My Favorite Mistakes

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Anyone who has started a new business hopes—and plans for—success, but those who are realistic also know that missteps are part of the game. Still, knowledge is power, and a new survey released today reveals that many budding businesses make the same mistakes.

The Hiscox USA Small Business Survey, which looked at 501 small-business executives at companies that employ 100 or fewer full-time workers, found the top four mistakes when setting up a business are as follows:

• Underestimating monthly expenses: 32 percent
• Hiring the wrong people: 20 percent
• Not knowing how to market and sell your product: 18 percent
• Not securing enough financing: 18 percent

Another issue for startups and entrepreneurs just venturing out these days is figuring out what they don’t know enough about—the hard way. Leading the list of knowledge areas that were lacking is the impact of taxes on the business, an error made by 33 percent of respondents. That was followed by a lack of understanding of financing and credit, an error that haunted 26 percent. In third place was how to handle personnel issues, selected by 24 percent of respondents who wish they knew more about topics such as hiring, firing, and holding on to good employees.

The reason small-business startup efforts go awry? Kevin Kerridge, a small-business insurance expert from Hiscox USA, says that those who start their own businesses often have “great energy and passion” for their area of expertise, but this enthusiasm can blind them to some of the bumps they’ll run into along the way.

"Cash flow, human resources, marketing, and insurance issues can seem boring, but are hugely important," Kerridge said in a release. "Any professional starting their own business, whether a young IT consultant or an experienced marketer, has a very clear vision of the service and value they will bring to their client base. But, if you don't plan for the basic essentials of running a business like getting the right contract in place for your employees or having appropriate insurance that covers the specific risks of the industry you're in, you could be very quickly going back to being an employee."

In terms of insurance, the biggest mistake a small-business owner that purchases it makes is not understanding what their insurance policy covers, according to 37 percent of respondents. Respondents also said that not doing research on rates (17 percent) and not buying a policy that is customized for their industry (16 percent) were other top mistakes they made.

Learning from their mistakes, and being able to take the blinders off is what generally separates successful entrepreneurs from everyone else who wishes they could be their own bosses, industry experts say. Being agile and having the skill to turn an error into an opportunity can not only be a positive step for the business, it can also often turn a small player into a major contender if that company can figure out how to best leverage the mistake—and turn it into a value proposition.

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