Starting a Business: 10 Common Mistakes to Avoid

Let’s just get this out there: you are going to make mistakes as a new business owner. When they say it takes blood, sweat, and tears to build something from the ground up, they mean it.

Some days you’ll feel like you haven’t invested enough money. On others, you’ll feel like you’ve gone overboard.

“Do we really need more product engineers when our marketing department is just…Sally making TikToks on her lunch break?”

In the world of small business, doubts, fear, and paranoia abound. It’s not just you — we promise. The trick of the trade, as cheesy as it might sound, is to learn from failure.

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Because while you can’t always prevent business mistakes, you can plan for them.

That’s exactly what we’ll do today: learn from and plan for the 10 business landmines to sidestep when starting a business.

10 Common Mistakes To Avoid When Starting a Business

The Bureau of Labor Statistics says about 20% of small businesses bite the dust within two years. Ouch. And after 10 years? A whopping 60% are gone. Double ouch.

But don’t freak out just yet! We’ve got resources, services, and enough tips to fill a warehouse.

So, let’s get down to brass tacks. Why do so many businesses crash and burn so early?

1. Not Creating a Business Plan

A business plan isn’t just some dusty document you need to impress bankers (although, yeah, they’ll want to see it). It’s your roadmap. It forces you to think about your business. Who’s your customer? What’s the competition like? How are you going to make money?

A solid business plan helps you:

• Define your vision: What are you trying to build? 
• Identify your target market: Who do you want to sell to? And why should they care?
• Analyze your competition: Are they sharks? Minnows? Something in between?
• Develop a marketing strategy: How will you get the word out? (Carrier pigeons? TikTok dances?)
• Create a financial forecast: How much money do you need? And how are you going to get it?
• Secure funding: Investors and lenders? They like plans. A lot.

Skipping this step is like trying to climb Everest in flip-flops. Possible? Technically. A good idea? Absolutely not.

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2. Not Validating Your Business Idea With Market Research

Before you pour your heart, soul, and savings into your new venture, let’s talk about market research. We know, we know, your eyes just glazed over. It sounds like homework for adults, but it’s mission-critical.

Over 40% of small businesses fail because of a lack of market need. That’s why even the most brilliant ideas need to be tested in the real world.

This isn’t meant to squash your entrepreneurial spirit – This is about setting yourself up for success.

Market research helps you answer the fundamental question: “Does anyone truly want what I’m offering?”

Think of it as due diligence for your dream.

Here’s your actionable checklist for validating your business idea (psst, here’s a Doc you can use as your own validation roadmap: copy checklist here):

• Define your core offering: Be crystal clear about what you’re selling and what problem it solves. Get specific with your value proposition—”Helping busy professionals organize digital photos” beats vague statements like “Helping people.”
• Identify your target audience: Define your ideal customers by demographics, interests, and pain points. Create a detailed customer persona with a name and understand their daily struggles and aspirations.
• Conduct primary market research: Talk to real people through surveys, interviews, and focus groups. Don’t rely on assumptions—collect actual feedback from potential customers.
• Analyze your competition: Identify who else is solving similar problems and determine their strengths and weaknesses. Create a competitive matrix to find your unique advantage.
• Conduct secondary market research: Supplement your direct research with industry reports, government data, and trade publications to understand market size and trends.
• Analyze the feedback: Consider both positive and negative input about your idea. Be open to pivoting if necessary, and maintain records of your findings for future reference.

3. Not Paying Attention To Tax Considerations

Ignorance is not bliss when it comes to legal and tax considerations. Are you complying with all regulations? Do you understand your tax obligations?

You can’t just sweep these things under the rug and hope they’ll go away. They’ll come back to bite you — hard.

Don’t wait until you’re facing a lawsuit or an audit. Get professional advice early on. It’s an investment in protecting your business.

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4. Not Investing in Your Online Brand Early

When you’re looking for a product or service, what’s the first thing you do? Google it.

If your business doesn’t appear in search results, or if your website looks like it was designed in 1995, you’re losing out on valuable leads. (In fact, non-responsive design is the primary reason people leave your website.)

Your online brand is your digital storefront, your first impression, and often, the deciding factor for whether someone chooses to do business with you.

So, let’s make sure you’re driving people toward your business and not away from it:

• Develop a professional website: Your website should be visually appealing, easy to navigate, and mobile-friendly. It should clearly communicate your value proposition and include a strong call to action. 
• Optimize for search engines (SEO): Make sure your website is optimized for relevant keywords so that potential customers can find you when they search online.
• Create engaging content: Share valuable content that resonates with your target audience. This could include blog posts, articles, videos, infographics, or social media updates.
• Build your email list: Offer valuable content or incentives in exchange for email addresses. This allows you to nurture leads and build relationships with potential customers.
• Monitor your online reputation: Keep track of what people say about your business online and promptly address any negative feedback.

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Whew! That’s a lot of reading to do. If you’ve got the time, go for it!

👉🏼 If you’d rather focus on high-level business strategy and leave the nuts and bolts to the professionals — DreamHost is at your service!

We offer a full suite of web development services for a beautiful (and functional) business website, professional SEOs who’ll make your competitors weep, and reliable social media management so you never have to worry about missing a beat. Plus, our 100% uptime guarantee and 24×7 customer support means you have a trustworthy partner every step of the way.

When we say DreamHost is a friend to small businesses, we mean right from the start.

5. Not Hiring or Delegating

A lot of first-time entrepreneurs have the “lone wolf” mentality. They think they can (and should) do everything themselves.

While that kind of drive can be an asset early on, it can quickly become a liability. Trying to be superhuman and refusing to hire or delegate is a recipe for burnout, inefficiency, and ultimately, stunted growth.

Think of it this way: you’re trying to build a house, but you’re also trying to lay the foundation, mix the cement, install the plumbing, and paint the walls. Sure, you might eventually get it done by yourself, but it’ll take you ten times longer, and the quality probably won’t be great. Plus, you’ll be so exhausted you won’t even be able to enjoy your new house.

You’re good at certain things. Let other people (or non-sentient AI tools) handle the stuff you’re not so good at (or the stuff you hate doing). This frees you up to focus on what you do best, which is where you’ll add the most value to your business.

💡Pro tip: Here’s everything you need to know about hiring a web developer. You could do everything yourself, but is it worth risking the burnout and inevitable crash? Instead, focus on what you excel at.

The real magic happens when you combine the power of outsourcing with the efficiency of AI. For example, you could use AI to generate marketing content and then outsource the distribution and promotion of that content to a freelancer. Or you could use AI to analyze customer data and then outsource the implementation of your marketing strategy to a specialized agency.

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Where to find outside help:

• Freelance platforms: Websites like Upwork, Fiverr, and Guru connect you with freelancers who have expertise in a wide range of areas. 
• Virtual assistant services: These services provide you with access to virtual assistants who can handle a variety of administrative tasks.

6. Not Scaling Strategically (Building a Mansion Before a Foundation)

You’ve heard the mantra: “Think big! Build for scale!” And it’s good advice…eventually. But many entrepreneurs get caught up in the hype and start building for a massive influx of customers before they’ve even proven their concept.

This is like buying a 10,000-square-foot mansion while living paycheck to paycheck.

Building for scale that doesn’t exist is a recipe for financial disaster. You’re investing in infrastructure, technology, and personnel you don’t need yet. This ties up valuable capital that could be used for marketing, product development, or just, you know, keeping the lights on.

Here’s how to avoid this trap:

• Start small and iterate: Don’t try to build everything at once. Start with a minimum viable product (MVP) and gradually add features and functionality as your business grows.
• Be lean and agile: Keep your overhead low in the early stages. Don’t overspend on things you don’t absolutely need. The fancy espresso machine can wait.
• Track your metrics: Monitor your key performance indicators (KPIs) closely. This will help you determine when it’s the right time to scale.

Focus on building a solid foundation first, and then scale your business as your customer base and revenue grow. This approach will save you money, reduce your stress levels, and increase your chances of long-term success.

7. Not Exploring Alternative Equity Split Agreements

So, you’re starting a business with a partner (or two, or three).

The excitement is palpable, the ideas are flowing, and you’re ready to take on the world. But before you pop the champagne and start working on your world domination plan, let’s talk about equity. Specifically, how you’re going to split it.

Many startups default to the “easy” options: 50/50, 33/33/33, and so on. While these splits might seem fair on the surface, they rarely reflect the reality of each founder’s contributions, risks, and future involvement.

There’s no one-size-fits-all approach to equity splits. The best option for your startup will depend on your specific circumstances. Here are some factors to consider:

• Financial investment: How much capital has each founder contributed?
• Time commitment: How much time is each founder dedicating to the business?
• Skills and expertise: What unique skills and expertise does each founder bring to the table?
• Roles and responsibilities: What are each founder’s roles and responsibilities within the company?
• Risk taken: What level of personal financial risk has each founder taken on?
• Future contributions: What are each founder’s anticipated future contributions to the business?

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8. Not Investing in Organic Marketing

You’ve got a killer product, a slick website, and a burning desire to succeed. You launch your business, sit back, and…crickets.

What happened?

You probably fell victim to the “if you build it, they will come” fallacy. Alas, they probably won’t, at least without some serious marketing muscle. While paid advertising can be effective, neglecting organic marketing is a huge mistake. It’s like renting a billboard in the middle of the desert. Sure, you might get some exposure, but you’re not reaching the right audience.

Organic marketing is all about attracting your target audience naturally, without relying solely on paid ads. It’s about building a sustainable, long-term presence that drives traffic, generates leads, and establishes your brand as an authority in your industry.

Here are the key components of organic marketing to focus on:

• Search engine optimization (SEO): Optimize your website and content for relevant keywords so that it ranks higher in search engine results pages (SERPs).  
• Content marketing: Create valuable and engaging content (blog posts, articles, videos, infographics) that attracts and educates your target audience.  
• Social media marketing: Build a presence on social media platforms where your target audience hangs out, and engage with them organically.  
• Email marketing: Build an email list and send targeted emails to your subscribers, providing them with valuable content, and promoting your products or services. 
• Link building: Earn high-quality backlinks from other websites to improve your SEO and increase your website’s authority.

💡Pro tip: Start selling before you build. A great product doesn’t mean customers will automatically‌ flock to it. Even the best products need to be sold, so invest in marketing early.

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9. Not Optimizing Your Cash Flow

According to SCORE, 82% of small businesses fail because of cash flow problems. Cash flow is the ratio of how much money is coming in and how much is being spent on your business.

You need cash to pay bills, employees, suppliers, and yourself. Without sufficient cash flow, you might miss payments, damage your credit rating, and even face legal action.

Here are five actionable tips to optimize your cash flow:

• Track every penny: Use accounting software or a good old-fashioned spreadsheet to track your income and expenses. Knowledge is power, and knowing where your money is going is the first step to optimizing your cash flow.
• Create a cash flow forecast: This helps you anticipate and avoid potential cash crunches.
• Trim the fluff: Take a hard look at your expenses. Are there any areas where you can cut costs without sacrificing quality? Can you negotiate better rates with your vendors? Every dollar saved is a dollar earned.
• Build your safety net: Aim to have a cash reserve equal to at least three to six months of operating expenses. This will give you a cushion to fall back on if (or when) unexpected expenses arise.
• Ask for help: Managing cash flow can be complex. If you’re feeling overwhelmed, seek professional advice from an accountant or financial advisor.

10. Not Prioritizing Intellectual Property Rights

You’ve created something unique, something special, something yours, but have you taken the steps to protect it?

Or are you leaving your most valuable assets vulnerable to copycats, imitators, and outright thieves? If you’re thinking, “I’ll deal with it later,” that’s a big mistake.

The National Intellectual Property Rights Coordination Center (IPRCC) reports that American intellectual property theft cost the economy a whopping $1.12 billion in 2023, up from $822.3 million in the past three years. A 36% jump.

Take these steps to secure your intellectual property (IP) today:

• Identify your IP assets: Take inventory of your intellectual property. What are your most valuable creations? What sets you apart from the competition?
• Choose the right protection: Consult with an IP attorney to determine the best type of protection for your specific assets.
• File for protection: File for patents, trademarks, or copyrights to keep your trade secrets confidential.
• Monitor your IP: Regularly monitor the marketplace for potential infringements on your IP rights.

The Golden Rule: Never skip contracts!

Contracts are the foundation of any business relationship. They protect your interests, clarify expectations, and prevent misunderstandings. Whether you’re dealing with clients, suppliers, partners, or employees, get everything in writing. It’ll save you headaches (and legal fees) down the road.

Preparing for Business Success

Starting a new business is exciting and full of promise. That said, there will be bumps in the road, unexpected detours, and maybe even a few face-plants along the way.

The good news is that many of these pitfalls are completely avoidable.

So, take this 10-step cheat sheet with you before you go:

1. Write a business plan.
2. Talk to customers before you build.
3. Don’t ignore legal and tax stuff.
4. A thriving online presence in 2025 is non-negotiable.
5. Hire help or delegate.
6. Don’t overspend before you’re ready.
7. Avoid those “easy” equity splits.
8. Organic marketing is your friend.
9. Don’t burn through money too quickly.
10. Guard your intellectual property.

Oh, and if you need help building and maintaining a stunning website, or professional SEO and marketing services, DreamHost has your back. (We won’t even ask for equity.)

Now go forth and conquer! And don’t forget to send us a postcard from the top.

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