7 Costly Mistakes New Entrepreneurs Make (And Are Super Cheap to Fix)
Are you starting your own business? Make sure to avoid these major mistakes new entrepreneurs make with a few simple fixes for success!
Starting a business is so exciting, but I’ve seen many businesses fail due to mistakes that could have easily been avoided. As an entrepreneurial lawyer myself, helping entrepreneurs like you, I’m sharing exactly what common mistakes new entrepreneurs make and how you can avoid or fix them with a few simple steps.
In this blog post, I’m helping you avoid all the most common, costly mistakes new entrepreneurs make covering:
The 10 deadly mistakes of entrepreneurship that could kill your business
The simple and cheap solutions to common mistakes new entrepreneurs make (so, don’t worry if you find out you’re already making 5 mistakes entrepreneurs make)
After learning all about the costly mistakes new entrepreneurs make, you’ll not only survive, but you’ll make your business thrive.
This post is all about the costly mistakes new entrepreneurs make and how you can easily fix them with a few simple (cheap) fixes.
Costly Mistakes New Entrepreneurs Make
10 Deadly Mistakes of Entrepreneurship
#1: Relying on Emails or DMs Instead of Contracts
The Mistake
The most costly mistake of the mistakes new entrepreneurs make is relying on an agreement made by email or through an Instagram DM. This can take several forms:
Agreeing to a project through Instagram DMs or email only.
Starting work without written terms.
Sending a contract or terms and conditions, but not getting client signatures on any document.
The Consequences
Can an agreement made over email or DM be legally binding? Sure, often, an email can be considered a legally binding agreement!
So, why do you need to go through the hassle (and awkwardness) of getting a client to sign a contract?
Well, you can agree on what service or product you’ll deliver and what the client will pay for it, but here are a few reasons why not having a contract could cost you:
There’s no process in place that either party is legally bound to, meaning it’s going to be the client’s way or the highway, and the client has no obligation to cooperate with you. Good luck actually getting the work done and getting paid!
There will be a lack of clarity on the services and deliverables you provide, which will lead to misunderstandings, and misunderstanding will lead to one of the following:
The client could ghost you halfway through the project, or even after you’ve already delivered the service or product (good luck getting paid for all the work you’ve put in).
The client could write a bad review about your business, which will crush your reputation and maybe even your entire business.
In the worst case, you could get sued!
You won’t have legal limitations and crucial indemnities in place, which leaves you exposed to unlimited liability.
The Cheap Fix
Get a contract template created for your specific niche or have a custom contract created (at a fraction of the cost of a law firm).
Here’s what a (properly drafted) ironclad contract will do for you:
Creates clarity on your processes and the client’s obligations
It will include deadlines for the client and consequences for if the client does not meet its obligations (on time)
It will ensure you’ll never lose all your money or even your entire business with the proper limitations of liability, indemnities, and disclaimers
It will give you full control over how you do things and also the option to temporarily stop (suspend) your services or even terminate the contract if the client misbehaves, without having to compensate the client
You can set boundaries on your time and services, so you can never be pushed to work all night for a client and avoid scope creep
#2: Using Free or Generic Contracts
The Mistake
That brings me to the next big one of the mistakes new entrepreneurs make: using free or paid generic contract templates that are not and can not be tailored to your specific niche.
Every niche and every subniche comes with its own risks, so a one-size-fits-all template just does not work. Here are some examples:
A UGC creator that creates content with their face and voice included will need extra protection and stronger licensing rights than a UGC creator who only creates product videos without themselves included in the videos. Thus, each type of UGC creator needs contracts with different licensing terms, disclaimers, and protections.
A fitness coach runs a completely different risk (physical injuries, health or diet issues, etc.) than a business coach (bad business decisions, bad financial results, legal business issues, etc.). Thus, coaches in different niches can’t use the same template with standard disclaimers because they both need protection against completely different risks.
Even consultants in the same exact niche will have major differences in approach; some consultants take a purely advisory approach, while others have a more hands-on approach. That’s why consultants especially need a custom contract with processes, fees, payment structures, and protections tailored to their way of doing business.
The Consequences
If you don’t have an ironclad niche-specific contract template or custom contract for your business, you’ll be running risks that could be deadly to your business:
Clients will not understand the limits of your services, and that ambiguity will lead to you providing services outside of your scope that you are not paid for, or dissatisfied clients who leave bad reviews or threaten legal action.
You will not have the full protection you require in your specific niche, leaving yourself exposed to very costly risks.
You could be blamed and even sued for a client’s outcome, and you may be forced to refund or settle out of fear.
The Cheap Fix
Use one of my niche-specific contract templates or book a custom contract service to get something tailored to your exact services.
Here’s what a proper contract will do for you:
Niche-specific disclaimer, indemnities, and limitations of liability to reduce liability and legal risk, and have peace of mind knowing your legal bases are covered.
Avoid misunderstandings and costly legal disputes.
Build client confidence by setting expectations upfront.
A clear scope of work (and what’s not in scope) and step-by-step processes so that clients won’t overstep your boundaries.
Make a professional impression that builds client trust.
#3: Skipping the Fine Print on Refunds & Cancellations
The Mistake
Another common mistake of the mistakes new entrepreneurs make is not having a refund & cancellation policy in their contract or terms & conditions for their services or products.
I often see the following mistakes made:
Not stating anywhere whether your services are refundable, assuming clients won’t ask for a refund.
Only have a simple statement on the sales page that their product or service is not refundable. A simple “no refund” statement on your sales page is not legally binding unless your clients explicitly agree to it (by checking a checkbox at checkout).
The Consequences
If you do not have the following in place:
A signed contract with a complete refund & cancellation policy, or
Terms and conditions including your policy which your client explicitly agrees to (by checking a box upon the purchase of your product)...
Then, your clients will have the right to a refund, even after they have:
Used your services and profited from your services,
Followed your entire online course, or
Downloaded all your digital products (and keep your digital products).
The Cheap Fix:
Use a contract template or terms and conditions (like mine) that includes a comprehensive refund and cancellation policy that states:
If and, if so, under what conditions any refunds and cancellations are allowed,
The time limit for refunds and cancellations (if permitted), and
Includes protections that ensure you’ll keep the full fee or (at your choice) a percentage of the fee, so you’ll never lose money.
#4: No Clear Scope or Boundaries in Client Contracts
The Mistake
Another one of the common mistakes new entrepreneurs make (or their lawyers) is either of the following:
Leaving the scope of work vague and only giving a general description of the service in the contract.
Not stating how many revisions or meetings are included in the service.
Not defining what’s not included (which might be even more crucial than stating what is included).
The Consequences
Here’s what will happen if you don’t have a clear scope and process:
Clients demand endless changes or additional services.
You spend extra hours unpaid.
Projects drag on with no clear end.
Burnout from lack of work-life boundaries.
Difficulty managing your projects and keeping up with project updates.
No boundaries on communication, leaving you feeling obligated to respond to every client request immediately, even at 11PM.
The Cheap Fix
Here’s what my service agreement templates come with and what yours should include:
A clear overview of what services are included in your scope.
A list of services not included to prevent scope creep and protect your time.
Limits in number and length of meetings to avoid clients keeping you stuck in calls forever.
Clear processes with deadlines for both you and your client to keep projects on schedule and budget.
Clearly defined work & communication hours so that clients can’t expect you to pick up the phone at 11PM or work all weekend.
#5: No Cooperation Obligations or Protections Against Ghosting
The Mistake
Another one of the mistakes new entrepreneurs make when they leave their jobs to start their own business is putting rose-colored glasses on. They think they’ll have a way easier life without their pesky bosses breathing down their necks, but don’t realize what a nightmare certain clients can be.
So, in their contracts, they focus on making sure the payment obligations are clear, but they still make the following mistakes:
Assuming clients will always respond on time.
Presuming clients will immediately provide all the information required for the project at the beginning of the project.
Forgetting to require timely input for feedback with deadlines not just for them, but also for the clients.
Not stating what happens if clients ghost halfway through the project.
Thinking clients will always pay on time if they did so the first time.
Believing clients will always show up at scheduled meetings.
The Consequences
Here’s what happens when you don’t have the proper boundaries and protections in your contracts:
Your timeline and income suffer due to delays, resulting in projects being dragged out endlessly.
You end up never getting paid for all the time and effort you’ve already invested in the project.
You can’t rebook or take on new clients (who will cooperate and pay you on time).
The Cheap Fix
Here’s what you need in your contracts to ensure your dream clients do not turn into nightmares:
Require full upfront payment or at least a deposit that covers the cost of your work, so you never lose money if a client suddenly ghosts you.
Include that you will not start your work until (1) you get paid the full amount or deposit, and (2) the client provides all the information you need.
Include that clients will not have the right to reschedules or refunds if they don’t show up at meetings.
Set deadlines for client feedback and anything else your client needs to do.
Include the rights to (1) suspend your services and (2) terminate the contract if the clients do not provide what you need or pay you (on time) without having to provide any compensation.
#6: No Privacy Policy (Even If You Only Use a Mailing List)
The Mistake
Another underrated mistake of the mistakes new entrepreneurs make is not having a privacy policy.
Under most privacy and data protection laws, you need a privacy policy when...
You have a business website
You have a mailing list (and don’t even have a website)
Whenever you collect client information (even if it’s just to include their information in your contract, email them, or call them solely for the project)
That means that if you run a business, you are required by law to have a privacy policy.
A privacy policy basically sets out what personal information you collect, what you do with it, and how you store and protect that information.
The Consequences
If you don’t have a privacy policy:
You may violate multiple privacy and data protection laws, like the GDPR (even if your business is not located in the EU), the PIPEDA (even if your business is not located in Canada), the CCPA, or one of the many State privacy and data protection laws. For a full list of all international and State-level privacy and data protection laws my privacy policy covers, check out this page of my Legal Website Bundle. Violating any of these laws could result in hefty fines that could kill your business instantly!
Customers may lose trust in your business, as (1) your business won’t seem legit without one, and (2) they don’t know if you’ll resell their information.
Many online services and platforms you use for your business will require you to have a privacy policy, especially advertising services and email providers, like Meta Ads (Facebook and Instagram), Google AdSense, Mediavine, and Mailchimp. These services could flag your account and even suspend you!
The Cheap Fix:
Get a privacy policy that is fully customizable to your business and niche.
Make sure to update your privacy policy every year to comply with new laws and any changes in laws!
I update my privacy policy every year to ensure my customers remain compliant and protected!
#7: No Rights to Testimonials, Logo Usage, or Portfolio Rights
The Mistake
One of the most overlooked mistake of all mistakes new entrepreneurs make is not having the legal rights to:
Use clients’ (brand) names and logos on their website
Post clients’ testimonials and photos on their website and social media
Showcase the work you’ve done for your client in your portfolio and your ads
The Consequences
If you publish your clients’ names, logos, or testimonials without the proper legal documents in place to do so, you’ll run the following risks:
Clients can request you to change whatever you publish about them, or tell you exactly where you may use that content
Clients have the right (even after giving permission) to demand that you delete their information from any platform
Clients may sue you for using their name, logo, or testimonials
The Cheap Fix
Here are three legal documents you need to use your clients’ names, logos, or testimonials and to showcase the work you’ve done for your clients on your website, social media, ads, or anywhere you want:
A client contract that includes a license for you to use your client’s name and logo.
A testimonial release form to get your clients’ permission and legal rights to publish their testimonials on any platform.
A privacy policy to ensure you can legally use your clients’ personal information without violating privacy and publicity laws.
That’s all you need to ensure you do not make the most common mistakes new entrepreneurs make, so you don’t run major costly risks and let your business thrive!
The Simple Solution to Avoid All Common Mistakes New Entrepreneurs Make
Don’t let these costly mistakes take down your business!
Head over to my contract shop and explore a range of niche-specific contract templates that will give you the peace of mind you need to focus on growing your business.
If you want something fully tailored to your unique needs, I also offer custom contract services to ensure your contracts are airtight.
Protect your business, your time, and your reputation today—check out my services now and let’s get you set up for success!
This post was all about the major mistakes new entrepreneurs make and how to fix them to make your business thrive!
Find a niche-specific contract template for your business on this page!
Learn more about all my legal contract services on this page!
