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3 big mistakes tiny companies often make

Every business has to start somewhere -- Apple started in a garage and Facebook in a dorm room -- but it's important to look back at what went wrong and the mistakes that were made by startups that have gone before you so that you avoid some of the same problems.

That way, when your tiny little startup becomes a corporate giant, you won't be trying to figure out how to fix these mistakes from the early days:

1. Having hazy future vision

Many decisions you have to make when forming your company can be answered by asking yourself, "Is this company meant to stay small?" If you're part of the artisanal movement, you probably intend to stay that way. If you want to be the next Google, you need to plan like it. Set your business structure up according to your answer. Aiming small and intimate lets you aim for a sole proprietorship, partnership or maybe a limited liability corporation -- but if you have big dreams with shareholders and stock markets involved, you need to incorporate and create a lot of other initial documents.

2. Protecting the founders at the expense of the company

If you protect the founders financially and agree that anyone can pull out and leave at will, you run the risk that someone is going to up and quit and walk away with his or her equity -- and all the company's ability to move forward. Just because everyone seems rock-solid now doesn't mean that things won't change. Startups are the current generation's garage bands -- the lead guitarist could quit or get married or move to Seattle suddenly for another prospect.

Aim for a balanced approach that allows for equity to vest over time. Make reverse-vestments part of the plan, so that the company can buy any founder's stock back if he or she is ready to leave.

3. Leaving the planning to amateurs

You and the other founders have some great skills that can take your company far -- but unless one of you is an actual accountant, consider hiring one for your business books. Same goes for other professional services you need, including a web designer, a search engine optimization firm and a business law attorney.

Spending money on these things may seem painful now, but it'll be a lot less painful (and expensive) than fixing problems down the line.

Source: Inc.com, "Just Starting Out? Avoid These 5 Startup Mistakes. You're Welcome," David S. Rose, accessed Jan. 02, 2018

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