6 Common Startup Mistakes To Avoid

Whether you’re launching a new business or trying to get better at your current one, avoiding common startup mistakes can help you accomplish your goals.

Every new small business owner should have a fairy godmother with magical startup powers who listens, guides, and protects them from inevitable business mistakes that first-time entrepreneurs often make.

I wish I had the benefit of a fairy godmother, or better yet an experienced startup mentor, when I started my small business five years ago. However, I’ll share my mistakes so you don’t have to needlessly suffer through the same mistakes I made, time and again.

Based on my experience, and that of entrepreneurs in my personal network, here are six common startup mistakes to avoid.


1. Selecting the wrong business structure

How did you choose your business structure? Did you select a sole proprietorship because it was the easiest? Perhaps you signed up for the lengthy process of forming a C Corp because it seemed to be the standard?

Choosing the wrong business structure can present unnecessary challenges and risks in the future. For example, in the case of a sole proprietorship, you are your business and you are also personally liable for all debt incurred, including egregious lawsuits. If something goes wrong, your personal assets are at risk.

Meanwhile, if you plan to follow the traditional route of investment to  an ultimate sale or IPO a C corporation can be suitable. However, a C Corp is also complicated and costly to set up and maintain, and not ideal for a local mom and pop shop. You can get the same benefits from a limited liability corporation (LLC) for less effort and less money.

Before you launch your business research business structure options and talk to a startup attorney and small business accountant to determine the structure that is best for you. This initial step could save you a lot of money and stress down the line.


2. Not choosing a legal business name

One night, over a glass of wine with your best friend, you probably dreamed up a smart and witty business name, but that does not necessarily mean that you can use it.

For starters, “You’ll have to conduct a name and trademark search [with the USPTO] to make sure no one else is using the name you want to use (or a very similar name) to market similar products or services.” Next, conduct an online search for business names registered with the Secretary of State, in the state you plan to conduct business. “You should also check with your county clerk’s office to see whether your proposed name is already on the list of fictitious or assumed business names in your county.”

If you find that your “perfect” business name is registered at a federal, state or local level, you shouldn’t use it. Infringing on another company’s trademark, no matter how small and obscure the company, can cause legal nightmares. Do not start using a business name on business cards, online or anywhere else until you have verified you are legally able to use it.


3. Not knowing your target market

Many entrepreneurs know the industry that they want to get into, and have expertise in the area. Yet they decide to go forward after chatting it up with family and friends who say, “that’s a great idea!”

Common startup mistakes
© Jacob Lund, YFS Magazine

“Family and friends” research does not properly address the question of product-market fit and whether others will pay for a product or service. Investigate the market need, monetization possibilities and how to tailor a marketing message to appeal to ideal customers.

The biggest mistake a business owner can make is misinterpreting the market. Whether it is underestimating or overestimating costs, appealing to the wrong target demographic, or poorly gauging the demand, a lack of market knowledge can end your business before it even starts.


4. Overlooking the importance of marketing

You may think that since you have dreamed up a cool business idea, the masses will flock to it. A “build it and they will come” attitude is the quickest route to defeat. Who needs things like a business website, right? Wrong!

According to a recent survey, nearly half of all small businesses don’t have a website. That is basically the equivalent of opening a shop and not telling anyone about it, or even putting a sign out the front.

When it comes to saving money and reducing expenses, one of the first places small businesses make cuts is always marketing. This is a huge mistake. How will you raise brand awareness and generate leads if you aren’t sharing your business with others?

Marketing should be viewed as a vital investment and standard line in your accounts rather than a nice-to-have expense. How much you need to spend on marketing depends on your stage of business, goals, market position and industry. Benchmark marketing spend against similar businesses in your niche, and expect to spend between 2% and 20% of your budget.


5. Ignoring the importance of strong written contracts

When you land a new client or find an interesting collaborative partner, it’s easy to get excited and jump straight in and get to work. Once disagreements arise, the best-case scenario can result in embarrassment and wasted time. However, the worst case can lead to mounting debts and lawsuits.

Always insist on a written contract before providing goods and services or entering a business relationship. There are plenty of  websites that can help you draft contracts which can later be reviewed by a small business lawyer.


6. Going at it alone

Get a mentor or at the very least build a local support network. When you start a new business, there is nothing more valuable than experience. Learning from others on similar journeys will help you avoid the pitfalls that lead to sleepless nights, or business failure.

Many of these mistakes can be avoided with the help of a mentor who has already been through the process and can help navigate the way.


Whether you’re launching a new business or trying to get better at your current one, avoiding common startup mistakes can help you accomplish your goals. By avoiding these six mistakes, and learning how to effectively build a business, you’ll be well on your way to creating a profitable and sustainable business that’ll transform lives, including your own.


Meredith Karter is the founder and proud owner of BusinessEntity. Since 2010, she has helped over 10, 000 Americans realize their dream of entrepreneurship by helping them incorporate. On her website, she provides DIY guides on how to check for business, name availability, and incorporate businesses across all 50 states.


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