6 Most Common Startup Mistakes
Dylan Bishop7/6/2018 8:03:23 AM 9/17/2018 6:36:20 AM
Starting a Startup is hot and it can be a complicated task. It’s not possible to ‘just start a business in a day’ because it often involves a significant amount of time and intensive preparation. Nevertheless, much can still happen during the Start-up phase. In order to ensure that you can create order in the chaos that is coming, we will list below the most famous Startup pitfalls for you: 6 mistakes made by startups. The Startups I usually right about have proven themselves already. They grow, have a working demo and make their first income. Make sure you learn from them:
1. You didn’t pick the best market and target group
It may seem obvious, but we emphasize once more that the chance you will come into trouble is higher if you do not prepare well before you start. It all starts with actually creating a strategy, a detailed planning and perseverance! Registering a company can be done quickly, but good preparation for entrepreneurship is essential. So it is wise to first investigate whether the most important target group in your region needs the products or services that you want to sell.
After all. Sometimes it’s only the entrepreneur itself that is enthusiastic about importing a specific item, but it might be possible cannot easily sell those items in your market. In addition, writing a business plan is a must for every starter (even if you do not need investors), because in this way you can accurately map the opportunities, competition and potential customers.
Choosing the wrong market means you will face heavy competition and limited growth opportunities, which can turn into a kind of Russian roulette, where every strategic step you take can have major negative consequences for the continuity of your company.
However, a highly competitive industry does not have to be a reason not to pursue your plans.
For example, when you start the webshop in a category that has a lot of competition, it’s wise to specialize in a niche. Then you can play a significant role for a smaller target group with your new online store.
Point of Action: Make a good competition analysis
2. Spend too much money too quickly
It may be a bit exaggerating to say that as a starter you have to spend every penny carefully, but unfortunately, it often happens that startups get into financial problems when they are spending too much money in a short period of time. An irregular and irresponsible spending pattern and insight into the cash flow may even - regardless of whether there is an economic downturn on the market - result in your company being declared bankrupt.
So make sure you will grow a financial reserve in order to cope with periods with lower revenue streams and income. Once your business model turns out to be successful, allow yourself some more freedom in terms of investments and other expenses. Until that time, you would be wise to save as much money as possible.
Point of Action: Make a worst case scenario Startup P&L, Expenses overview, and budget
3. Collaborate with the wrong people
If you wish to start a business with someone else or get help from a good friend, you first need to ask yourself what kind of business partner you are looking for. You would not be the first starter to work with good courage with a family member or close friend and later repent this decision. Because it doesn’t matter how well you can go along with each other: a good bond can quickly weaken if you can’t come to an agreement with each other.
Instead of looking primarily at someone's personality traits when selecting a business partner, his or her business qualities should prevail. And to this aspect, the principle: 'opposites attract' can certainly apply for a fruitful cooperation.
Point of Action: Make a job description for the profile you are looking for
4. Timing is key, don’t postpone the start of your Startup for too long
Starting unprepared is often not a recipe for a successful company, but waiting too long isn’t good either. Although a marketing plan and business plan offer a detailed insight into opportunities, there is - if you really dream of becoming an entrepreneur - only one way to discover whether your product or service really appeals to the target group.
For that reason, you should not postpone the start of your Startup indefinitely. In the initial phase, you have to find the right balance in predicting the growth opportunities in the market and responding adequately to (unexpected) developments. In other words: you need to start well prepared and use the first feedback from customers to optimize a product or service.
Point of Action: Ask yourself how to put a product in your market?
5. Listen to your gut instincts
Take an example to big entrepreneurs like Richard Branson, Jack Ma, Steve Jobs or Mark Zuckerberg. They all had a vision and were convinced that their products, services and company’s philosophy would appeal to their target group. The great entrepreneurs of our time had one thing in common: they all listened to their intuition and regardless of the advice they received from ‘so-called experts’, they often are stubborn and went their own way. And built up their famous successful empires.
Undeniably, it is often not wise to ignore all advice from experts and business advisors, but it certainly does not hurt to listen carefully to your intuition. Just be sure it’s a rational decision, which is not fully based on emotions. So, if you feel that a product does not perfectly match the demand in your market, you must make sure to intervene in time. Adjust the product / service / brand experience, until the target group is as enthusiastic about it as you are.
In the case, you are negotiating with a potential investor, who you think he or she might not fulfill his or her promises and has unreasonable requirements according to your intuition then don’t go any further and find another party that will accept your terms!
Point of Action: Make an attractive Investor Presentation
6. Hire the wrong staff
If you plan to hire staff, you need to look for the best match for each job, which results in the best output for your company. What qualities does the employee need to have in order to contribute to the growth of your Startup? And does he or she fit the principles of the company or brand? A first new staff member can make or break the Startup. If you are not making a lot of revenue yet, make sure you keep a lean Startup model.
Unfortunately, it still happens in rapidly growing start-ups that are quickly hiring new people "because it is necessary". This is often not the best way, because you won’t succeed with an employee that is not fit for the job.
You should spend enough time on drafting the vacancy until you are satisfied, in order that you exactly know what the profile is you are looking for. Also, make sure you use your business network or a specialized recruiting agency for this job.
Point of Action: Create and Follow a New Hire Checklist.
We hope these 6 most common mistakes will help you to tackle the issues when you see one or more specific situations occurring to you. Certainly, make sure you will be more cautious when you feel you run into the same circumstances. Yet there are also many entrepreneurs who are in the previous phase. They have an idea, and still, have to go through the entire process of the Startup phase.
Useful example Startup Planning Gantt Chart with steps for the first years:
And a powerful Startup Starters Toolkit with all the Document templates for each step in the coming years: