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Common Mistakes Made By Startups
Startup companies provide the perfect opportunity for individuals to launch an innovative business idea in today’s contemporary market. Startups are usually small in size and of little economic value but provide the perfect opportunity for companies to grow in size and expand in the future. Startups can appear to be a simple solution to make quick money, but common mistakes made by entrepreneurs can easily lead to the downfall of their company.
Statistics from “Infographic: The 20 Most Common Reasons Startups Fail and How to Avoid Them“ demonstrate that up to 50% of startup companies fail within their first four years.
As such, it is fundamental for entrepreneurs to take the necessary precautions to prevent such mistakes from destroying their company.
Business Plan
The first requirement for a startup company is to have a business plan. It is not enough to have a great idea or product. One must consider all of the relevant categories included within a successful business plan. Such plan should include: marketing strategy, availability of funds, targeted market, price and location of manufacture, quantity and salary of employees, time of manufacture, expedition price, online websites, headquarters, legal documents, store location etc.
Once a business plan is finalised the next step is to consider the following questions:
- Does a market for the goods in question exist?
- Is the good a substitute or complementary good?
- Is the product innovative and or alternative? (If yes the product is patentable)
- Is the product in question an alternation of an existing product? (If yes the product is patentable)
- Is the product a discovery? (Not patentable)
- Is the targeted market the best fit for the good in question?
- What is the average net worth of similar companies?
Market Research
The answers to the following questions will determine the likelihood of the success of the product. A common mistake made by entrepreneurs is to discuss their business idea only with their family and friends. This is not sufficient. Before investing time, energy and money for a specific product, one should make an in-depth analysis of the market in question and ask for the opinion of a professional. In many situations, a professional advising on the idea may prevent the company from launching. It may sound harsh but it could help prevent a huge future loss.
Spend Wisely
It is common for startup companies to venture and find funds for their project. However, in many situations, entrepreneurs do not create an adequate business plan that provides the company sustainability and profitability for the future. One of the biggest reasons many startup companies fail is because they run out of funds. It is crucial that the economic side of a startup company is evaluated and analysed fully, to prevent the company going bankrupt. The company should not spend too much money, but at the same time not underspend. A balance must be found. If a company underspends and does not invest in capital goods, the company will be very limited in terms of success. However, certain companies overspend on capital goods, without realising that there are other valid options that provide the same quality at a cheaper price. This will allow the company to produce a good product and still have funds for the future.
Hire Help
While writing a business plan, many entrepreneurs believe that their judgment and knowledge is all they need. In many situations, it will not be the case. Hiring a professional will take the business plan a step further. Allowing and accepting the help of professionals is key. Do not allow your ego to get in the way. Whenever a person is hired for their services it is fundamental that they sign a simple assignment document. This document will prevent the exploitation of the good in question and will shield the company’s interests.
Hire Wisely
A common mistake made by startup companies is hiring the wrong employees. In many situations, employees are hired too quickly and without in-depth research on who they are. This impacts greatly a company’s success. Startup companies are small in size, as such, the quality and quantity of work produced by every employee holds great value. It is of extreme importance that in-depth research is conducted about those you hire. The working attitude and moral values of a person cannot be understood by their CV alone. Checking a person’s social media (Instagram, Facebook, snapchat..etc.) will provide a better and in-depth understanding if this is the right person to hire and a carefully considered interview process is imperative.
Build Delays Into Your Timeline
When it comes to technological deliveries, many times things will not go as planned. It is important that when these delays occur you know about them and know that the final project could get delayed. Including the possibility of a delay in the projects, the timeline will prevent the due date from being late.
Know That This Is Now Your Life
A startup company requires more effort and time than a regular job. It is seven days per week of commitment. Many entrepreneurs start their own business thinking life will be easier than being an employee. If a founder doesn’t pour their heart and soul into their business, their employees are unlikely to do so. Understand the responsibility, time and effort that running your own business will require.
This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.
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