TechStars Co-Founder David Cohen was recently asked why some startups never get off the ground. His Response:
“The two big startup killers are when there’s just no market for what you are doing, and team problems. The first is very preventable: Do some lean startup testing, get in front of customers, and see the response. The other often stems from not thinking about potential problems up front, like what happens if one person leaves. Talk about them and, ideally, write things down.”
Now, while I completely agree with Mr. Cohen, I would say there are FOUR all too common startup mistakes.
When starting a business, mistakes are going to be made. Most of these mistakes can be fixed, learned from, and avoided in the future; but there are a few, unfortunately common mistakes can be the determining factor between start-up success and failure.
1. Losing a core team member and not having a back-up plan. In the infancy of your business you will likely only have a small team, so what happens if you lose a core team member? Too often businesses collapse because they fail to pick up the slack should someone they relied on resign from the company. Here are some simple steps to avoid this:
Be thorough in your hiring process- choose people who are as passionate about working for the company as you are about starting it. Be sure that they fit into your company culture and weigh cost vs. experience.
Cultivate a positive working environment that makes your employees want to be there.
* Pay your employees on time.
* Communicate. Communicate. Communicate.
* Know exactly what each person’s responsibilities are within the company so should they choose to resign you know exactly what work needs to be redistributed prior to finding a replacement.
* ALWAYS have a plan in place in case a team member has to resign.
2. Running out of capital/not budgeting properly. A major reason that many startups fail is because they run out of money. One of the CEO’s core jobs is to know and comprehend how much capital remains and whether or not that will further the startup to becoming cash flow positive. Ways to avoid this include:
* Do some market testing prior to starting your business. Many companies overestimate the value of the product they are selling which results in miscalculations in projected revenue. Testing the market beforehand will cost little money and ensure that you are setting your price points realistically.
* Stick to your business plan.
3. Failing to be original. You would be surprised by how many businesses were bankrupted before they even started because they didn’t do their research. An intellectual property lawsuit could ruin your business before it even begins.
* BE SURE that your idea or invention isn’t already patented somewhere else in the world.
* Do a little research to make sure that your logo is original.
* Check to make sure any slogans you are using are not copyrighted.
4. Over promising and under delivering. When starting a new business it’s common to get excited, to want to share that excitement with potential clients or customers and to want to talk yourself and your business up. However a common MISTAKE is telling clients or customers that you can provide something that you just simply can not (even if you plan to be able to do so in the future). Client’s are always more impressed with companies that under promise and over deliver versus the way around.
By avoiding these common mistakes you will greatly increase the likelihood of startup success.