30 Most Outrageous Startup Mistakes to Avoid

29. Choosing the Wrong Location

Finding the right location can make or break your business. If your store is in the back of a run-down strip mall, you may never see any customers walking through your door. A lot of people choose a bad location, because they feel as though they need to settle for what they can afford. Instead of settling, take your time to save up more money while you search for a better place to set up shop. Sometimes, this may mean that you need to move to another town or state.

Moving to another state might sound extreme, but that is exactly what Jeff Bezos did when he launched Amazon.com. He lived in New York City at the time, but he moved to Seattle, because it was close to Microsoft. He knew that the city was full of tech geniuses that he could hire, and it would also be far cheaper to rent a house and offices, compared to New York or Silicon Valley. In the end, starting up in Seattle was probably the best thing he could have done.

28. Choosing Names With Trademark Issues

You may be tempted to name your company something that is close to a competitor, because you want to let your customer know that you are offering a similar product or experience. Before you even think about doing this, pump the breaks! You don’t want to potentially get sued. In 2005, a woman named Sam Buck from Astoria, Oregon opened a coffee shop called “Sambucks”, and even gave it a green logo similar to Starbucks. The nearest Starbucks was over 100 miles away, so people in her small town loved going to Sam’s coffee shop to have a similar experience. You would think that a huge corporation like Starbucks wouldn’t have the time to worry about a small coffee shop in Oregon, but they actually did sue her. If she had just named it “Sam’s Cafe”, she could have avoided the lawsuit.

Small business owners aren’t the only ones who make these kinds of mistakes. In 2017, Costco was sued for selling “Tiffany” engagement rings. Since Costco partners with big name brands like Adidas, thousands of customers assumed that these were genuine Tiffany & Co rings. Now, Costco owes Tiffany & Co $19 million.

27. Not Knowing Who Your Customer Is

Far too many companies make the mistake of trying to build a company that “everyone” will want to use. However, you should have a vision in your mind about the general age, gender, and socio-economic status of your perfect customers. Are you trying to sell to teenagers? Stay-at-home moms? College-educated millennials? Each of these audiences are going to look for different things that they need in their lives. Once you narrow your focus, it will be much easier to start a marketing campaign. Even if your business idea truly is for “everyone”, there is always still a specific type of customer in mind. For example, everyone loves pizza. But if you build a gourmet pizza restaurant in the middle of a low-income neighborhood where a single pie costs $30, your customers are going to walk out the door and go to Domino’s.

26. Not Knowing Your Competition Well Enough

Far too many businesses create a startup because they believe they invented some revolutionary idea. Unfortunately, a lot of these ideas already existed somewhere out there, and that founder just failed to find the competitor. It’s very possible someone else out there is already five years ahead of you in the process. This happens a lot in the tech industry. If there is another company that is doing the same thing as you, can you do it better? Why, and how likely are you to succeed?

25. Charging Too Much For Products or Services

There are a lot of startups who overcharge for their products and service. Ever since the recession in 2008, customers are way more mindful about saving their money. Even if you have a luxury business, you still need to prove that you are worthy of a customer’s money. In most cases, a business owner over-charges for a product or service, because they have done the math, and they realized that they cannot make a profit otherwise. The reality is that people are not going to trust a brand new company with tons of money. They need to read reviews, or hear recommendations from family and friends. Keep in mind that it is not realistic to make your initial investments back in the first year. If your project is far more expensive than you anticipated, try to find supplies or manufacturers who will work within your budget, instead of over-charging your customers.

24. Forgetting to File as an LLC or Corporation

When you first start a business, you may want to become a “sole proprietorship”. While that might be fine in certain cases, it is usually smart to file as an L.L.C, even if you are the only employee of your company. If you hire people, it may be better to become a corporation. Filing these documents usually cost a couple hundred dollars, but there are tons of websites out there that make it easy. If you are not sure what to do in your state, visit your local Business Bureau and ask some questions. This kills two birds with one stone- local networking, and getting help specifically for your local area.

23. Trying to do Everything Alone

A lot of people feel motivated to start a business because they want to work for themselves. Sometimes, it is okay to start your business journey by yourself, but at some point, if you want to grow, you will have to ask for help. This may come in the form of outsourcing tasks to a digital assistant, or hiring a new employee. If the struggle is balancing your personal life with your business, you might need to ask your family and friends to help babysit the kids, or hire a housekeeper.

22. Working With Family

There is a common saying that you should never work with family, and it is very true. This rule also applies to romantic partners. Even if you get along with your family members really well, the business might strain your personal relationship. It also makes it nearly impossible to divide “family time” from “work time”. It is extremely important for someone’s mental health to have a personal life outside of work, so that they can focus on what is truly important.

Sometimes, you will also partner with a family member simply because you love them, or you are trying to help them get through a tough financial situation. Ask yourself if your family member is truly the best person to go into business with. If the only reason you are choosing them is because they are related to you, that is a huge red flag. Once you get your answer, try to move forward appropriately. Gently tell your loved one that you value your relationship with them too much to put it in jeopardy.

21. Hiring The Wrong People

Similar to working with family, hiring friends or acquaintance is a bad move, too. Or, maybe you are in a hurry, and you feel like you are desperate to employ anyone who is willing to work for you. No matter how small your company is, you still need to ask yourself what qualities you are looking for in the perfect employee. Sometimes, this requires being really self aware. Do you work better if you are alone, or do you need someone who is talkative, and willing to bounce ideas off of one another. Once you have a list of those ideal qualities in mind, come up with a series of interview questions that will help you make your decision. Don’t forget to run a background check, too.

20. Failing to Keep Proper Employment Documents

So many businesses try to get away with hiring workers “under the table”, meaning that they get paid in cash, without ever doing the paperwork to give them proper pay stubs. This is a horrible idea for so many reasons. Firstly, it puts your employees at a disadvantage when they are trying to improve employment to creditors. Secondly, you are losing out having the ability to deduct employee wages as a business expense. This will help save you thousands of dollars in taxes. You are also setting yourself up for the possibility that the IRS might come after you later.

19. Never Making a Clear Divide Among Co-Founders

Let’s assume you found a great business partner, and you both want to start a company together. Did you ever talk about how much of a percentage each of you gets? Is it split an even 50-50, or is the person who does the majority of the work going to own 90% of the company? If you want to see an example of how this can end in disaster, just watch The Social Network. Eduardo Saverin helped to pay for the original Facebook website. The founder, Mark Zuckerberg, attempted to cut Saverin out of the company, and it went on to be worth billions of dollars. Eduardo Saverin truly believed that they were co-founders, but from Zuckerberg’s perspective, he was that he did the majority of the work, so he deserved more. Even if you are friends, there needs to be a document in black and white that addresses each person’s share in the company.

18. Not Doing Your Taxes Properly

If you have been working for someone else your entire life, filing your taxes is as easy as getting a 1040 or a 1040EZ form, and filling it in with the information on your pay stubs. When you run a business, or if you are self-employed, taxes become more complicated. You’ll need Schedule C forms from clients, and you will need to track your business expenses. A lot of startup businesses are afraid to hire an accountant, because they think that they cannot afford it. The truth is that as a business, you are required to pay quarterly taxes. If you are not keeping track, you might be shocked to find that you owe thousands in taxes by the end of the year. If you do your taxes incorrectly, you might get sued by the IRS for back-taxes. Even some of the biggest “untouchable” companies have been sued for tax fraud.

In reality, it is actually very easy to keep track of business spending. Intuit Quickbooks Self-Employed is only $10 a month, and they have different levels of software for all kinds of companies. It syncs directly with your bank accounts, so that your spending it automatically recorded. You can manually go through your books and divide your business and personal spending, create invoices, and give out paychecks. You should also keep track of the miles you spend driving for your business, because miles are deductible, too. During tax season, all of your information gets exported to a tax software, and you can file online. Or, you can hand the login information over to an accountant to do this for you.

17. Forgetting to Check Local Laws

To some people, it may sound like common sense that you must obey local laws. However, you will have no idea just how many rules and regulations exist for businesses until you actually open one. Every municipality is different, and will expect different permits in order for you to set up shop. In some cases, a town may completely ban the sale of certain items. For example, a “dry town” completely forbids the sale of alcohol. In other cases, the local historical society might force you to restore an old building according to their exact specifications, even if you are the legal owner of the property.

These are not things you only need to worry about in the beginning of opening your business, either. There will be a lot of responsibility that comes along with keeping up with local laws, as well. For example, if you own a company that is located in a residential area, you may be legally obligated to hire a lawyer to send certified letters to each and every person living on that street. You might have to repeat this process over, and over again every time you need to update your business. If you ignore these laws, you may end up getting your business shut down by local authorities. So be sure to get along with your municipality, and stay on top of it.

16. Pushing a Product That Is Not Ready For Market

If you have invented a new product, you may be really excited to start selling it right away. And this would be understandable, considering how much money it costs to pay for the whole process. However, the most successful product launches take tons of planning. Usually, there is a stage of sending sample products out to testers and getting their honest feedback. You also need to make sure your product is not cheaply made, and won’t fall apart or malfunction within a month. Then, of course, you need to make sure you include proper warning labels for potential choking hazards. If your product is not ready for market, this could lead to returns, and possibly even lawsuits.

15. Not Staying Organized

If you are terrible at organizing and cleaning in your personal life, you really need to make a change. Organization is essential for the sake of keeping your business alive. Whether it’s keeping your supply closet fully stocked, or promptly replying to the emails in your inbox, organization can make or break your success. Even if you think that you don’t mind, your subconscious truly does. Maybe you claim to enjoy a bit of a mess, but it actually makes it a lot more difficult to focus on your work. Once your office space is clean and organized, you will be shocked at how much more work you can get done in a single day.

14. Having a Terrible Website

Making a good website and having an online presence is more important than ever before. Even if your business exists on social media, it is still a good idea to create a website, as well. If you are not sure what to include on your website, look at your competitors to get an idea of what features you want, too. There are plenty of pre-made templates out there on WordPress, as well as websites like Wix that make it easy to build a website from scratch. Be sure to open your website on all different types of computers, tablets, and smart phones to look out for any potential issues. If your business requires a much bigger online presence, it will be necessary to hire a web designer. This can be costly, but in some cases, it is completely necessary. Be sure to plan for those costs, and choose your designer carefully.

13. Never Making Standard Forms and Contracts

One of the biggest mistakes startup companies make is not being prepared with standard forms and contracts. For example, if you need to hire a contractor, freelancer, of any employee, you are going to need certain legal forms ready. This is such a common practice, that a contractor will request forms you may have never even heard of before. If you are caught off-guard, it will make you look unprofessional. Even worse is that you may end up scrambling to search for a sample template from another company, and simply copy-and-paste theirs. This can be a huge mistake, because if you do not take the time to thoroughly go through the specific legal concerns, this contract may miss something very important. If you are struggling to get this paperwork together, consider hiring a lawyer.

12. Falling Behind on New Technology

When you start a business, you might find out that your competitors are paying for new tech to help them propel into the future. This may come in the form of having an iPad to help with orders at the checkout counter, or having an app. You might think that you can make it by without paying for all of this tech, but there will eventually reach a point where you are so old-school, customers will choose to go elsewhere. Think about Blockbuster. All the way back in the year 2000, they had the opportunity to buy Netflix, but they believed their customers would always be loyal. Today, only two Blockbuster stores still exist in the United States.

11. Focusing Too Much On The Competition

Throughout this list, we have mentioned doing research on your competitors. While it is important to do this research in the very beginning, you will reach a point where you need to stop and focus on your own business. It is important to be aware of what’s going on around you. But if you completely obsess with it, and you are always trying to one-up your competition, that will hold you back from focusing on your unique identity.

10. Forgetting to Grow

Some business owners are hyper-focused on maintaining the status quo. Once they find something that works for them, they might forget to grow. A business cannot become more successful if things stay the same. In fact, if you refuse to improve as time goes on, it might mean that your start to lose money. People are fickle with their loyalty in a company, even if they have been around for decades. A great example of a company who forgot to grow is Sears. They had a formula that worked so well for them, they believed their customers would be loyal forever. They refused to move to online sales, and pretty much stayed the same. Now, they have declared bankruptcy, and they are closing all of their stores.

9. Marketing In The Wrong Places

If you do your research on marketing, you are probably getting a lot of conflicting advice. For example, some people swear by Facebook ads, while others say they are a total waste of money. This is because the marketing needs to be tailored to your particular audience. Instead of looking for general advice, try to think about where your ideal customer goes on a day-to-day basis. Are they housewives? Well, maybe advertising with coupons at a local grocery store will be a good place to hang an advertisement. If they are teenagers, maybe it’s best to buy Instagram ads. Once you have a good grasp on the life of your customer, it should become obvious where you need to focus your marketing.

8. Ignoring The Timing

You might have a great idea for a business, but it is really the best month or year to get started? Take seasonal factors into consideration, and give yourself time to get ready for customers. Even if you were planning to get started at a certain time, there may be some unforeseen circumstances that will make it difficult for you to turn a profit. For example, countless number of businesses closed during the 2008 recession. Maybe there has been a recent natural disaster in that area. Sometimes, your personal goals need to take a back seat to what is going on in that particular community. On the flip side, you can use timing to your advantage. Maybe you notice that a neighborhood is becoming gentrified, but they do not have a cute coffee shop yet. You could use that to your advantage, and start your business before anyone else.

7. Dwelling on Failures

Nobody is perfect. No matter what kind of business you own, you will reach a point where you make a mistake. Some failures are bigger than others. But if you let those setbacks define you, it will be impossible to move forward. When something catastrophic happens, take a deep breath, and try to calm down. Try to focus and think clearly about a solution, instead of believing that everything is over. Yes, it might set you back. You may have to take out a loan, or delay growth for a few more months. But if you feel like a failure, you will be a failure. Do not let those mistakes define your career.

6. Not Knowing When To Pivot

There may be a point in your business journey where you see that something is no longer working. Sometimes, the breakthrough can be just over the horizon, and your patience will pay off. Other times, it is better to completely abandon a project in order to save a company. In these situations, it is important to know when it is time pivot, or move in a different direction. In a lot of ways, you may have no idea what the right answer is, unless you have the experience to back that up. If you find yourself in a situation like this, really take a step back to evaluate. Crunch the numbers to see how much longer you can keep going. Talk to your mentors, and do some research online. Just don’t ignore a problem so long in the wrong direction, you end up going over a cliff.

5. Ignoring Intellectual Property Laws

It’s all too easy to accidentally break an intellectual property law, especially with people sharing things online constantly. If you are a company, you cannot use intellectual property like images, music, and videos without getting the permission of the creators, first. You may have to pay royalties on websites like Shutterstock, or pay for the right to use original music. It is also important to make sure you are protecting your own intellectual property, as well. Don’t forget to file trademarks on your original content.

4. Forgetting to Put Money Back in the Business

Tons of people want to start a business because they believe it will make them rich. But if your only goal is to fill your personal bank account, the business is likely going to suffer. If you are a corporation, you can choose how much money you make every year in your personal salary. Seriously consider taking a pay cut in exchange for making your business grow, because it may pay off in the long run.

Amazon.com’s business model is based on putting as much money as possible back into the company, and not taking any profit. By continuing to do this every year, Amazon becomes more and more massive, and they are now the largest company in the world. The founder, Jeff Bezos, is a billionaire. But he would have never gotten there if he was only interested in lining his own pockets from day one.

3. Ignoring Your Instincts

Sometimes, you will have a bad gut feeling about something, even if your logic tells you that everything should work out. There is probably a very good reason why you are getting bad vibes. You might feel hesitant about a new office location, an employee, or someone who is asking to partner with your business. If you get a bad feeling about something, take at least 24 hours to think about it, and discuss with trusted advisors. Make sure to either address the problem in a personal way, or avoid getting yourself into a potentially bad situation. If you ignore your feelings instead of addressing them head-on, you may end up regretting it down the road.

2. Never Making Commitments

If you are flaky in your personal life, you cannot let your bad habit carry over to your business ventures. Giving vendors, partners, and clients a “maybe” instead of a specific date and time will raise a red flag. Showing up late, or completely bailing on a meeting is never okay. Everyone works on a schedule, and their time is extremely valuable, especially if they are also business owners. If you act as if you do not have respect for other people’s time, they will no longer want to work with you. As soon as you act like you cannot commit, or you break promises, people will know to never trust you again.

1. Never Buying Insurance

Last but not least, you should pay for business insurance, especially if you have a brick and mortar store. As a business owner, you will be liable to pay for any of the expenses of your employees, as well as your customers. What would happen if someone slipped and fell? Or worse, what if someone died while using your product? If the victims sued your company, could you afford to pay for their hospital bills, or would it end up filing for bankruptcy? It’s not fun, but you need to think about worst case scenarios, and make sure you are prepared.