Start-ups are one of the hardest business challenges you will ever face, whether as a founder, investor or a developer. It’s a common public secret that 90% of all startups fail. Why is that?
Well, unlike traditional businesses, a startup is essentially a “business experiment”. Nowadays, Startups are characterized by innovation and never-before-seen technologies, products, and business models.
What does this new kind of risk mean for entrepreneurs?
It means that their Startups are prone to failure from testing models that haven’t been tested before. Coupled with traditional cash-flow and operational business risks, it’s no surprise that most startup failure can be credited to unwitting self-sabotage, rather than competition.
We know that many of our developers have tried and/or will try to start or join a Start-up. Since ScreamingBox has a lot of experience with Start-ups, we have compiled the 10 most common mistakes that startups make as they strive for survival, growth and excellence:
#1 – Good Product, But No Value
If a new product brings no extra value above and beyond what already exists in the market, then the startup behind it is likely to fail. This is the most common startup mistake, with 38% of unsuccessful startups citing failure to find a unique market fit as their reason for closure.
Through projects or beta-tests, Startups should quickly and affordably validate the market purpose of their product; and learn to pivot and adapt for the value their target market actually needs.
#2 – Misguided Business Plan
Business plans are to startups what maps are to pilots. Without a clear and up-to-date map, it is difficult to discern the correct direction a flight ought to be going. Similarly, Startups launching and operating with ill-conceived plans risk ‘flying blind’ in the business world.
A well put business plan should at least define the purpose of the startup, classify the target audience, identify competitors, and clearly define the ways the business will measure success.
#3 – Don’t Bend, You’ll End
Markets are ferociously dynamic and ever changing, that startups must be flexible enough to know when to bend to market trends; and how to pivot and adapt to them quickly. This one factor, alone, could ultimately make or break a promising startup.
Be it a small improvement in response to user feedback, or needing to change an entire business model, having the insight and courage to affect such business flexibility is vital to a startups’ progress.
#4 – Rollin’ Solo
Usually after launching, to save costs and maintain a semblance of control, startup founders and solopreneurs alike, often operate in as many roles as their businesses demand; from accountant, to hiring officer and even to janitor!
As noble, and as affordable, as that might be, such ‘solo-behavior’ risks stress, burnout and eventually depression. A safer bet for any such startup, would be to partner with a trusted co-founder to help with the load. After all, reports say startups with two founders are more likely to succeed, and have a 30% higher chance of investment.
#5 – Wasting Money, Overspending & Underspending!
Whether bootstrapping or funded, 29% of failed startups go under from improper use of money.
It is most essential to properly appropriate money (and time) within the startup to places and activities where it is needed the most. If finance management is not a strong suit, a good accountant to keep control could be a worthwhile investment.
#6 – Your Price Is Not Nice
Navigating pricing models for a sweet spot is tricky business for any new startup. Though some are indeed guilty of needlessly overpricing things, most startups are prone to undervaluing their new innovations. An in-depth market research can reduce the risk involved.
However, having an exhaustive pricing plan in place, with financial details from current status, to even return on investment projections, makes for a better chance at scoring an investment.
#7 – Growing Up Too Fast
In today’s markets, where startups are driven by the engine of innovation, growth is the most welcomed measure of success. However, growth needs to be organic, or else a startup runs the risk of scaling faster than what it is capable of managing.
Scaling up should be preceded by formulation of a growth plan detailing all of the features of a new product, a targeted market niche, and the services you intend to soon be providing.
#8 – Not Listening Enough
The entrepreneurial instincts of today’s startup founders need to be sharply tuned to read the pulse of social culture, but more importantly to pay attention to customer feedback.
Often caught-up in venture hunting, startups end up being less alert to the insights from customer queries that could inform the broader business motive of customer satisfaction.
For ground-breaking startups, like biotech startups, patents are recommended. However, they should not be the barrier to prototyping. No prototype, no feedback. No feedback, no growth!
#9 – “Wrong Time, Wrong Place. That’s All.”
Mistiming and misplacement are both serious setbacks for startups. An untimely launch could be too early and predate the tech necessary to sustain a product, or could be too late and land a startup in an oversaturated market.
Even a well-timed product still risks launching in a location that cannot support it.
Startups must recalibrate their product development path to account for place and time. One way is to constantly research, ask questions, analyze competitors; and from the conclusion yielded, pivot and adapt for the market.
#10 – Quitting Too Soon
Some startups take off right away, while others take more time to gain traction. However, for the latter, there’s a 90% failure-rate chance it will not reach its first birthday.
The turbulent ups and downs of startup entrepreneurship calls for strategic endurance, and clever innovation. That’s why many startups today launch while already armed with a 5-year-growth-and-exit plan in hand, to cushion the unavoidable failures and setbacks along the way to success in the industry.
In summary, we all make mistakes, and startup businesses must be prepared to make more mistakes than most. The key to success, however, is to be mindful of them. If making mistakes is unavoidable, then learning to make fewer-smarter ones will save time, and guide better business decisions.