Starting a business is difficult. Launching a startup is even more challenging. Aside from facing the challenge of attempting to build a company from the ground up, many entrepreneurs have little prior experience in the business world. Even when they have an incredibly awesome idea, complex problems arise, such as managing the young enterprise, handling finances and hiring employees on a budget.
Due to a lack of experience, many startups endure the misfortune of failure — if they launch at all. Be sure to not add to their tales of disaster. Here are 10 startup mistakes to avoid at all cost:
1. Going it alone. How many startups that have met with success have only one founder? Larry Ellison’s Oracle is an exception.
Indeed establishing a company is hard work and it often takes more than a single individual to launch a business. There are highs and lows, not to mention some tasks that few can undertake alone. Crushing blows and setbacks sometimes make it hard to continue on without another person’s encouragement. Then there’s a need to market the plan and build the product or service. Money has to be raised to launch the startup.
In most situations, it’s an incredibly daunting to tackle all this alone. A little help from friends and professional colleagues can help in launching the startup.
2. Skimping on the business plan. Having a solid business plan plays a vital role in determining future success. A business plan, after all, serves to guide the startup in the right direction by answering the following questions:
What is the purpose of the company? Who are the potential customers? What are the mission and values?What’s the direction desired for the company? Who are the company’s competitors and what are they doing? How can the company measure success?
In other words, a sound business plan determines every aspect of the startup. And whenever the company is stuck or a new venture is to be launched, refer to the business plan.
There’s no need to go creating a business plan in as formal a manner as someone would in business school. But having a business plan is recommended since it will help determine the company’s direction over the long term.
3. Not handling money correctly. When it comes to startups, having money is very much a big deal and it needs proper handling.
One of the biggest mistakes is spending too much, which may occur when a business owner or founder becomes overly eager and hires a ton of people. At first, the entrepreneur may believe all the new employees are needed. But this will just mean burning through the startup’s finances faster. To avoid this, hire those only those truly needed and take staffing up step by step.
A founder may be tempted to blow through a lot of cash pretty quickly, spending on unnecessary expenses. Instead of these funds going to good use, they’re just wasted.
If a venture capital firm just handed the company a big, fat check, it may be expecting a big fat result very soon. No more fooling around. It’s time to get to work.
And what if the business suddenly has to undertake a costly change and insufficient funds have been set aside? What happens if the original plan must be scratched in favor of a backup plan? What if an investor backs out or a client doesn’t pay? What if a vital element for the business costs too much? Is there money to handle such scenarios?
Without proper management and use of its finances, a new business may never set sail. Be sure that someone good with numbers can help out with this.
4. Not being able to pivot. Every entrepreneur will say that nothing ever goes as planned. But being able to pivot is part of the game. At one time Nokia had a paper mill and made rubber boots. Today, it’s a telecommunications company.
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 worse-case scenario but also be flexible and able to pivot if the original proposal isn’t going to work.
5. Thinking too small. If an entrepreneur thinks too much outside the box (meaning targeting a very tiny niche market), success may be elusive. Investor Paul Graham, the founder of startup incubator Y Combinator, explained in “The 18 Mistakes That Kill Startups” that many entrepreneurs believe it’s safer to target a smaller crowd so the competition isn’t as fierce. But “if you make anything good, you’re going to have competitors, so you may as well face that,” Graham said. “You can only avoid competition by avoiding good ideas.”
6. Choosing the wrong location. Siting a business has always been important. Setting up shop in the right location is key, considering the cost and the geoposition of potential customers and the industry as a whole.
For example, Rowland H. Macy originally started a store in Massachusetts, but it didn’t pan out. So, he learned from the mistakes and relocated his business to Sixth Avenue in New York City. The enterprise was successful and resulted in the retail giant known as Macy’s.
And consider the fact that many successful tech companies tend to emerge from tech hubs like Silicon Valley, Seattle, Portland, Ore., and Boston.
But there’s another reason why location matters: venture capitalists. Graham observed how most venture capitalists fund startups that are located about an hour’s drive away. This may be because investors learn of startups through someone else in their network. So to receive funds, site the startup close to where the money is.
7. Ignoring a hunch. There’s nothing quite like the instincts of an entrepreneur. It’s probably the reason many get far with their startups. So don’t ignore that hunch. Use it to advantage.
But make sure that that entertaining a hunch is balanced with engaging in number crunching, viewing key performance indicators and developing business strategies based on research.
8. Launching at an inopportune time. When launching a startup, timing is everything. While certain circumstances lie outside of control (like the economy or natural disasters), launching at the right time can be arranged. Never mind the exhaustive scientific approach. Just make sure the company doesn’t launch too early or wait too long.
Launching too soon might put the entire enterprise at risk. Consider the following: Is this a product or service that people really want? Is it ready to be marketed? After all, there’s nothing worse than rushing a startup to market out of a desire to beat the competition or start making revenue. Be sure that the startup is ready to go before making it public.
On the flip side, don’t wait too long. Otherwise there’s the chance all the money will be exhausted or that a competitor will be first to market a product. Make sure that everything is ready to roll but don’t procrastinate. Establish deadlines and meet them.
9. Getting the hiring process wrong. Be sure that hiring doesn’t start too quickly. That will drain the entreprise financially. But the part o the hiring process that’s constantly tweaked is the attempt to recruit the right people.
So many startups have folded because the people hired were just not right for the company, perhaps a friend who lacked skilled for the work role. Or someone didn’t fit in with the team because of a personality mismatch. Be sure to have qualified people working at the startup.
And ensure that everything is documented. No one wants an ex-employee to sue because a huge chunk of the company was promised in exchange for services, an agreement that was only sealed with a handshake.
10. Too much outside influence. Whether it’s advice or criticism, feedback from an outside source sometimes is a great assist. Would Facebook have taken off if Sean Parker had not suggested to Mark Zuckerberg that he move to California and change his project’s name from Thefacebook to just Facebook?
Of course too much feedback can be detrimental. Along a company’s journey, many will say what’s best for it. If everyone’s advice is followed, the business would no longer bear a resemblance to the original idea. Being pulled in too many different directions just isn’t good for a business.
Even though Zuckerberg took Parker’s advice, he still kept a vision of what he wanted Facebook to be. He didn’t take every piece of advice offered. He just used the suggestions that he knew would work for his company.