Surveys show that 90% of businesses fail. Speaking from experience, more of my business ideas are strikeouts than home runs. 90% might be conservative.
The odds are stacked against us. I've linked to some great articles at the end of this post that cover why this is but I want to talk about three things that I've seen ruin initially successful entrepreneurs.
Those people who make a great business but fall off the face of the earth and land with a thud back in the 9-5 workforce.
Here they are (in no particular order).
#1 Messing up on Their Taxes
No, I’m not gonna start with something vague and corny like “not believing in yourself!” Taxes are much more actionable and meaningful.
Believe in yourself sure but understand that the government will always get their share of your profits.
How you handle your taxes from day number one will have a huge impact on your ability to be a full-time entrepreneur.
It makes me nauseous when I hear stories of entrepreneurs who found tremendous success early on but forgot to pay their taxes.
My personal record is $32,024. The disturbing thing is I have friends who envied that number...I've seen 6 figure audits that made me want to vomit.
Do you ever see those “millionaire entrepreneurs” taking part in low quality cash grabs?
Most of them are likely trying to pay off massive tax bills
A massive tax bill floored me in my first year of business. If I wasn’t lucky enough to have had some extra money (money I wasn’t planning to spend on taxes) I’d have been back in my soul crushing 9-5 faster than you could say, “audit.”
How to Avoid Messing Up on Your Taxes as an Entrepreneur
- Hire a Good CPA
- Know Your Numbers
- Automate Your Payments
- Form a Proper Business Entity
The first thing you need to do is accept that you are not the person who should handle your taxes. Hire a CPA. It may seem like a punch in the gut when you see the rates they charge but it is almost always well worth it.
A good CPA should leave you with much more money in your pocket than if you tried to handle things yourself.
Next, know your numbers. I recommend a software like Bench.Co to manage your income statements, balance sheets and overall financial health. It is affordable and will help you make much better decisions.
Next, make your payments automatic. Your CPA should be able to help you with this but you shouldn’t need to guess when and how much to pay.
Finally, set up your business properly.
Most entrepreneurs start as sole proprietors. It is the default business entity and you don’t have to do anything to become one. However, sole proprietors miss out on tons of tax savings.
Use a service like IncFile.com (or whatever your CPA recommends) and get things right from the get-go.
#2 Letting Trolls and Haters Dictate Their Decisions
If you're in the public eye, you're going to have haters.
Can you handle it? You can, just decide now.
How to Avoid Letting Trolls Derail Your Business
- Separate real feedback from real hate
- Accept that it is inevitable
- Remember that life isn’t so serious
First, not all negative feedback is bad. Although it would be great to say, “oh that person is a hater, I don’t need to change anything,” that isn’t always the case.
Learn to use constructive feedback (even if it’s said in a rude way) to get better.
Recommended Reading: Hug Your Haters: How to Embrace Complaints and Keep Your Customers
Then, learn to ignore feedback that is from a legitimate troll or hater. You’ll have a good idea of who is real and who isn’t. True trolls aren’t hard to spot.
#3 Not Diversifying and Planning for the Future
Wouldn’t it be awesome if what worked today worked forever?
How great would it be if you could come up with just one idea, market it and then set it on cruise control indefinitely, collecting big paychecks while you sip mai-tais on the beach?
So great but also, so unrealistic.
The nature of an online business is that it’s online…this means anyone can see it. Almost any online business is suspect to emulation. If you have a great business idea, someone else will eventually come into the market.
Competitors will make better alternatives or charge less. They’ll most likely learn how to out-market you. It’s a big world and if there’s money involved, there will always be competition.
Also, things change. Methods come and go. Products boom and bust. You have to be ready to move with the flow.
How to Ensure You Diversify Your Internet Business
- Don’t get comfortable
- Always be learning and listening
- Don’t buy into the specialization craze
- Reinvest earnings in new businesses
First, don’t let yourself become complacent. Understand that your honey pots now may not be around tomorrow.
Focus on developing certain broad skills that will transition well into other opportunities. You’ll listen to your audience and when the time comes, you can fill a need and start a new honey pot.
The entrepreneur community hypes up specialization like it’s the only way to success. I strongly disagree.
While “nicheing down” is important, being a one-trick pony is a recipe for eventual failure.
Focusing solely on one area or skill will make it difficult for you to transition into a new opportunity. Develop skills that will allow you to be a money-making machine for the rest of your life.
Next, reinvest in your business. Instead of keeping up with the Joneses (and there are many Joneses in the entrepreneur world) focus on spending on things that will strengthen your businesses.
90% of businesses fail. Avoiding these three mistakes (messing up taxes, letting negativity crush you and not diversifying) will improve your chances of surviving in the difficult world of online business.
Remember, this article is just about the things people aren’t talking about. Here are a couple of great articles that cover more about all the reasons online businesses fail.
- 10 Reasons Why Your New Online Business Will Fail and How to Avoid Having These Things Happen [HuffingtonPost.com]
- 5 Things to Do If You Want to Fail at Online Business [SmartBlogger.com]
- Why Online Businesses Fail And What You Can Do About It [TechHelp.Ca]
What do you think? Leave a comment and I will reply!