I am sure everyone has heard the scary numbers relating to the chances of failure of a new company.  In case you haven’t, here is a quick recap…80% of start up companies cease to exist after 3 years of starting.  After year 5, there is only a 10% chance that you are still around.  Not the most promising numbers when considering to leave your comfortable salary and benefits to live a “dream.”

With our break down of mistakes that most start-ups make…it should help you eliminate some risk and get started on the right foot.

1) Starting Your Business With Debt-

Although this sounds like a basic principal, majority of business owners plan to carry negative cash flow with debt for the first 24 months of business.  Bad idea!  The number one reason companies file bankruptcy is due to lack of cash.  It is never due to lack of a good IDEA, or hard work ethic, it is failure to plan on cash.  One way to eliminate this risk is to make sure that you have the financing in place to run your business for a minimum of 12 months with no cash flow.  If you can with out a doubt look in a mirror and know that you can run your company without making a cent for 12 months, than you are in business.   With banks on a tight lending leash, there is no way you are going to be able to walk into a lending institution and write up a business loan.  They are going to want to see P&L statements of profit in order to lend.  There is NO institution that will lend with the idea that you will turn a positive cash flow sooner than later.

2) Hiring Employees You Don’t Need

Avoiding unnecessary expenses is a key element to finding success.  One of the ways to eliminate expenses is to hire few employees and giving them a busier work load.  Some ways you can eliminate the costs of hiring employees is to look for outsourcing methods.  There are companies now that can do just about everything to run your company from a virtual location.  This is a big cost savings when starting out.  You can use these business expenses as a tax right off, as well as avoid having to pay for employee benefits as well as Social Security taxes.

One of the best sources to building your credibility virtual is by running a professional looking website.  A website can essentially be your marketing employee that works for you 24 hours a day 7 days a week.   Let your website tell your business story the best way possible with pictures, video and interactive features to build trust with prospects.  Your website with effective SEO strategies can be found any time of the day.  Never forget to use local internet marketing as an effect marketing tool to help your companies branding efforts.