New business pitfalls that entrepreneurs should avoid

Illinois residents who are thinking of going into business for themselves are sometimes put off by grim statistics that make their chances of achieving success seem remote. Entrepreneurs are generally highly motivated and work extremely hard, but effort and commitment are not enough to prevent about 80 percent of new ventures failing during their first 18 months. While figures like these may be sobering, entrepreneurs who are able to avoid common pitfalls may be able to buck the odds.

While entrepreneurs are often animated and enthusiastic when speaking about their product or service, they sometimes fail to come to grips with the financial side of running a company. Most businesses encounter slow periods, and having sufficient capital to weather these difficult times could prove to be the difference between survival and failure. Experienced business owners watch their account receivables closely and work hard to keep their overheads low.

Many new business owners believe the better mousetrap theory and find themselves completely unprepared for the realities of the competitive marketplace. They sometimes fail to understand that buying is an emotional process, and their marketing efforts often dwell on features rather than benefits. Inexperienced entrepreneurs may also underestimate their competition and procrastinate when the time comes to revise their plans.

New businesses may fail because their owners made poor decisions before they even opened their doors. Some rent properties in poor locations or choose unreliable suppliers, and others are forced out of business by litigation. Sole proprietors and partners may have personal liability for damages awarded in lawsuits brought against their businesses, but corporations and LLCs offer protection. Experienced attorneys could explain the advantages and disadvantages of the various types of business entities and make recommendations based upon the type of venture involved.

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