17 Common Mistakes New Business Owners Make (And How to Avoid Them)

women in office dealing with business issues

Opening a business is a lot of things—exciting, empowering, fun—but it certainly isn’t easy! 

While you might feel eager to hit the ground running, you may also have thoughts of doubt and anxiety. And that’s totally normal! 

The key to success is to prepare for potential risks and avoid common mistakes new business owners make when starting out. 

So, what are the most common mistakes business owners make, and how do you avoid them?

Let’s find out. 

1. Neglecting Your Logo Design

We’re leading with this because it’s often an underestimated part of starting a business – but it’s a crucial thing to get right. 

That’s because logos are the most recognizable brand identifiers, and 60% of consumers will avoid brands that have logos that they judge as unappealing.

To attract your target audience, your business’s logo needs to be easy to understand, quickly identifiable, and representative of your offer or the value your business provides customers. 

Additionally, many business owners fail to use their logo consistently – putting an icon on their website, business initials on their social media, a full name on business cards, etc. – which minimizes the chances that your audience will come to recognize your business. 

If you’re making this mistake already, no need to feel bad; there’s an easy fix!

You can use an AI-driven logo maker that takes information about your business into account to create a logo that appeals to your target audience – in 5 minutes. You’ll get your logo in every size and file type you need to maintain a consistent web presence while attracting your audience. 

To try it out, enter your business name below (it’s free!): 

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2. Not Having a Business Plan

A good business plan helps evaluate the market for your product/service and the competition you’ll face. 

It also analyzes the amount of money you’ll need to start your business, the income it can generate, and whether your idea is viable. 

Creating a business plan takes work, and because of this new business owners often start without one and wonder why things don’t turn out the way they imagined.

There are 2 types of business plans you can use: A traditional business plan and a one-page business plan.

A traditional business plan is a 100+ page document businesses need when applying for funding or bringing on new partners. It includes: 

But not all new businesses need a traditional business plan. A one-page business plan is often more than adequate for most businesses, especially those that don’t require external funding.  

3. Not Monitoring Cash Flow

Cash flow refers to the net balance of money moving in and out of your business during a specific period and your business’s ability to pay its bills.

It might sound like basic bookkeeping, but according to U.S. bank statistics, 82% of small businesses fail due to cash flow problems. 

You can avoid this common mistake by reviewing periodic cash flow statements that monitor your credits (incoming cash) and debits (outgoing cash) from business activities during a set time, such as monthly or quarterly.   

Strategies to help control your cash flow:

Working with a minimum viable budget

Adopt a start-up mindset, only spend what’s necessary, and keep enough cash reserves to support you when times get tough. 

Protect your credit at all costs

Most banks only lend when your business has healthy credit, so pay your bills on time every time. 

Avoid too much debt

Only take on debt when you’re sure you can afford to repay it. 

Employ an accountant

Cash flow problems accumulate over time while you’re busy running your business; an accountant can help monitor your cash statements to ensure you stay in balance. 

4. Underpricing Your Product and Services

A sure-fire way to run out of cash flow is underpricing your products and services. 

It’s a mistake many new businesses make either because of a lack of market research or offering a lower price than their competitors thinking they’ll get more sales. 

Unfortunately, underpricing could put you out of business for 2 reasons:

  1. Perceived value: Most customers don’t want cheap; they want quality and relevant value.
  2. A race to the bottom: Odds are your established competitors can afford to sell at a lower price for longer. If you enter a price war, you’ll probably lose.

How to calculate your product’s price:

Calculate your variable price per product

Manufacturing, selling, and delivering product costs fluctuate depending on how many units you sell.

Include your fixed costs

Fixed costs are expenses you’ll pay regardless of how many products you sell, such as rent, utilities, services, wages, insurance, etc. 

Add a profit margin

Add a profit margin that suits your target market and is sustainable for your business.

Use a product pricing calculator

You can make your life easier and find the correct selling point for your products using a product pricing calculator. 

5. Not Forming the Right Business Entity

The term business entity refers to the structure you choose to run your company. Forming the wrong business entity can be costly as it determines your taxes, level of personal liability, and your business set-up and running costs.  

There are 6 main business entity types: 

  1. Sole proprietorship
  2. General partnership
  3. Limited liability partnership (LLP)
  4. Limited liability company (LLC)
  5. S corporation
  6. C corporation

The right choice for you depends on your industry and personal business aspirations.

For example, if you’re a solo entrepreneur in a low-risk market, a sole proprietorship is a good choice. Or, if you’re teaming up with a buddy, a general partnership could suit your requirements. 

An LLC (link to – Types of LLCs) suits both a single and multi-member business structure because of the liability protection and pass-through tax advantages it provides its owners. 

And a corporation works for people who need a structure that enables investment funding and share options. 

But before you choose, do your research and seek legal guidance from an expert to ensure you form a business entity that enables your business to grow. 

6. Not Having a Marketing Plan

A marketing plan is a strategy you’ll use to determine your target audience, how to reach them, what price point to sell at, and how to measure your success. 

Without a marketing plan, businesses can waste time and money by implementing a strategy that engages no one and provides zero revenue. 

You can help ensure your marketing plan generates profit by using the 7P’s marketing mix model that creates value and provides a competitive advantage.  

The 7Ps of marketing:


Your product is the center of your marketing strategy, so you must promote what problems it solves and why it’s the best option for your customers.


Base your price on your manufacturing costs, retail mark-up, average market price, and what your customers will pay for similar products.


Your plan might need a marketing mix that includes digital, traditional, direct, or in-store advertisements. You can find the right combination for your marketing campaign by researching your competitor’s sales platforms. 


When you provide excellent customer service, your customers will help promote your business and refer it to others.


Your product delivery and return policies are essential for marketing and require maximum reliability and efficiency.

Physical evidence

Your branding, packaging, in-store displays, social media accounts, and website are all physical evidence of your business and must visually connect to create a recognizable marketing plan.

7. Forgetting to Lock Down Your Intellectual Property

You must lock down your intellectual property to ensure another business doesn’t file a patent, steal your ideas, prevent you from selling your products, or force you to pay royalties. 

Intellectual property could include your inventions, artistic and literary works, symbols, designs like logos, and any images or names you use in commerce.

You can contact the United States Patent and Trademark Office to lock your intellectual property down and apply for trademarks, copyrights, or patents.

8. Poor Hiring Decisions

Hiring the right people who can support your new business is essential, especially if they’re working with the public or providing you with vital services you can’t perform yourself. 

To ensure you hire the right employees, you should consider the following: 

And if you make a mistake and hire the wrong person, act fast, amend, and move on. 

9. Micromanaging

Micromanaging is when a boss provides excessive supervision, controlling every part (however small) of an employee’s actions. 

New business owners often struggle with micromanaging because of one or all of the following reasons:

The problem is that employees don’t appreciate micromanagement, as it leaves them feeling over-scrutinized and mistrusted.  

You can avoid micromanagement by implementing the following 4 steps:

  1. Only hire people that suit your business and the role you need them to fulfill.
  2. Ensure you provide your employees with clear expectations.
  3. Don’t expect perfection—it doesn’t exist.
  4. Ask your employees which management style they prefer and whether they need constant supervision or the freedom to fly. 

Once you implement a management style, assess your employee’s performance to ensure it helps them fulfill their role.

10. Trying to do Everything Yourself

It’s common for new business owners to do everything themselves. But the problem with investing your time in everything is that you could spread yourself too thin and achieve less. 

It’s more beneficial to focus on what you’re good at and enjoy doing, then find others who can take care of tasks you don’t like or require specialized knowledge.

If you’re not ready to employ people full time, you can always outsource using the following websites:

11. Not Setting Attainable Goals

Goals help you set a direction for your new business and focus on what you need to do to move forward. 

Successful businesses often use the SMART goal strategy, as it helps identify targets and implement strategies for achieving them. 

SMART goals are:

You can apply SMART goals to everything you do in business, breaking each project into manageable parts ensuring you don’t become overwhelmed. 

12. Not Having KPIs in Place

Key performance indicators (KPIs) are metrics that help business owners guide them in the right direction based upon set goals and progress analysis.

By measuring the correct KPIs, you can optimize your sales or production process and ensure you and your team prioritize activities that lead to the best results.

KPIs come in several forms and can measure specific activities, including:

You can take the guesswork out of how your business is performing by using business analytics software and reporting tools to measure and track your KPIs.

13. Over- and Under-spending

Starting a business costs money, and as most new business owners are on a tight budget, it’s essential to prioritize your expenditures. 

Often, this can lead to business owners thinking they either need to spend money to make money or pay the bare minimum. 

The problem is if you take either to the extreme, they can be harmful to your business. The key is knowing where your money is most needed and where you can save it. 

Here’s a list of the most common top 5 business expenditures:

The saying “when you look after the dimes, the dollars will look after themselves” is true. 

So, spend your cash wisely and invest in good people and quality products—they’ll prove profitable in the long run.

14. Not Having a Lawyer or Legal Guidance

Not understanding local, national, and state laws and how they affect you can be a big pitfall for new business owners. 

If you’re bringing products to the market or choosing a business name, there are many trademark, copyright, renewal, and licensing laws you might need to know. 

You can mitigate these problems by researching the US.gov website, asking questions on relevant online forums, or hiring a lawyer to ensure you fulfill all your legal obligations. 

6 types of business lawyers you might need:

  1. General business lawyer
  2. Employment and labor lawyer
  3. M&A (mergers and acquisitions) lawyer
  4. Tax lawyer
  5. Intellectual property lawyer
  6. Contract lawyer

15. Expanding too Fast

When success comes, it’s easy to think it’ll stay forever, but if you grow your business too quickly, it could have disastrous consequences. 

A period of rapid growth might only be temporary and if you over-extend too early and take on too many overheads, you could run out of cash. 

A slow, steady approach to expansion is far more beneficial. It helps you identify potential future hazards, maintain your cash reserves, and implement steps to reduce risks before they occur.

The 6 most significant expansion risks for small businesses start-ups you need to know are:

  1. Financial risk
  2. Strategic risk
  3. Reputation risk
  4. Liability risk
  5. Business interruption risk
  6. Security risk

You can only identify and avoid the risks when you know what they are, so do your research and think twice before expanding.

16. Thinking You Don't Need Business Insurance

If you set up an LLC business entity, you reduce your liability for business obligations. However, no business structure provides 100% protection from accidents involving company cars, lawsuits for defective products, malpractice, or any other sort of individual wrongdoing.

To secure your new business and yourself, you must have the right insurance in place to cover any unforeseen events or claims that could be disastrous for your financial situation. 

Here are the 7 most common insurance policies for new business owners:

  1. General liability insurance
  2. Professional liability insurance
  3. Business income coverage
  4. Commercial property insurance
  5. Workers’ compensation insurance
  6. Commercial auto insurance
  7. Data breach insurance

17. Not Taking Time to Smell the Roses

Some blogs and websites portray starting a small business in a soft light, making you think they’re easy to get up and running. But the reality is quite the opposite; new businesses are hard to get off the ground and require enormous time and energy.

Many new business owners work long hours, 7 days a week, and while that’s commendable, it can lead to burnout.  

Burnout is very real and can happen to anyone. It leaves you exhausted, reduces your performance and productivity, and increases anxiety. 

You can avoid burnout by implementing a time strategy that ensures you take regular breaks to evaluate your progress and congratulate yourself on a well-done job.

Taking regular time out also: 

The takeaway is to take time out, give yourself a break, and smell the roses.

Go Easy on Yourself

Even though there are mistakes you should avoid, you’re bound to make one or 2 at some point. 

Richard Branson gave this advice: “One thing is certain in business: you will make mistakes. When you are pushing the boundaries, mistakes are inevitable—how you react is important.”  

So don’t get too upset when things go wrong. Instead, learn from your mistakes and adapt your business model as needed.