5 Red Flags to Avoid When Starting a Small Business
If you're ready to turn your side hustle into a business, make sure you aren't waving one of these red flags that screams "hobby." New entrepreneurs can have a lot of fear and self-doubt as they move forward and level up a business, especially when they want to be taken seriously by potential partners, investors, vendors, and customers. Follow these five tips to make sure you're sending a confident and professional message to the world and attracting those who are ready to pay for what you're offering.
Mismatched Payment Details
Nothing screams "I'm new here!" like using your roommate's Paypal email or defaulting to Venmo Friends and Family when you are actually neither. Your payment processing details should match your public-facing brand or business name, especially if you want to lower your risk of fraud.
Many credit card chargebacks happen simply because a customer doesn't recognize the charge on their billing statement — don't let that happen to you. If you have an existing Limited Liability Company (LLC) set up with a different name than what the public sees, file a DBA (doing-business-as) or fictitious name filing with your state and update your merchant accounts so that the payment details are nicely aligned.
Unbranded or Unprofessional Email Address
A small business needs a professional email account that matches its domain and inspires confidence in new customers. One study found that 75 percent of ecommerce customers thought a domain-based email that matched a website was a "very important factor" when it came to trusting an online small business.
Email providers like Google offer affordable options that allow entrepreneurs to match their email address to their domain and to easily switch from one account to another. Having a predictable email address also makes it easier for people to remember your business's contact information. Besides, having your email address tied to your domain helps you easily send emails to all of your customers. Bonus points for setting up email accounts for your team (or future team), like email@example.com.
Using a Home Address As a Business Address
With 50 percent (and growing) of all US small businesses based from home, many new entrepreneurs build their businesses from their kitchen table without an outside office or store location. However, apart from just looking sketchy, using a home address for your small business makes you unnecessarily vulnerable to spam, fraud, and doxxing.
To avoid this red flag and preserve some privacy, set up either a PO box or a virtual mailbox (using a service like Anytime Mailbox or iPostal1). You should also get a commercial registered agent service if you manage your business virtually, especially if you're a digital nomad. You can also use that new business address for your email marketing footer (required by law) and your company formation documents.
Not Using Contracts
While a lawyer preaching contracts is a bit like a barber toting haircuts, contracts are a necessary evil to help manage business relationships with partners, vendors, and customers. If you successfully pitch someone your product, program, or service, make sure you know what to do next to close the deal.
You and your client should sign a solid contract so that both sides know what to expect from the relationship, and so that everyone can move forward with clarity and confidence. A good contract will be fair to both sides and answer the obvious who, what, where, and when of the project. Additionally, a contract needs to cover what to expect when the unexpected happens (Covid-19 and force majeure clauses anyone?). Check out my template shop at creativecontracts.co for your modern contract needs.
Saying "I'm 'Just' a ____"
Quit playing (and staying) small. Don't use qualifiers, disclaimers, and other limiting language when you're describing your business, product, or offer (especially when you're pitching, and spoiler alert — you should always be pitching!). You don't just have a "small shop" or write a "little blog." You're not "just an" Etsy store owner or food blogger, you're a profitable business owner looking to diversify revenue streams and expand your product line.
You don't have to be inauthentic or exaggerate your success, but you also don't have to cower or make yourself smaller to make others more comfortable. People's opinions about you or your success is their business, not yours. Stand tall and be able to explain without qualifiers what you do in 20 words or less. Practice in the mirror (hello, business affirmations!) and tweak as necessary so it's crystal clear what you offer and who you help.
What if you're 5 for 5 on the above red flags? Cut yourself some slack, and do better now that you know better. As any seasoned entrepreneur will tell you, starting a business is one of the greatest self-development challenges out there, and you have to learn early on to separate yourself, your worth, and what problems you are solving for customers. The most important person who needs to believe you're a "real" business is YOU.
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Brittany Ratelle is an attorney for creative entrepreneurs who helps creatives become more confident business owners. She has helped hundreds of business owners protect and grow their brands and has worked with Sharon Says So, Blogilates, Bravery Magazine, the Bucket List Family, Cake by Courtney, Kelsey Nixon, Dayna Bolden and many others. With a background in PR, marketing, and law, Brittany helps modern creative businesses navigate the digital landscape without losing their minds (or sense of humor).
She believes in the power of cute office supplies AND good contracts and hosts a weekly podcast, Creative Counsel for Entrepreneurs, with business tips and inspiring founder stories from successful creative entrepreneurs. Brittany lives with her hunky husband and four kiddos in her beautiful hometown of Coeur d'Alene, Idaho but has clients all over the US. She also runs an e-commerce shop selling DIY legal resources called Creative Contracts.