Four Mistakes Early Stage Startups Make That Keep Them From Reaching $1 million in ARR

We all know that technology continues to change the way we live and work. And the barriers to entry to building your own technology startup has never been less. From a time when owning a business was something only the rich could afford, it's now become a possibility for anyone who has an idea.

But being a startup founder isn't easy. It's a tough road to travel, with many pitfalls and challenges along the way. While there are many benefits to starting your own business, there are also some common mistakes that can make or break your success, and we're here to help you avoid them!

Mistake Number One: Improper Planning

You can't just have an idea and expect to make it work. A good business plan is essential for making sure your company succeeds, and that means you have to put some serious thought into what you're doing. If you don't, you're setting yourself up for failure.

Ideas are great, but they aren't enough. You need a short-term plan with measurable goals and objectives, including dates and deadlines, and a long-term plan that takes into account the big picture. Having a plan forces you to address all of those areas, which will help you better understand how things work together in your business. 

It also allows others (including investors) to look objectively at the business and determine how likely it is to succeed. If they feel confident in your ability, they'll be more likely to invest in your company!

So what do these plans look like? The first step is coming up with a concept: What problem are you trying to solve? What product or service are you offering? Why do people want this? 

Then it’s time to start doing research: looking into competitors' strategies, evaluating market trends, figuring out where there's an opportunity for growth, basically everything that might change how people perceive your product or service. 

Mistake Number Two: Underestimating the Capital Needed 

As a new business owner, it can be easy to underestimate the capital required to get your business started.

The best way to avoid this mistake is to get your finances in order before you start.

You should consider the following:

• Plan ahead and forecast: estimate the months you'll be able to operate before you run out of money, and the amount of credit available for emergencies. 
• Keep track of your capital: make a spreadsheet to break down your monthly expenses. 
• Keep an eye out for the black swan: a lot of businesses go under because they don't anticipate emergencies, slow seasons, or even the amount of taxes they will need to pay. 

Mistake Number Three: Doing It All on Your Own

You may think you can run a one-man show, but most successful startups have a team. You need people to help you tackle the big challenges ahead of you, even if it's just for an hour or two a week.

It's hard to find good talent, especially when you're just starting out. You'll want to hire people who are trustworthy, reliable, and have the same goals as yours. This can help them feel like part of your team and incentivize them to work hard for your success!

Once you've found someone who is trustworthy, reliable, and wants what's best for your company (and has skills that complement yours), make sure they're ready to take on responsibility. Don't give them too much at once; start small and slowly add more responsibility as they prove themselves capable of handling it well.

If possible, try hiring someone from outside of your industry or discipline, like a tax expert, to help you get a comprehensive understanding of your business' finances. 

Mistake Number Four: Not Understanding Your Tax Burden 

Taxation is a complicated business, and it can be easy for startups to get lost in the details.

Startups are small businesses, and their owners are often the only employees, so they may not have an HR department to help with payroll. This means that it's even more important for them to understand what they owe and why they owe it.

Startups also tend to work long hours and have irregular paychecks, so they may not be saving enough for taxes or paying taxes on their own income. They might also not be properly separating funds for payroll vs taxes.

If you're a startup or small business, there's no shame in taking advantage of write-offs. On the flip side, you could be potentially missing out on some extra money – or even over-paying the IRS! Small businesses are often eligible for different kinds of tax credits and write-offs, and if you're not aware of what you're paying for, you could be missing out on some serious savings! If you're interested in learning more about what tax credits you could be eligible for, talk to us at TaxTaker.