Why do startups fail? Is there a recipe for success for your new and exciting business venture?
Unfortunately the answer is no. There is no way to guarantee success in your new business.
While there may be recipes (or templates) you can use to help you on the path to success, it’s also useful to know what things you should avoid as a startup.
A groundbreaking idea alone, the one that will transform the market, won’t have you climbing the ladder of success especially when you’re running your business single-handedly. And failure is hard, demoralizing, painful, and embarrassing.
But let’s look at it another way. Failure is also an opportunity to learn from the big mistakes that are usually made by so many new entrepreneurs. Today we’ll discuss some of the most common pitfalls for new entrepreneurs so you can avoid them.
Mistake #1 – Lack of Emergency Funds
You have dreams. You have goals. And you want to get started really quickly!
But be careful. Don’t spend like there’s no tomorrow.
Many new businesses fail to manage their funds effectively while investing in and running the different parts of their business. And as such, these budget mishaps often lead to losses which demands the availability of backup funds.
In research done by U.S. Census Bureau in January 2015, nearly 5.2% of companies closed because of inadequate cash flow.
Try to understand your business financing options and keep a track of your monthly burn rate. This will help you know how long your business can survive with your current funds. And don’t forget to keep some reserve for unexpected expenses.
Goal Investor suggests setting up a personal emergency fund to pay your daily living expenses as well as one for your business.
But how much should you put aside? That’s a tough question to answer. As with so many questions in life, the answer is “it depends.”
It depends on your needs and your business expenses. Many financial advisers recommend at least 3 months’ worth and some suggest as much as a year.
Mistake #2 – Lack of Planned Strategies
The famous American educator, Michael Porter said it so right –
“The essence of strategy lies in what not to do.”
While it’s important to remain flexible, frequently changing your strategies causes confusion and will actually hamper the growth of your business. Do a little more research before you jump onto something new and give your plan time to see if it reaps you the desired benefits or not.
Related Article: 5 Mistakes That Destroy Startups
As a solopreneur, you have the advantage of doing strategic planning in isolation which has often proved successful for many entrepreneurs. Have your strategies listed in great detail while keeping in mind where you are right now and where you want to go.
Then set target dates for accomplishing each of your objectives and brainstorm solutions for potential problems. Ensure that there is a cohesiveness between the devised plan and the day-to-day business operations. Moreover, your plan must bring out the complexities that need to be confronted.
Mistake #3 – Lack of Effort
Just because something seems like a good idea doesn’t mean that you should work on it. Pursue what you are actually passionate about. Starting a company takes full determination and not just the mere input of few hours.
It is advisable NOT to start a new business alongside a job, as many of the new entrepreneurs make this mistake. Success demands commitment, and you can put true commitment into something only if you’re truly passionate about it, because this is what keeps you going!
“The game has its ups and downs, but you can never lose focus of your individual goals. And you can’t let yourself be beat because of lack of effort,” said Michael Jordan, the famous American former professional basketball player. With each successive step, you’d need to put an added level of devotion. No casual attitudes please!
Mistake #4 – Failure to Understand Your Audience
Do you know if anybody will care for your potential product before you spend millions of hours developing it? Market research is crucial to understand who your prospects are. Failing to validate the product or service you’re offering to your customers often results in startup failure. Picture it! If nobody wants what you’ve developed, then you’ll end up wasting your time, money, and efforts. Ensure that your product fits a proven need before you start working on it.
Based on an analysis of 101 startup post-mortems, it was found that “no market need” was the primary reason for why startups fail to succeed with 42%.
Analyze these four factors crucially:
- Market size:Know an approximate count of customers in your target audience.
- Market wealth:Does your target audience have enough money to purchase your product.
- Competition:Is your target market already filled with numerous competitors?
- Value proposition:Will your product be able to stand out of the crowd?
With this, you can gain insights about the ongoing demand, standard costs and competition.
Moreover, this might sound counterintuitive, but you need to understand that not everyone is your target audience. A simple example just because you’re developing a mobile app, everyone with a smartphone isn’t your target audience.
Mistake #5 – Failure to Cope With Legal Challenges
Legal complexities are another big reason behind shutting a startup down.
Not complying with the standard legal terms can put you and your business in trouble. Some common blunders made by inexperienced startups include failure to consider the IP protection steps in order to save their unique product or service from infringement.
Also, not taking into consideration the tax issues or maintenance of employment documentation are some of the common legal mistakes made by new entrepreneurs.
Learn From These Mistakes!
As you gear up for your new business venture, you need a good road map to track your way. Each and every move you make determines whether you meet realistic mile markers or not.
By doing your homework and learning how to avoid the above mistakes, you will surely be well ahead of the game. Here you go!
Have you made any mistakes in your business? What lessons have you learned from failures? Or maybe there’s a mistake you’re afraid of making that’s stopping you from moving forward. Share your thoughts, stories and concerns with us in the comments below!
Author: Kanika Sharma works as a writer at ProofHub. For the past 2 years, she has been writing for various technology blogs. Being an engineering graduate, her background allows her to connect with cutting edge technologies and relate them with real world scenarios. She also likes to think and pen down her thoughts towards various facets of life. When she is not writing, she can be found in the abode of Himalayas, as exploring nature excites her the most. She is an early riser and loves to bask in the morning sun rays. Kanika also enjoys sketching, cooking, dancing and spending time with her family and folks. Her future plans include joining a writing community, a vacation in Paris and riding a white horse. Follow Kanika on Twitter to know more about her.