, and if you’re not very valuable you don’t make much money.
The same is true for your business: The MARKETPLACE VALUE of your product or service is what will ultimately determine your business success. In other words, if you focus on all of the other details of your business versus working on the quality of your product or service, your business will likely see an early demise.
Pitfall #7: Lack of Strategic Direction
Here’s the key: Find your business sweet spot and then stay in your lane. Because if you disperse your energy in too scattered of a fashion, you will experience the Law of Diminishing Returns and your business will crumble.
Startups, emerging enterprises, and aspiring entrepreneurs are increasing at the crosshairs of a messy challenge, namely, how to create an orderly, secure, single source of truth for their documents and agreements.
We recently asked Equa Start Vice-President Sten Wie, to share a few brief thoughts on the herculean efforts taking place at Equa START to deliver a fresh set of solutions around this prevailing issue.
What’s the fundamental problem Equa Start is trying to solve?
The problem we are solving ties back to a knowledge gap among entrepreneurs and business owners around running a company efficiently and compliantly from a document system, corporate governance standpoint.
When you say corporate governance, what are you referring to?
It’s true, most people don’t know what that is. They may have a vague understanding or an operating agreement that references it and states that they have to do certain things. But they don’t understand the recipe in terms of their document system.
Can you elaborate a bit more here?
Business owners are often solely focused on building a product, idea or brand, that they are seeking to communicate to customers. While that’s great, they later find that not managing these document systems in an efficient way becomes problematic.
Problematic in what way?
Let’s say you want to add capital to your company because you’ve taken on a new partner. Or you want to issue shares or do a capital raise. It’s no mystery here that your documentation trail needs to be solid. There’s a proscribed process for doing this and doing it right. And if you don’t, you’ll be subjected to a lot of risks.
What are some other instances where due diligence around documentation is important?
If you are a company that’s vastly successful, and you want to get acquired or have now issued shares, documentation is of vital importance. In other words, you have issued stock or vested shares and handshakes have taken place. But if that paper trail is not outlined, defined and stored somewhere, then you expose yourself to a tremendous amount of liability. Even worse, you could even get sued if people become angry.
So a failure to address these shortcomings creates exposure?
Correct. It’s a simple truth that when you are leading a company that has reached a certain level of success, you will have a target on your back in one way, shape, or form. And without a process of establishing and maintaining your corporate governance, all this can now become a threat to the wealth you’ve built, to your livelihood, to your family, to everything.
So how does Equa START fit in here?
Doing this well and doing it right is our motto with clients. We are essentially providing an old school software installation wizard for document management, agreements, and corporate governance.
What’s the primary value proposition?
Whether it’s an employee agreement, vendor agreement, new bylaws, whatever a group of people can create consensus around the terms of a document, that’s where we are here to help.
But why replace the architecture or systems a company currently has in place?
Great question.So here’s the deal,many of these systems made sense and worked when a company was in its early stages and had, say, two partners. Problem is they never went back to their corporate bylaws once their number of partners grew and said, OK, we need to make sure that we have one version of a document instead of each partner making revisions and not knowing what the reality is, what the true document is.
So, in other words, it’s very difficult to reconcile what the truth is when everybody can individually without oversight, without notification, edit that reality?
Correct. If you have nineteen partners and they are all editing things, how do you reconcile all of that? Often things are in paper format, in Dropbox, maybe even in Excel. But there is no path, there is no process to force everyone to do it in only one master document, in one place. This is what we mean by the term “single source of truth.”
What is the ramification of not addressing this?
Without this reconciliation and due diligence, people simply do whatever they feel they need to do with regard to a single source of truth. It’s not malfeasance or people trying to screw one another. It simply becomes a scenario where a bunch of people all acting independently in terms of what they think needs to be done.
What sorts of issues ensue from this?
As more and more people become layered into this process, it becomes extremely problematic. Because if everyone is not looking at the same single source of truth then it becomes almost as if impossible to figure things out and to bring everything together.
So ultimately, what’s the solution?
Reconciling their documents into a digital environment where everyone is looking at one truth.
Can you describe the Equa START onboarding process?
It starts with setting the expectation in terms of the documents that we are going to need from your company, things like an operating agreement, bylaws, board meeting minutes, and corporate shares documents. Our philosophy is to get all of this gathered first and so we can migrate it into our system and structure it properly.
At that point, what’s the next step?
Once captured on our ecosystem all future document changes can occur in a single document instead of ten people having ten different versions of the same document. Everyone who has access to that single document can’t change it unless there’s a consensus.
And then are there principal overseers of this process?
Yes, your company leadership will determine who is going to be the administrator. You’ll also be prompted to invite your chief financial officer and legal counsel so that everyone can begin working within your one document environment.
So how will the system work once these documents have been migrated into the Equa START environment?
Once everyone is working off of the Equa framework, changes can be redlined and passed back and forth through a notification system that essentially says, alright, somebody made an edit or change here. But you can’t delete text because it’s always just redlining. In other words, you make a suggestion and then that suggestion is then sent out into the notification. The beauty here is that all of the documentation is captured in one environment instead of being pulled out to email or retrieved from Dropbox.
So ultimately this represents a much more efficient process?
Yes. When you can make something that may normally take five people, two hours and boil it down to something that takes five people 30-minutes, this can represent enormous time savings. And if you multiply this every time you need to go through this process, you are also fundamentally saving so much money for your company. In the end, you are preserving wealth instead of just letting it go out the back door with all these expenses.
learn more about Equa.