Startup Mistakes – Why Do Businesses Fail

30 Jan 2017

New Start Business

Why do startups fail? Startups don’t always get off to the best start within the first few years.  This is no secret and something which most entrepreneurs and startup owners will be painfully aware of, and surely reminded of regularly. Small Business Administration (SBA) reports that,  about half of all employer establishments survive at least five years and a third survive ten years or more. Almost 80 percent survived more than one year”. Not all bad for startups, but remember that this also means 20% don’t survive the year and half will not survive the first 5 years. Making sure you are not in either of those groups is your aim!  Make it easier on yourself and make sure you aren’t making the simplest of startup mistakes.

Your People

Your people become your business; the individuals which you choose to hire, especially in the beginning, become your foundation, so you need these to be strong choices that are able to carry your venture to success and not let the startup fail.

If you select your core team badly, this is an opportunity for mistakes.  Those who are invested in the company or business and really understand your core aims, goals and values are the ones who will work hard to ensure you succeed, being the only one in the company who understands and is passionate about these elements is not the route to success.

You’ll want to hire as few employees as possible, you may well need a marketing presence, legal force, developers or whatever it is that you might need, but it might be an idea to look at hiring freelancers to carry out any such work where possible.

Failing to Plan: Planning to fail

This may seem a little obvious but so many don’t plan properly or indeed at all.  Having a rough or vague business plan or beginning without a plan at all just won’t cut the mustard in the world of startups.  You need to know how you are going to grow your business into the successful company you intend it to be.  A strong business plan is needed as the foundations to build upon.   How will you market? When will you begin to see any profit? A growth plan? Do you know your competitors?  Perhaps an idea similar to yours has been tried before, why did this fail? Can you learn from their mistakes?  Preparing your business plan should make you so well versed in your chosen area of the market and really, really know your product or service, the good and the bad.

Bad Budgeting

Each business plan should have a detailed budget which errs on the side of caution.  This is a common pitfall for new businesses.  The stream (or often trickle) of money runs dry too quickly.  And if you can not find investors quickly enough then this is a huge problem, and likely the end of your startup, for now at least.   Hiring too many too quickly will soon take up your money, as will equipping an office with things that aren’t really needed yet, you’re a startup, you need the bare minimum, and when things seem to be going well for your company, that is not the time to loosen the purse strings, keep them taught!

All in all, you need to be aware of what is going on, coming in and out, and know that you have planned with enough foresight to know that there is money available to tide you over in the case of a late payment or an unexpected bill.

Be aware

This point also falls in line with your business plan.  Be aware of your business’s weaknesses and expect them to happen, expect them and plan for them accordingly.    A lot can, or should we say will, happen even in your first year of business, which is unexpected and could cost you greatly.  If this isn’t in your business plan or your budget, then you likely won’t have the money to pay for it or be able to fix it.  You also may not potentially have the time or resources, or know how to pull yourself back up from it.  If you have made yourself an effective risk assessment of the business, then there will be much less that is going to jump out from nowhere and trip you up.   Even better, if you have allowed extra budget, time and keep an eye on these risks, you may be able to preempt or at least fix more efficiently.

Ignoring Feedback

This may come in the form of an employee or a user or customer, but regardless, should not be ignored.  Feedback is how you grow, it’s testing of your product or service.  Ignoring feedback because that is not how you predicted the response in your business plan or even not what previous consumer research taught you, is not a clever move.  Your customers are the ones who enable  the startup to continue, and if they are not happy or not buying or just plain not interested, you need to know why and quickly if you are going to change this.

Management with Heads in the Sand

If things start to take a downward turn, management need to be aware of what is happening in their business and if there is an issue, take steps to deal with it, not just bury their head in the sand.   There will be expected losses and expected issues, but a good, successful startup will know when these issues mean trouble and when not to panic.  How these situations are handled is evident of good or bad management, a leader who has a handle on and knows their business inside out, and one who does not.

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