Starting a business is exciting, but it is not without its challenges. When we research the reasons why so many startups fail within their first year, we can see some common trends–pitfalls and mistakes businesses make that hamstring their growth. Let’s take a look at ten common mistakes that startups make so you can steer clear of these as you chart your course and set your new venture up for success.
Not Having a Clear Business Model
One common misstep startups make is not having a clear business model or a well thought-out business plan. Your business plan outlines your business goals and strategies, and how you plan on achieving them. Sounds simple enough, but as with everything else, the devil is in the details. What product or services will you offer? Why are your offerings different than others? How will you raise money? How will you structure your team? Without clarity in these areas, it is difficult to forecast or analyze changes in your economic status. Even if market conditions are favorable to your business now, unforeseen developments could cause a negative impact to your bottom line. To prevent costly surprises down the road, it is important to carefully assess and plan out a strategy around what services your business will offer and how they will be delivered. This strategy should also include a thorough examination of how your business intends to generate income.
Not Doing Enough Market Research
Failing to do the necessary market research before launching a new product or service could lead to major consequences for your business. Market research provides information on how a company can best meet its customer’s needs and succeed in the competitive, economically uncertain environment of today. Without the valuable insights gathered from doing research, you might end up choosing strategies that won’t be successful or sticking with untested marketing plans which could turn out to be ineffective and costly. Businesses need to invest in thorough and meaningful research to have reliable facts about customers’ perceptions, wants, needs and buying habits in order to maximize their chances of success.
Not Keeping a Handle on Your Finances
When you are busy trying to launch a business–or if business is good and you’re struggling to keep up with customer demand–it’s easy to get careless with finances and budgeting. You might be able to get away with this for a bit if you’re a one-person operation, but as you grow, it could hustle you into bankruptcy faster than you can blink. You have to have a reliable accounting system in place so you always know what’s coming in, what’s going out, and what’s coming due. Make sure you have a trusted accountant to help you.
Being Hasty with Hiring
As you grow, you are going to need help. Sometimes the need feels so critical that you’ll get someone hired before understanding whether they’re a good fit for your team. When an unsuitable candidate is hired, it can cause workplace issues and lead to the organization not achieving its goals. This can damage the reputation of the company and cost both time and money to resolve. One of the most important aspects of any business is its team. Make sure you take the time to hire the right people for your team as they will be instrumental in helping you achieve success. Focus not just on hiring staff, but hiring talent.
Not Marketing Properly
Marketing is essential for any business, but it’s often one of the areas that startups neglect. It’s important to create a marketing strategy that will help you reach your target market and promote your products or services effectively. Without a solid marketing strategy (and a reasonable budget to back it up), it will be difficult to generate sales and grow your business. Investing in the right marketing tools, such as social media campaigns, content marketing, and targeted ads will help you build a customer base and increase revenue.
Not Having a Clear Brand Identity
Let’s be clear: you’re not just building a business. You’re building a brand. Without a clear brand identity that can be easily conveyed to the public, you’ll be unable to compete amid the many other “businesses” out there. Your brand identity should be an extension of your mission and values. Without a clearly defined set of guidelines that accurately represent your business, you are likely to end up with a multitude of different messages going out to customers, which can have disastrous effects on recognition and loyalty. Take the time and effort to develop a consistent message across all channels and make sure that it is well-aligned with your brand’s core values. This will ensure that customers understand who you are and why they should trust you.
Onboarding the Wrong Investors
As a startup, you don’t just need investors: you need the right investors.
Partnering with investors is a tricky task. While it may seem tempting to take money from anyone willing to give it (especially if money is tight), you need to be sure that the people investing in your business have both the resources and vision necessary for your success. Look at potential investors’ backgrounds, their previous investments and track records, and make sure they are aligned with your goals. Taking on the wrong investors can leave you dealing with friction between your vision and theirs–and without carefully designed contracts, you could lose more of your company than you should. Take your time, do your research, and choose wisely.
Being Afraid to Fail
As a startup, you’re going to have some stumbles. It’s inevitable. Obviously, there are some mistakes that can ruin a company, but ironically, one of the biggest mistakes you can make is being unwilling to try new things for fear you will fail. If you’re a startup, chances are you already see yourself as an innovator. So innovate. Don’t be afraid to try things that don’t work. If you learn from those failures, they’re not actually failures–they’re stepping stones to eventual success.
Not Having Patience
When it comes to running a new business, patience is key. You can’t expect immediate success; there are going to be times when things feel like they’re not going your way. Don’t give up–instead, focus on the long-term goal and make adjustments and course corrections as necessary to keep you headed toward your goal. It may take months or even years to get where you want to be, but if you stay focused and keep pushing forward, eventually you’ll reap the rewards of your hard work.
Not Investing in Legal Counsel
It’s easy to get caught up in the excitement of starting a new business and forget to develop a framework to ensure legal compliance. Too many businesses fail because they rushed into business without proper legal counsel and got into hot water. It’s important to have a good lawyer on your side to make sure you’re protected from any potential issues. An experienced attorney can help you create contracts with partners, investors, and vendors; draft sound employee policies and contracts; and make sure you’re in compliance with all laws and regulations. It’s an investment in your business that can save you tons of money (not to mention headaches) down the road.
Many startups face a dilemma on this last point because they know they need legal advice, but they can’t necessarily afford to hire a dedicated general counsel. Fortunately, there are affordable alternatives available that let you get the legal services you need without hiring a full-time attorney. At Hood Venture Counsel, we focus our practice on helping startups like yours, and we offer a variety of concierge packages specifically geared to your stage of growth. Reach out to us to learn more about these options.