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3 Huge Mistakes Startups Can't Afford to Make Follow these tips and steer clear of situations that can sideline your startup.

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Starting a new business can be risky, with so many new companies failing to survive long term. Often, mismanagement and bad decisions are to blame for a startup's downfall, with founders failing to do sufficient research before getting started.

But what happens when an entrepreneur does everything the right way, only to have a catastrophe destroy the business they've worked so hard to build? Everything from natural disaster to a bad business partner can easily sideline a vulnerable young company.

But this doesn't have to be your outcome. Here are three mistakes you can't afford to make if you're new to trying to build a new business, along with tips for avoiding them.

1. Trusting the wrong people.

Building a business means placing trust in others. Whether it's a business partner, a contractor or the employees you hire, at some point you're going to have to put faith in someone else.

Fortunately, that faith doesn't have to be blind. You can carefully research the people you work with, such as conducting online searches and background checks. You also can ask for references and take the time to reach out to the contacts provided before proceeding.

To avoid losing money to fraud or embezzlement, take time to study the different ways you can be scammed, as well as the reasons people get involved in these types of schemes. A Hiscox study found that small businesses are most at risk, and 37 percent of embezzlement cases were committed by someone in finance or accounting.

To avoid embezzlement, make sure you keep a close watch on your business's financials so that you'll spot issues as early as possible.

You can also further protect your business by investing in small-business insurance that will at least cover a portion of any stolen funds. If you're the victim of fraud, you should press charges to send the message that you will not allow fraudulent behavior among your business partners and employees.

2. Risking injuries and accidents.

Even a business that takes every precaution could fall prey to an on-the-job injury or a slip-and-fall accident on the premises. When that happens, your business could lose all its assets in a lawsuit unless insurance is in place to prevent it. If you haven't taken measures to separate your business assets from your personal assets, that lawsuit could bleed over into your own bank account and belongings.

Most states require businesses to have workers' compensation insurance to protect against employee injuries while on the job. This coverage will help pay an employee's salary while out of work due to that injury, as well as protecting you against lawsuits.

But what happens when someone who isn't an employee is injured while on your property? General liability insurance can safeguard your small business, as well as your personal assets, against claims from non-employees. Even if you win a case, without insurance, you may be responsible for legal fees and court costs.

General liability insurance also protects your business against property damage. If one of your workers or contractors damages a client's equipment while representing your business, the right coverage will replace that item. With your insurance policy handling damages in these cases, you can keep moving your business forward.

Hiscox offers business owners policies (BOPs) that include general liability insurance to cover electronic data liability and the cost of defense in the event of a lawsuit.

3. Intellectual property issues.

If a large corporation claims trademark infringement, a new entrepreneur most likely won't have the resources to battle a much larger legal team. Such a lawsuit can close your doors before you have a chance to build a clientele. Even if your idea is only close to something already in use, you could still face a situation where you can't afford legal fees to fight a lawsuit.

Long before you open your doors, you should have conducted thorough research into the existing market for the products or services you're selling. You may think that you're the first to come up with a specific concept, but an in-depth search could unearth a trademark-protected item that is very similar. Go beyond Google searches to conduct a search through the U.S. Patent and Trademark Office (USPTO). Such a search can be complicated, though, which is why some businesses choose to hire an attorney who specializes in patents to search for existing patents and trademarks.

Another area that can create legal issues for a business is its name. Naming a business can be an exciting process, but it also can be frustrating if you learn someone else already has the name you want. If the other company won't directly compete with yours, you likely won't have an issue, especially if you serve completely different markets. However, it's always best to make your name as unique as possible.

Once you see that your product, service, and business name aren't in use, take measures to claim it for yourself. Follow the steps to document the progress of your invention and apply for a provisional patent to protect your invention as you begin to line up funding and market what you're doing. You'll have a year to apply for a regular patent application to lock your property in place.

As frightening as the prospect of legal action can be, small-business owners also have the comfort provided by professional liability insurance. Not only will this protect against copyright infringement lawsuits, it also keeps your business and its employees safe against negligence. Simply having this coverage in place can give you the peace of mind you need to put your product on the market.