Working on a startup? There is a huge chance that it might fail.
I hate to tell you this, but this is as important for you to know this to amend the startup mistakes you are about to make. We have studied the data for years and brought you a list of startup mistakes you won’t want to make.
So, tighten your seat belts and stop worrying. Here goes the first startup mistake to avoid:
1. Spending too much
The data states that nearly 67 percent of startups stall at some point in the venture capital process and fail to exit or raise follow-on funding.
This problem arises when the founder becomes eager and hires a ton of people. They don’t realize that resources come with money and go on spending without any output. Cutting down energy can save some money too.
If a venture capital fund has handed so much money, then surely, they might be expecting huge amounts pretty quickly.
How can you avoid this startup mistake?
Hire only those who are really needed and do it step by step. Otherwise, what if your business suddenly needs a costly change. Or you need to switch to a backup plan.
For example, experts at www.jltlawut.com suggest exploring loan modification options if you’re already running short on capital. It would prove to be a wiser decision than filing for bankruptcy if needed.
2. Waiting too long to launch
The biggest startup mistake I see with companies is waiting too long to launch a product. It gets equally easy to lose an ongoing probability of winning the game.
Not only competitors come up with more efficient ideas but this time they might have come up with more advanced technology. Also, they have more knowledge about the market because of launching their last product when you dogged the chance of doing so.
So, shall we launch it anytime to avoid this startup mistake?
No, launching at an inappropriate time is important
Timing is important when launching a start-up. Uncertain circumstances like natural calamities or economic depression may hit us hard. Not only is the company becoming financially unstable but also people are not ready to spend much.
Customer behavior changes when it comes to high purchase value. They research all the options and at such times reviews have a huge role to play. You can study their expectations by reading reviews on your and your competitors’ sites.
The product once launched and failed can never do better. And bringing down a product to a low price margin will beat our strength.
Let’s study the pricing strategies first:
Skimming pricing strategy
This is when a company starts with the highest possible cost and then lowers the price as the product becomes less popular over time.
Dynamic pricing strategy
It is a flexible pricing strategy in which prices change in proportion to market demand. Companies use dynamic pricing by applying algorithms that consider competitor demand, pricing, and other factors.
Penetration pricing strategy
Opposite of Price skimming, companies enter the market with the lowest price possible drawing attention from its competitors and earn revenue. Penetration strategy is not feasible in the long run and is used only for a short period.
3. Sparing business plan
Not taking a business plan seriously is a big startup mistake that can be a problem. If you don’t need investors you don’t have to cut off the idea of a business plan.
A business plan helps you understand the market, financial projections, strategies, product features and specifications, and other important factors.
In case you don’t have leisure time to invest in a business plan you can automate the process by paying the companies for a business plan. These companies study your company throughout and give you the analysis results in a short span.
Here are some more pricing strategies for cost management.
4. Securing the idea is a big startup mistake
How many of you would really like to discuss a startup idea with others?
Surely not many. You are not protecting your idea but resisting it from being better. It is just an idea and not an execution. So better get comfortable with sharing your idea.
5. Distracted by negative feedbacks
Not every startup is perfect at the start and it is not even a one shop store. It acquires power steadily. We start with one and then get along with the others. If we see that we are making a profit and people are happy with what we are doing, then surely, they appreciate it.
What if they criticize your idea?
Listen to what they want from you. Don’t rush to get to a decision. What if there is a single customer who is unhappy. You can’t take everyone together, get this in your mind, and be strong to listen to critics too.
Making decisions only after listening to a few customers can lead to hardships. See what is comfortable and liked by the majority. If you are confused, create a form and make your customers fill it. Acquiring customers is not tough but retaining them is.
When you are working there comes a time when you feel stuck, you feel to stop doing it any further. But if you follow these steps I can assure you will be successful one day.
One of the most recent statistics, in this case, is the Business Employment Dynamics report coming from the Bureau of Labor:
- the failure rate of 20 percent until the end of the 1st year
- the failure rate of 30 percent until the end of the 2nd year
- the failure rate of 50 percent until the end of the 5th year
- the failure rate of 70 percent until the end of the 10th year
6. Learn to be patient
Being an entrepreneur is not easy. You won’t get instant results. You can take 2-3 years or even more. Don’t be discouraged. If you don’t get results, try to analyze by changing parameters for once. Single parameter at a time.
Don’t lose hope.
After some time, you’ll learn that you’re losing focus and can’t concentrate anymore. You feel that you should take a break.
If you are taking a break don’t make it a long one. Because then you’ll need time to get where you are now. Many repercussions will come along it.
You can take the help of different software. For sales, you can go for marketing analytics and analytics in the near future. Stop making judgments on intuition. Get your data work for you.
Start collecting data that you think is essential for you to derive conclusions. Your data will not be organized, you’ll have to organize it according to the conclusion you want.
Do I have to keep updating the data?
No, if you do it properly you don’t have to invest much of your time and don’t even have to keep updating it.
Even this will take time. If you’re new to it, you probably have to learn it from the part Close to 46 percent of companies that raised their initial seed in 2008–2010 and ended up raising a second round of funding.
7. Choosing the wrong location
Setting up a store in the right place is important. And the geographic location is important to find potential customers.
Rowland H. Macy originally started a store in Massachusetts, but it didn’t work out. So, he learned from the mistakes and shifted his business to Sixth Avenue in New York City. The enterprise was successful and resulted in what we call Macy’s.
There is another reason why location matters: venture capitalists.
Graham studied how most venture capitalists fund startups that are located about an hour’s drive away. Investors look for startups that are close to where the money is.
In July 2017, device maker Jawbone became one of the most arresting failures in the history of startups. Despite earning $930M in funding during its 10-year lifespan, Jawbone failed to hold on to significant market share for its line of headsets, fitness trackers, and wireless speakers.
Jawbone became the second-costliest VC-backed startup failure of all time. This was just months after well-funded consumer hardware startups Electric Objects, Hello, and Lily Robotics also got kicked.
Why did they fail?
Many reasons typically come together to lead to a startup’s death.
But it is possible to tease apart some common reasons if you look closely. We studied through nearly 400 failed consumer hardware startups from our database and identified the reasons for the failure of most of them, and found some of the main reasons include:
- Lack of consumer demand
- High burn rate,
- Lack of interest after initial crowdfund
- Product strategy mistakes
After the asset sale in July 2017, Jawbone co-founder/CEO Hosain Rahman found investors to keep the company alive in a related venture:
- Start-ups take 2-3 longer than what their founders expect (This states that cashflow/availability problems can kill the project before you were able to properly test the waters.)
- Founders overestimate the value of the intellectual property by 255 percent before the product-market fit.
- Start-ups that pivot 0 times or more than 2 times do considerably worse. But, Start-ups that pivot 1-2 times have 3.6x better user growth and raise 2.5x more money.
Despite the difficult challenges of building a successful business in this space investors and entrepreneurs never stop chasing the dream of creating the next mass-market product.
8. Keep a backup plan
If the original plan doesn’t work, you don’t have to pack up your bags and leave the place saying there is nothing more to do now. Think and then react.
Odeo was a podcasting platform. But when Apple launched its podcasting platform, Odeo had to change. Today Odeo is known as Twitter and is one of the biggest social media platforms.
To become a successful entrepreneur, keep a backup plan for every worst-case scenario but also be flexible and able to change if the original proposal isn’t going to work.
Think out of the box
If you aren’t flexible, you’ll be like Nokia. Nokia once owned paper mills and made rubber boots. Today it is just a telecommunications company.
Like I’ve mentioned above, be ready for changes as you’ll listen to entrepreneurs saying nothing happens as planned. Don’t stop expanding.
If you are growing, explore the probable options that you think would work for you and yes. Remember, not according to instincts.
9. Being overconfident
Everyone likes their idea. Not knowing how well it is going to be in the market we just can’t go on doing it.
Don’t be overconfident about your idea. Neither you’ll become a billionaire in a day nor is anything going to change suddenly.
Think wise. This is your wake-up call. If you are not serious about it don’t do it. Being an entrepreneur is not easy.
Taking risks at your own expense is not easy. Waiting years for results is not easy. But startups check all of these. Don’t fool yourself by not taking up challenges.
Work on your USP.
There are lots of startups out there. Why would they choose you? Learn to generate a need. Because people don’t understand what they want until you relate your products and services with them.
10. Not maintaining relationships
Be consistent with your work. Maintaining relationships with your co-workers and customers is important. You cannot afford to lose your high-value customers.
High-value customers are those who are your frequent customers and the purchase amount is more than the average.
This you can do in certain ways:
- Tell them how important they are to you. By telling them about your new products and offers.
- Make them feel that they are special to you. Provide them different offers. You can study your customers’ data and organize them accordingly.
- Customize your data by breaking them into segments. Keep your segments relevant and simple. Don’t form segments if you are going to treat them similarly.
You can create segments like high priority who are your frequent customers and low priority for those who haven’t purchased from you in recent years. You can modify it according to your specified terms.
Conclusion: Startup mistakes to avoid
I have explained all the chances in which your startup can fail but it is on you to make sure you don’t fail. Nothing goes as planned. Maybe we can have some new problems. Don’t stop what you’ve started.
Lastly, don’t be overconfident, don’t rush to make decisions, learn to build relationships, think differently, always have a backup plan, choose your location wisely, be patient, brainstorm your ideas, sparing business plans, spending too much and waiting too long to launch.
Avoid these startup mistakes in your business and you are good to go. If you are facing any startup problem we would love to hear it from you.
I am so happy to share the biggest startup mistakes with you. Thanks for being a patient reader.
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Abigail Relish is the CEO of the Gateway company. She also works as an investment advisor for Alcor, a Global Investment Bank. She’s best known for writing on Business Analytics and helping start-ups grow. Apart from writing Abigail has a good network in the Marketing and Advertising industry.