Running a business in California isn’t easy, but business owners can follow good practices to avoid unnecessary troubles. To gain a better perspective of good practices, they must look at missteps. Keep reading to learn about mistakes to avoid when running a business in California.
Mismanaging Finances
Mismanaging finances is an easy way for business owners to experience debt or legal troubles. When owners overspend, don’t keep track of profits, or inaccurately file taxes, it can lead to issues with the Employment Development Department (EDD) and may result in an audit. However, following good business practices like keeping a record of everything is one way to mitigate the risk of an EDD audit.
Failing To Get Insurance
Some business owners think specific insurance policies are unnecessary and opt out of getting one to save money. However, insurance is essential for every business because owners may have to dip into personal finances to resolve problems without it. For example, if a customer injures themselves inside the business, public liability insurance would cover the cost of legal fees or compensation. But without the insurance, business owners must cover those expensive costs.
Underpricing Products or Services
Another mistake to avoid when running a business in California is underpricing products or services. Businesses tend to underprice things to attract more customers, thinking the extra foot traffic will translate into more money. However, this can hurt the business more than it helps because a profit cut may not cover overhead costs such as rent, insurance, and employee wages.
Not Protecting Intellectual Property
If a business produces software, music, artwork, or other inventions, they should consider copyrighting or patenting their items. In addition, business names and logos are also eligible for trademark protection. Failing to protect intellectual property can leave the business vulnerable to copycats or stolen ideas.
Not Creating a Written Agreement With Business Partners
Business owners who start their company with a partner need a written agreement that explains each partner’s rights and responsibilities. All too often, partners who fail to create written agreements can’t handle disputes. Though the partners get along with each other and think they can informally handle problems, written responsibilities help them navigate business-related issues.