You can expect a huge learning curve when you decide to work for yourself and start your own home business. It involves a lot of factors you have probably never had to deal with before, which leaves plenty of room for you to make costly errors.

Here are 10 common mistakes newly self-employed people often make, and how you can avoid them.

1. Selling to the wrong people.

It’s a waste of time to try pushing your products and services on people who simply don’t need what you have to offer. Don’t try to sell to everyone. Some customers are much easier to sell to than others, and it could be to your advantage to say no to clients who are more trouble than they’re worth. For example, instead of pandering to clients who can’t afford your services or don’t understand the value of your business, you can let them turn to your competitors so that you can free up more of your time to focus on working with the best customers for your business.

You don’t have to accept every business offer. Most relationships really aren’t worth pursuing. Learn to say no to weak opportunities so you don’t overstretch yourself when golden opportunities arrive.

2. Spending too much.

Don’t spend your start-up cash unless it’s absolutely necessary –- at least until you have a steady cash flow coming in. Before you “invest” money in your business, you should be clear on how you’re going to get that cash back again. Every dollar invested in the business is another dollar that will eventually have to be recouped from sales. With the help of the internet, you can very easily start a lucrative business for next to nothing.

3. Spending too little.

Sometimes, better efficiency demands spending a little more money. When it’s clear you’ll get your money’s worth and you can afford to, buy decent equipment that won’t slow you down or break down constantly. Paying a ridiculously low price for a contractor could backfire in the end if they are less skilled than more expensive ones. Don’t overspend on fancy furniture, but do get furniture like comfortable chairs and ergonomic keyboards that help you be more productive. If you’re not sure whether or not something is worth the price, get a second opinion.

4. Making yourself sound better than you are.

If you’re a newly self-employed person, don’t pretend you’re anything else. It’s okay to refer to your business as an “I” rather than a “We” when you’re its only employee. Referring to yourself as “We” won’t gain you any respect in any way that matters. Price your products and services fairly for your level of skills and talents. Don’t try to fool your customers by promising them things you can’t deliver. Develop your skills more if you think you need to lie in order to succeed with your own business.

5. Assuming a signed contract will be honored.

Written contracts are still necessary, but they’re secondary to relationships. The purpose of a contract is to clearly define everyone’s roles and commitments. However, it’s the relationship, not the paper, that ultimately enforces those commitments. Business deals almost always stray from the paper contracts that represent them. As long as you keep your business relationships in good order, you won’t have to worry so much about what’s on paper.

6. Going against your gut.

Listen to your intuition when making business decisions. Since business deals depend on relationships, you need to get a feel for the other people involved in any deal you consider. If you sense that something is off about them, then feel free to walk away. Even if the deals people make sound good on paper, a bad client could end up ripping you off after you’ve completed your contracted work for them. If you get a good read on potential clients, go ahead and work with them — but do so with caution.

7. Being too formal.

While in some settings a certain degree of formality is appropriate, in most business situations, being too formal only gets in the way. Business relationships work best when there’s a decent human-to-human connection behind them. People don’t like building relationships with faceless corporations.

Treat your business relationships like friendships (or potential friendships). Take the time to show that you have a real personality and a good sense of humor and you’ll be far more likely to make a connection.

8. Sacrificing your personality.

Especially if you’re in your 20s or early 30s, it’s perfectly OK to be your own quirky self and to inject your own unique spirit into your business. Don’t pretend to be something you’re not. You’ll enjoy your work much more if you attract the kinds of customers and partners that want to work with you the way you are and can appreciate your oddities.

9. Failing to focus on creating value.

It’s possible to make money in the short run without creating much value, but in the long run, it’s unsustainable. Your business should provide some sort of value, both for you and your customers. The better you understand what value you’re trying to provide, the better you’ll be able to focus. Be clear on what value you’re trying to provide and direct your efforts there.

10. Failing to optimize your business processes.

As a business owner, you need to find a way to deliver your value in a cost effective manner. Once you have a particular business process in place, you will need to re-examine and re-optimize it from time to time and look for ways to make it more efficient. Can you get it done faster, cheaper, or less often? Can you get rid of the process altogether?

Don’t use archaic methods for doing routine tasks that could be automated, including marketing, inventory management, billing, accounting, and order processing. Optimizing the tasks you do over and over again will help you save time and money. Running an online business provides many opportunities for optimization because it’s so easy to try new things and measure the results.

Building a profitable business of your own is a tremendous experience. Avoid these common mistakes for a quicker path to success.

By Cathy Lau

Tags: Getting Started