Starting a business in college is quite tempting. Students have access to resources and a lot of motivation to succeed. But the problem is they often lack knowledge and experience for that. The fail rates among startups are quite high. According to the Small Business Administration, the failure rate among startups in the US in 2019 was 90%. 21.5% of them fail in the first year and 30% in the second one.
It is also decently challenging for many students to balance out their lives. They have to navigate college, and as well as entrepreneurship, that take lots of time, especially the first couple of years. Fitting social life seems impossible sometimes. The underlying issue is the inability to prioritize tasks.
For example, if in the moment, working on distributing strategy is more important, you can delegate written assignments to a reliable thesis paper writing service by WritePaper to achieve both goals. It means that professional academic writers will take care of college papers while you can work on your business. Prioritization and delegation are essential skills any entrepreneur needs. It is impossible to do everything by yourself. And if you want it to succeed, you need to learn that and be aware of the main pitfalls small companies face.
Unclear Business Idea
You’ve probably heard a lot of “make a business of things you love.” Although it is great to be invested in what you are working on, the center of any company is the customer. It is not about what you want; it is about what a client wants.
The idea for a startup should be viable in terms of the market. Think about what you love to do and what you are good at. But also consider what a potential customer might need. Will people want this product or service? How much are they willing to pay for it? What is an approximate potential market for it?
You need to have a strong business idea of what you are offering, who you are offering it to, and how it solves a particular customer problem.
Not Researching the Competitors
People get so invested in working on their prototype that they neglect competition. It is crucial to be on top of the industry news and other producers. It allows adjusting the business plan and strategy as well as seeking out future product/service opportunities.
Also, you need to have a clear understanding of what separates them from the competition and makes the offer unique. It doesn’t have to be extremely innovative but rather distinctive.
Primary research means getting information from potential customers directly, like with a survey or questionnaire. Secondary research means obtaining data from available sources like statistics, industry reports, or forecasts.
Not Having a Business Plan
Do not overestimate the power of planning and organization. A startup should not be handled in chaos; a business plan is a roadmap for any company. It is also necessary to attract capital and investment. It should include:
- An executive summary with a description of the company, its goals, and methods;
- Company description – product/service, its market value, and the problem it solves;
- Market analysis;
- Company’s organization and structure;
- Financial plan;
- Marketing plan.
It doesn’t have to be extremely detailed at first, but it is great to know all those things before getting out there and risking money.
Neglecting Legal Paperwork
It is never too early to take care of legal issues and taxes. Consider the structure of a company as it impacts the taxes (LLC, LLP, Corporation, and Sole Proprietorship). Register it properly.
- The necessary paperwork also includes:
- Legal name, registration, trademark, etc.;
- Company formation filling with local authorities;
- Getting employer identification number;
- Getting appropriate licenses and permits.
You might consider hiring an experienced accountant for bookkeeping.
Not Setting Separate Bank Account
Another pitfall a lot of students face is managing finances. It is essential to separate a company’s finances and personal assets right away.
Set a separate bank account and apply for business insurance. Get accounting software and make sure that bookkeeping is clear and transparent.
Working Without Contracts
You always need a contract. Before you do anything at all, set the terms of the agreement on paper. Sign it. After that, you can start working. Contracts are necessary to protect both parties in terms of scope of work, deadlines, payments, and intellectual property rights.
Consider working with a legal professional to create a customizable draft of the contract you can use further. And learn about non-disclosure agreements that will protect your rights.
Rushing Into Partnerships or Hires
A bad partnership was named one of the main reasons for startups failure. Although partnering with the right person can be incredibly beneficial, if you choose wrong, it can be a disaster.
A business partner needs to have a similar perspective on goals and mission. They also need to have similar business ethics to yours. Another important factor is to set all the duties and areas of responsibilities on paper to eliminate possible conflicts. Remember that business and emotions do not go well together.
The same goes for hiring employees. Do not rush into hires; make sure you are suitable for each other.
Not Managing Finances Wisely
The primary reason for failure for small businesses is finance, according to the SBA report. Yet, this is quite a wide answer that can cover multiple issues.
Some companies run out of money. But why? Maybe they didn’t plan properly for supply and demand. Or maybe they underestimated the capital they needed to launch the product properly. Were funds not handled wisely? Or maybe sales just were not as high as predicted.
Financial planning and management is a fundament for future success. It is also important to stay flexible and agile with your management system, goals, strategies, and tools to achieve them.
A lot of students dream about running their startup that will eventually turn into an established company. They often have revolutionary or original ideas and desire to turn them into reality. But starting a small business is much more grounded than those dreams. It takes a lot of time, effort, and paperwork to even begin. Yet, knowing the main risks and pitfalls can save you from making the same mistakes.