Starting a Business in New Mexico? Don’t Make These Critical Mistakes
New Mexico is seeing plenty of new businesses crop up in 2023. In fact, the state saw a 2.80% growth in GDP in the first quarter of the year. That said, its overall ranking as a business-friendly state has also gone down compared to previous years.
If you’re going to start a business in New Mexico, you’ll need to take the right steps if you’re going to last more than a year. 95% of new businesses in the US don’t make any money when they first open up. This is because they make some critical mistakes that hurt their profitability and scalability. For the land of the cowboys, you’ll want to avoid these particular errors.
Not Getting All Your Paperwork Filed
One of the most common yet grave mistakes a new business owner can make is to miss out on certain paperwork that needs to be filed. Even if you don’t forget, you’d be surprised to find how many people end up filing as the wrong business entity altogether.
The most promising route is to go for a Limited Liability Company (LLC) as it offers more protection than a sole proprietorship but is still easy to form in terms of paperwork. When forming an LLC in New Mexico, you need to make sure that you appoint a registered agent, file the right Articles of Organization with the Secretary of State, apply for an EIN, open a business account, and get the right business licenses and permits. Although the state doesn’t have a general business license requirement, there are still permits necessary for different types of businesses. Don’t skip the research and make sure you hit all the right paperwork so that you don’t get unceremoniously fined or shut down.
Not Knowing the Home-Based Restrictions in the State
When it comes to New Mexico businesses, many strict zoning regulations apply. Since many new entrepreneurs start out at home, it’s important to take note of these compliance concerns so that you don’t get in trouble for any legal violations. The US Small Business Administration notes that the state does not permit individuals to conduct business out of their homes or engage in industrial activity in a retail district.
Although you can still potentially have a home-based business if you have the right location, you need to reach out to both the state and local departments to ensure that you get the proper license. You also have some limitations on the type of business you can conduct, especially in congruence with zoning laws. Because you are more limited in how you are allowed to operate in this setup, you may want to outsource certain tasks like IT management, legal work, and bookkeeping, among others.
Not Securing Cash Flow
According to a study by Skynova and CB Insights, 44% of failures in business are due to running out of cash. Failing to secure enough capital is already an issue faced by many businesses, but an even bigger problem is simply overspending and underpricing at the same time. Considering how intensely the economic turmoil of the country has affected inflation, it’s much too easy to slip up and hit a point of no return.
It’s also worth noting that New Mexico has ranked 47th overall in terms of access to capital throughout the United States. It’s also quite low on the scale for business-friendliness and infrastructure, so you’ll need to actively secure cash flow for your business. You can do this by cutting out unnecessary costs, keeping an updated cash flow outline, creating a customer loyalty program, and building sustainable lines of credit.
Skipping the Operating Agreement
Although an operating agreement is actually just an optional part of the business formation process, you should go ahead and take time to flesh it out anyway. Too much liability and potential disputes can hurt your business in the long run when you don’t have one, so skipping the agreement creation step is just asking for trouble. It’s especially important to have this agreement if there is more than one owner. Within this agreement, you need to establish the management structure, any shares between owners, decision-making responsibility and guidelines, and safeguards for any potential disputes. It is also during this stage that you can start Finding Your Brand’s Personality as you break down how the business will operate. Creating a reference for a deep understanding of what your business entails is essential if you want to thrive and scale in the future.
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