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Especially in the early phase, mistakes can have serious consequences for later success. Those who are familiar with typical pitfalls can identify risks at an early stage and deliberately avoid them.
Possible Mistakes When Starting a Business
Below are possible mistakes that can occur during the process of founding a company or in a young business. They are often related to the fact that problems are not recognized at all or that their significance is underestimated. To clarify what is meant, the 22 points are illustrated with practical examples.
1. Lack of Market Analysis
Many founders start with an idea without systematically analyzing the market. As a result, they do not know whether there are enough potential customers or how strong the competition is. Without a market analysis, price levels, target groups, and demand remain unclear. This significantly increases the risk of developing a product that nobody needs.
Example:
A founder opens a vegan restaurant in an industrial area with no foot traffic. He assumes the concept will “catch on” because vegan food is a current trend. In reality, there is hardly any demand for such an offering in that area. After just a few months, the restaurant has to close.
2. Unclear Business Idea
A business idea is problematic if it cannot be formulated clearly and understandably. Customers must immediately recognize what benefit they will receive. If the offer is too generic or interchangeable, it lacks differentiation from competitors. This makes it difficult to convince customers or retain them in the long term.
Example:
A founder offers “consulting for companies” without having a clear focus. Potential clients do not understand what she actually helps with or what her specific expertise is. Compared to specialized providers, the offer appears interchangeable. Acquiring customers remains difficult.
3. Business Idea Not Tested
A great business idea does not automatically guarantee success. Customers often perceive a product very differently. Before launching on a large scale, the idea should first be discussed with friends, family, or acquaintances: How is it received? What do others like? What would they change?
Example:
A potential founder plans to sell environmentally friendly soaps. Her personal network points out: “The product is great, but the packaging doesn’t fit at all.” Instead of reacting defensively, she takes the feedback seriously and revises the concept. After all, it’s about the customers, not personal ego. Testing ideas and using feedback early saves money and nerves and helps avoid a flop from the outset.
4. No or Insufficient Business Plan
A missing business plan often leads to unstructured actions. Important aspects such as costs, revenues, and growth are not realistically assessed. Without clear goals, decision-making lacks direction. In addition, chances of receiving funding or loans decrease significantly.
Example:
A start-up develops an app without realistically planning costs and revenues. Marketing expenses, for example, are not considered. When the money runs out faster than expected, the product is not yet market-ready. Investors and lenders withdraw because there is no clear plan.
5. Underestimating Capital Requirements
Many founders calculate only the initial costs and forget ongoing expenses. Revenues often occur later than planned and at a lower level, while costs arise immediately or are higher than expected. Without sufficient reserves, liquidity problems can quickly occur. This is one of the most common reasons for early failure.
Example:
An online retailer calculates only product and website costs. Expenses for returns, advertising, and discounts are underestimated. Customer payment terms are too long. Ongoing expenses quickly exceed revenues, and the company faces early payment difficulties.
6. Lack of Business and Financial Knowledge
Entrepreneurial knowledge is often underestimated or seen as secondary. Mistakes in accounting, tax planning, or costing can be expensive. Without an understanding of numbers, profits and losses are difficult to manage. As a result, the company quickly loses financial control.
Example:
A master craftsman starts a small business but hardly takes care of bookkeeping. Invoices are issued late, reminders are forgotten, and taxes are not paid on time. The bookkeeping is disorganized, and there is no overview of the financial situation. In addition to financial difficulties, unexpected tax payments may arise at the end of the year.
7. Incorrect Pricing Strategy
Prices that are too low can prevent the company from operating profitably. Prices that are too high, on the other hand, deter potential customers. Often, a solid calculation that includes all costs is missing. An incorrect pricing strategy jeopardizes the long-term existence of the business. Short-term introductory prices are fine—but afterward, prices must be realistic.
Example:
A photographer sets very low prices to attract many clients. After deducting all costs, hardly any profit remains. As a result, she can barely build financial reserves for difficult times. The high workload for such little return leads to frustration. In the long run, the business model is not sustainable, even if the work itself is enjoyable.
8. Insufficient Customer Orientation
Founders are often very enthusiastic about their own ideas. In doing so, they overlook what customers actually want or need. Feedback is ignored or collected too late. As a result, the product often fails to meet market demand.
Example:
A software start-up develops numerous additional features that customers hardly use. Customer feedback is ignored because the team is convinced of its own ideas. The software is perceived as complex and confusing. Customers switch to simpler solutions, also because they feel they are paying too much for unnecessary features.
9. Choosing the Wrong Location
The choice of location has a major impact on a company’s economic success. A poor location can mean that potential customers hardly notice the offer or cannot easily reach it. This is especially true for brick-and-mortar businesses.
Example:
A retailer selling organic products opens a store in an area with little foot traffic. Public transportation and bike paths are barely accessible. Despite a good product range, sales remain low. A more accessible location would have offered significantly better sales opportunities.
10. Choosing the Wrong Legal Form
The legal form affects liability, taxes, and financing options. If chosen without careful consideration, long-term disadvantages may arise. Changing the legal form later is often complex and expensive. Many founders do not seek sufficient advice on this matter.
Example:
A founder starts as a sole proprietor despite high liability risks. After a damage claim, she is personally liable with her private assets. A limited liability company would have been more suitable. The later conversion costs both time and money.
11. Insufficient Marketing
Even a good product rarely sells itself. Without marketing, potential customers do not know the offer exists. Sales activities are often underestimated or postponed. As a result, revenues fail to materialize and growth stagnates.
Example:
A founder focuses entirely on producing his product or service. Because he has little time for promotion, he relies on word of mouth. Unfortunately, the product remains largely unnoticed, and sales are too low. Without active customer acquisition, no business develops.
12. Unclear Target Group Definition
Without a clearly defined target group, it is difficult to tailor products and services effectively. Marketing measures become inefficient if they are not aligned with the needs and expectations of the right customers. This often leads to unnecessary costs and low response rates. A precise target group analysis helps optimize offerings, pricing, and advertising.
Example:
A start-up develops an expensive fitness app but advertises mainly on platforms used by very young users with low income. The addressed audience cannot or does not want to pay the high price. Downloads and revenues remain low. With a clearly defined target group—such as working adults—marketing would have been more successful.
13. Wanting to Do Everything Alone
Many founders try to handle everything themselves to save costs. This leads to overload and a lack of time for strategically important tasks. Mistakes happen more quickly when expertise is lacking. External support can save time and money in the long term.
Example:
A founder handles product development, accounting, marketing, and sales alone. Errors accumulate due to missing expertise. There is also less time for actual product development. The quality of the product suffers noticeably.
14. Ignoring Legal Aspects
Legal obligations are often seen as complicated or unimportant. Contracts, data protection, or permits are left unchecked. This can result in warnings, fines, or liability issues. Such mistakes can threaten the company’s existence.
Example:
An online shop uses images from the internet without licenses and does not adequately protect customer data. Shortly afterward, the operator receives a legal warning and a threat of fines. These issues could have been avoided by reviewing legal requirements in advance.
15. Missing Permits or Authorizations
Many founders do not sufficiently inform themselves about the legal requirements of their business. Certain industries require special permits, licenses, or qualifications. If these are missing, fines, business closures, or legal consequences may follow.
Example:
A craft business offers electrical installations without the legally required master craftsman qualification. After an inspection, the business must stop operations. Only after obtaining the necessary qualification and registration can work resume.
16. Poor Liquidity Planning
Profit does not automatically mean available liquidity. Bills must be paid even if customers have not yet paid. Without a liquidity plan, payment difficulties can arise. Even profitable companies can become insolvent as a result.
Example:
A service provider works with large companies that pay after 60 days. However, their own bills must be paid immediately. Without reserves, a financial bottleneck quickly develops, despite good order volumes.
17. Insufficient Insurance Coverage
Inadequate insurance coverage can have serious financial consequences for founders. Many underestimate risks such as liability claims, property damage, or business interruptions. Without appropriate insurance, even small incidents can threaten the company’s existence. This also includes private risk coverage, such as illness or accidents.
Example:
A self-employed IT consultant causes significant financial damage to a client due to a programming error but must cover the costs personally because he lacks professional liability insurance.
18. Lack of Emergency Planning
If a company is not prepared for unexpected events, the consequences can be severe. Illness, accidents, technical failures, or cyberattacks can quickly disrupt operations. Without clear rules documented in an emergency plan, financial losses and organizational chaos can occur.
Example:
The sole managing director of a small business suddenly falls ill. Since no deputy has been appointed, invoices cannot be paid and customer orders cannot be processed.
19. No Separation of Private and Business Finances
Mixing private and business finances quickly leads to a lack of clarity. Entrepreneurs lose track of income, expenses, and the company’s true financial situation. This can also cause problems with tax authorities. Separate accounts provide transparency and financial security.
Example:
A founder pays for private purchases from the business account. At year-end, it is no longer clear which expenses were business-related and which were private. This causes bookkeeping problems and inquiries from the tax office.
20. Lack of Adaptability
Markets, customer needs, and conditions are constantly changing. Some founders rigidly stick to their original idea. They recognize new developments too late and ignore customer demands. As a result, they lose touch with the market.
Example:
A shop owner relies exclusively on in-store sales and ignores online trends. Customer numbers steadily decline. Competitors with similar products and online offerings capture the market.
21. Overconfidence and Excessive Optimism
Many founders assume ideal conditions. Risks are downplayed or ignored entirely. Warning signs such as declining demand are not taken seriously. This can lead to delayed or incorrect decisions.
Example:
A founder expects rapid growth and hires staff early. However, revenues fall short of expectations. Fixed costs rise sharply, putting unnecessary pressure on the business.
22. Lack of Perseverance
Building a company takes time and patience. Setbacks are part of the entrepreneurial journey. Some give up too early, even though adjustments would be possible. Successful founders learn from mistakes and continue.
Example:
A start-up generates only minimal revenue in its first year. Instead of optimizing the offer and adjusting strategy and tactics, the founders give up. Later, the market grows rapidly. With more patience, success would have been possible.
Conclusion
Mistakes often happen faster than expected and sometimes even unnoticed. They cannot be avoided 100%.
But:
Those who are familiar with typical start-up mistakes can identify risks early and take targeted countermeasures. Careful preparation and continuous adaptation to new challenges significantly increase the chances of a successful business start-up. Sometimes it is more cost-effective to involve experts early rather than correcting mistakes later at great expense and effort.
Below are some links with further information:
Welche Rechtsform ist für mein Unternehmen die richtige?
Brauche ich wirklich einen Businessplan?
Finanzierung: Ein entscheidender Faktor für den Erfolg!
Welche Versicherungen braucht mein Unternehmen wirklich?
(Which insurances does my company really need?)
Marketing: Mehr als nur Werbung
(Marketing: More Than Just Advertising)
Ein Notfall-Handbuch sollte jedes Unternehmen haben
Bildrechte im Internet: Was Du beachten musst
