Starting a business is no easy feat, and sustaining them is not for the faint-hearted. There are plenty of startup mistakes that could be made.
There around 100 million startups born every year, and the majority of them (90%) fail to reach growth and success. Around 30 percent of them will live for two years, and half of them will be shut down in five.
Startups today are not mere businesses in their infancy. They are defined as businesses working to solve problems but fail to successfully provide solutions.
They are companies going after change and disrupting the status quo.
But only around 25% of startup businesses graduate from the startup stage to become a full-fledged company.
There are several factors that contribute to this statistic like competition, premature actions, and financial woes, and startup mistakes you can make.
If you are in the middle of conceptualizing a startup business then you have to read on and be informed to prevent your startup from doom.
5 Startup Mistakes to Avoid
1. Forcing an Idea with Incompetent Research
Many startups may have an amazing product or service idea but fail to back them up with knowledge of how to implement them.
They tend to skip through market research and, as a result, what they end up with is inaccurate or incomplete data.
Bad data and poor research, together with a forced execution of the business model, leads to incorrect target market, competition, market condition, and erroneous business forecasts.
Pushing an idea without doing the prerequisite research is a big startup mistake and can cripple a budding company.
If the owners and operators of the business are not knowledgeable in conducting the research, the work may need to be delegated to a new hire with experience in market research.
Another option would be to outsource the research to a virtual assistant or a research firm who can compile the necessary information for them.
2. No KPI
KPI stands for Key Performance Indicator, and many startup businesses do not establish appropriate metrics that fit their marketplace.
KPIs are used to determine if your business is succeeding or failing. If you have inappropriate indicators or no indicators at all, then you are more likely going to lose your financial direction.
KPIs can include daily or weekly sales, productivity levels, production time frames, service targets, and other such goals. These will help a startup identify the important aspects of their business.
If they notice they are not hitting their KPIs, then those will be the areas the business needs to focus on to improve.
This is one of the biggest startup mistakes as without KPIs, the business cannot capitalize on what it is they are doing right. Either way, there is no way to gauge the business’s standing.
3. Hiring Problem
Many startups begin operating with freelance-like employees, especially those in the upper management positions. Their marketing head is working 40% of the time in the office, the senior finance officer is available on MWF.
Conceptualization needs to come from a group of committed people. You need capable and devoted people to create a strong foundation for your startup.
A team working toward the same philosophy and goal are capable of overcoming challenges and prevent internal strife.
Businesses are now more in-depth in creating specific products, so hire people with specialized skills that are perfectly suited for the position that will handle the product development.
Be careful hiring overqualified employees, though (overqualified in terms of the business, not of the potential employees skill level). Bringing them onboard early can lead to financial loss, which is yet another one of the common startup mistakes business owners make.
For example, if the business hires a senior IT officer but only needs basic or minimal IT support, then their salary may put a strain on the business’s payroll, unless the person can wear multiple hats and fill multiple positions.
Most startup businesses will require several of these types of positions.
Owners will be sacrificing their family and personal time to get the company up and running. They have to wear many hats for the business to function.
Any employees hired on during this early stage of existence will need to be as flexible as possible with performing the tasks necessary to keep the business going.
4. Scaling Too Soon
Scaling in a well-balanced manner leads to a steady pace of growth. Aggressive expansion with an incapacity to produce based on the now-increased demand can lead to financial losses.
Operating costs will only get higher while the profits from previous years may not be able to sustain them.
If a startup is to the point where growth is sustained and can be managed, one suggestion that can maximize the scaling of the business while reducing the cost of growing would be to rent, rather than own.
You do not have to own your own trucking fleet; equipment such as electric pallet jacks can be used on contract. Especially if it will require a hefty amount of cash to purchase the needs of the business. Or if those needs will require large monthly payments, using someone else’s equipment would be a better option.
The business will likely pay a smaller amount per month by renting its needs.
Another option for a growing startup to consider in order to avoid this one of the most common startup mistakes would be to outsource back office functions.
Virtual assistants can help maintain a small business’s daily paperwork functions. And at a price that may be less than hiring another individual.
5. Not Asking for Feedback or Thinking too Big
Feedback about a business’s services and products is a crucial way to effectively understand their successes and failures, and their customers.
Most startups believe that their products are what the customer needs, but most of the time it is the business who needs to listen to the people’s needs.
A startup should offer solutions to the customer’s problems, not solutions to create a problem.
A small business needs to accept positive feedback cautiously. It is very validating to hear such positive commendations from customers, investors, stakeholders and the market as a whole, but it can set the business up for failure.
A single individual praising a product as intriguing or claiming the service offered is interesting, but the majority of customers may not agree; those products or services may not be the ones customers are paying for.
These are the startup mistakes you must watch out for as an entrepreneur.