5 Crucial Mistakes Early-Stage Businesses Make (2020 Update)
The decisions you make now can affect your business far into the future. Find out the mistakes early-stage businesses make and how to avoid making them.
Start-ups don’t always do things by the book, often opting for the “it won’t hurt me I’m just starting out” mentality that hurts so many later on. However, there are some things that need to be done the right way, because if you don’t, it can mean trouble for your business later on. In this article, we’ll outline 5 mistakes early-stage businesses make and how your business can avoid making them.
1. Failing to protect your IP
In the early days, often the most valuable part of your business is the idea. Australia similarly operates under a first-to-file system, meaning that legal rights attach to whoever registers their intellectual property first. As a result, it is vital that you Trademark your name and logo early on. Doing this will also prevent you from accidentally infringing on someone else’s trademark.
2. Neglecting advice on financing term sheets
Investors employ a number of approaches to protect governance, liquidation privileges, and preferences in financing structures. Business owners generally enter the negotiations without the intricacies each investor will take advantage of. Seeking appropriate legal advice to take you through these terms is a necessity, as a lawyer will be able to explain to you what can and can’t be pushed back on. You also need to be mindful of how dilution will occur in the event of a venture-funded deal at a later date.
3. Not having a clear focus
Develop an initial business focus that you can articulate naturally. You and your team should be aligned in answering what you do, who you do it for and what your unique advantage is. One key way you can ensure you stay on track is by drafting a comprehensive business plan. Having clear goals when running your business will give you a clear target to work towards and unite your team.
4. Forgetting about your customers
Who are your customers? Your business’s success depends on bringing in customers, and neglecting them is one of the biggest mistakes early-stage businesses make. Knowing your customer base will inform how you market and promote your business, and how you make your business stand out from competitors. No matter how successful your business becomes, your customers should always be at the forefront of what you do.
5. Financial problems
Raising the correct amount of capital is vital to ensure that you don’t hinder your future raising potential. You also don’t want to run out of money at the wrong moment. Managing your money wisely requires careful planning and sticking to what at times can be a tight budget. Think about how you can make the most of your capital – is it by pouring more money into your marketing efforts or hiring more staff? It’s also important to keep track of any and all of your debts so your business doesn’t become insolvent.
Starting a business can be immensely exciting, but it’s also important to set your business up for success by avoiding the common mistakes early-stage businesses make. The best way you can do this is by tackling the legals early on, so they don’t come back to bite you further down the track.
Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.