So how do you successfully launch and run your startup? We’ve analyzed why +50 startups have failed and identified some of their common mistakes. Here’re our findings! It’s sad in general, especially as many of these mistakes that commonly take down a business are avoidable.
Due to a lack of experience, many startups endure the misfortune of failure — if they launch at all.
Here are 6.5 startup mistakes to avoid at all cost:
1. Startup Mistake 1 – Don’t try to do everything yourself
How many successful startups have you met with success that has only one founder? A big mistake that entrepreneurs make is thinking they are all alone, and they try to operate independently without surrounding themselves with wise counsel. Don’t try to run a new business by yourself. Find and onboard trustworthy seasoned advisors to discuss your business ideas, strategy, challenges, and progress. Wisdom and power only exist in the abundance of counsel.
In most situations, it’s incredibly daunting to tackle all this alone. A little help from friends and professional colleagues can help in launching the startup.
2. Startup Mistake 2 – They don’t evolve when they should
“It’s important to stay objective and read the market,” said Shama Hyber, founder of Zen Media. “Don’t be afraid to pivot if you find that your original idea isn’t taking off as you’d hoped.”
Respond to what the market needs rather than what you want to give it.
“Remember,” she said, “YouTube originally was meant to be a dating website. The founders realized that the market didn’t want to date via videos — but they did want to upload and share videos. The rest is history.”
Odeo once existed as a podcasting platform. But when Apple launched its podcasting platform, Odeo had to pivot. Today Odeo is that social media outlet known as Twitter.
To become a successful business owner, keep a backup plan for every worst-case scenario but also be flexible and able to pivot if the original proposal isn’t going to work.
3. Startup Mistake 3 – Never spend too much, too soon
Fancy offices, Aeron chairs, and expensive lunches? Forget about it. You’ll bleed yourself dry before you even make your first sale. Likewise, with hiring your staff. “It’s a warm and comfortable feeling to have dedicated full-time staff. It makes you feel legit” Justin Beegel, said the founder of Infographic World. “But it will eat you alive if the economics don’t support having that number of people on the payroll.”
And guess who’ll go without a paycheck if cashflow gets dicey? You. Keep your organization lean until you reach a revenue level that can truly support employees.
Luxury is good but never at the expense of the business growth. Set your priorities first. Endeavor to keep your spending on the very minimal. Google, Amazon, and Microsoft started either at the back of their garage or in a warehouse. The focus is to break even and make good profits
4. Startup Mistake 4 – Forming the wrong team members
Many successful entrepreneurs won’t admit this secret. But I’ll let you in on it. There is no such thing as a solo entrepreneur. Nobody who’s ever scaled the business from the ground up did it alone. Left to themselves, they wouldn’t have a business. I recently read a book about the legendary businessman and investor Warren Buffett.
Buffett spent years trying to convince his longtime friend, Charlie Munger, to be his business partner.
He never went looking elsewhere nor settled for anybody else. He knew Charlie was the man, and he did everything to get him on board. Reading this story just solidified what I already knew. The people you choose to work with can make or break your business. To avoid business failure you must align with people that make you grow, Always learn to cut out the bad energy in the team
5. Startup Mistake 5 – Never neglect legal protection
“The biggest mistakes that startups make are not registering their business, failure in picking the right business entity or protecting their intellectual property. These three areas are crucial to a business starting right, where if not done properly, will cost valuable time and money to correct.” – Heather Green Miller, attorney, and owner, HGM Law Office
So you’re starting a business with a friend, colleague and you’ve written your plan on the back of a napkin, and sealed the deal with a clink of your glasses. Great, but don’t neglect the next steps.
Failure to address these beginning steps can come back to bite you, your business years down the line.
6. Startup Mistake 6 – Leadership Failure
Your business can fail if you exhibit poor management skills, which can be evident in many forms. You will struggle as a leader if you don’t have enough experience making management decisions, supervising a staff, or the vision to lead your organization.
Perhaps your leadership team is not in agreement on how the business should be run. You and your leaders may be arguing with each other publicly, or contradicting each other’s instructions to the staff. When problems requiring strong leadership occur, you may be reluctant to take charge and resolve the issues while your business continues to slip toward failure.
Dysfunctional leadership in your business will trickle down and affect every aspect of your operation, from financial management to employee morale, and once productivity is hindered, failure looms large on the horizon.
Learn, study, find a mentor, enroll in training, conduct personal research—do whatever you can to enhance your leadership skills and knowledge of the industry. Examine other business and leadership best practices and see which ones you can apply to your own.
6.1 Never go for fundraising unless it’s needed
Entrepreneurs often think they need to raise outside capital right away. But the bottom line is that you’re much better off beginning by earning money on a smaller scale for your startup. “Until you’ve got 100 passionate users — which can usually be acquired by word of mouth — you’re not ready to grow.”
Once you’ve proven that there’s market demand for your product, potential investors will see your company as more valuable and it will be easier to raise money.
6.2 Get organized
“Being organized is key. Running a small business is like being a circus ringmaster. It’s normal to have dozens of things happening at once. So, I have a daily task list, things that I need to do. And I list them by their priority. It sounds simple, but it works, and makes me far more productive.” – Tara Langdale-Schmidt, founder, VuVatech.
6.3 Don’t undervalue your product or service
“Don’t price too high, but don’t price too low just to gain market share. If you are good, price like it! Many entrepreneurs start with the best of intentions and give things away for free, or do free things for charity, community, or visibility. Be very careful with this, because you don’t want to be known as a source of freebies. Ring the cash register first.” – James Chittenden, small business consultant, OneClickAdvisor.
6.4 Don’t waste money
“Handling money incorrectly and being irresponsible with cash flow is a death sentence for startups with limited access to capital. I’ve made the mistake of hiring too many people instead of the right people and spending money to fill the top of the funnel without having a well-defined process to manage the bottom of the funnel. Putting good money to bad use and trying to be everything to everyone instead of being niche-focused is a sure-fire way to waste valuable time and money, which are the lifeblood to any startup.” – Thomas Aronica, founder, and chief executive officer, Biller Genie
6.5 Implement a proper bookkeeping process
“Many startup founders begin without a bookkeeping process in place. Great bookkeeping habits help you make smarter business decisions, spot opportunities early on, and head off problems before they become unmanageable. Understanding your financials helps to keep a pulse on your business’s financial health avoiding any form of business failure. Good bookkeeping practices also ensure that you’re on top of issues like tax and insurance payments that can get otherwise great businesses into trouble.” – Paola Garcia, vice president and small business advisor, Pursuit
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