15 Mortal Sins When Launching a Startup
It is very difficult to launch a startup whatever beneficial, profitable and attractive effect it may have. Today, let’s focus on the main mistakes that can lead cool startups to a bankruptcy.
There are zillions of articles that describe how to launch a successful startup, however, we want to outline one more time the most obvious mistakes that startups may suffer from, because (in the majority of cases) these mistakes are similar.
First of all, making a reliable forecasting regarding a particular startup in pre-investment and investment periods is hardly possible due to a variety of “outcomes”: a project that generates $5k losses can pay off quicker than another project with an instant $500 revenue. That’s why, a comprehensive business plan with a set of different scenarios may not be a key to success.
Furthermore, as research show, IT experts are unanimous regarding the fact that a startup idea is just a stimulus for finding both a team and investment sources. At the moment, the ratio seems to be as follows: 70% – market’s potential, 29% – startup team, 1% – startup idea.
According to the above, the importance of smart management without risks of losing your last favorite pants gets even more topical. Here is a list of top-15 startup mistakes regardless of their segmentation:
- Bad team members. This is what we covered in our previous article, like hiring your brother (or cousin) just because he is your brother is not quite a good idea, although there are many successful examples: Trump’s construction business, Hilton hotels, Walt Disney pictures, etc. Lack of practical knowledge is the cause of the failure of every third startup. Another mistakes to be noted: too many employees on earlier stages, lots of managers and lack of implementers, complex multi-staged hierarchy of subordination.
- Lack of response on client’s feedback. It is very important to work with clients via their feedbacks, because if you created a perfectly-shaped startup based on your own experience, you risk getting a useless product for your target audience. Even if your project at the beta-testing stage and there is a lot of things to be done, do not hesitate adding a form to allow users submit a feedback, thus giving you ideas on further improvement of your product and startup as well.
- Narrowly-focused product. It derives from the previous point – having a product that solves only a limited set of issues (owner-related) tends to be useless. Obviously, you can try to implement it and see what happens, but it is better to know market needs and requirements. You can also use target analytics data and discussions on different forums.
- Amateur promotion. Working on promotion using a direct advertising sent by entrepreneurs theirselves – another big mistake of different startups. The reason here is that owners are (for example) good programmers, but they are unable to explicitly define promotion niches. That’s why it is recommended to use professional promotion services.
- Excessive and irrational resource consumption. The question here whether it is better to allocate existing resources right now or do it gradually, thus maintaining the overall stimulus and motivation.
- Product release in an inappropriate time. If you released your product too soon with some critical functional flaws (or even bugs), your potential clients may * it as “not good enough” and go away. From the other hand, if you released your product too late, you may exceed a suitable level of spendings and miss favorable circumstances. As Reid Hoffman said: “If you are not embarrassed by the first version of your product, you’ve launched too late”. This was the reason why 20% of startups fail.
- Lack of motivation and knowledge. The reason why 18,8% of startups fail was the underestimated importance of correlation between corporate and personal interests.
- Late refusal of a unprofitable product. If you did a wrong step (for example, hiring a new employee), try to make a correction asap. If you saw that your product is not as attractive as it was intended, make required adjustments asap. Pertinacity and inertness to change existing business model lead to serious growing limitations and cause 20% of startups to fail. You should continuously track not only the whole product for both efficiency and profitability but also its components and features.
- Inefficient pricing. Both low and high prices are dangerous. Event Vue’s owner said that their main strategic fault was the corporate sector sales model, where new pricing plans were lower than previous. In such a case, when your sales rates do not grow continuously, your spendings at some time can exceed your profits. Too expensive plans may mark your product as “not worth using”, thus forcing your customers to search for alternatives.
- Underestimated personal contacts. Some of your friends are your invisible allies. 16% of startup owners didn’t know about that and failed.
- Conflicts with investors. You should keep in mind that you are hardly to change your startup concept in the pre-investment period (we mentioned it in the Startup consulting article). Doing so without negotiations with main investors may lead to serious troubles, making your startup vulnerable to different factors.
- Wasting money and development “forces”. It is vitally important to release one particular product and focus on it in order to prevent your startup team from working on several “never-ending” infinite projects that worth nothing both for you and your target audience and dealing with unexpected issues on releasing a new product, add-on or version update.
- High concurrency and market threshold. Today’s market has even more competitiveness niches, that’s why it is difficult for young project to get their audience, thus succeed. Anyway, ignoring this fact was fatal for 10% of startup projects. Don’t be afraid of high thresholds, just make sure to properly analyze your target niche and potential competitors, making your startup product armed cap-a-pie.
- HQ location. This aspect was already mentioned in our previous article [Startup Ideas: Bullshit vs Brilliant]: if you are too far from your target audience, chances for success get drastically reduced.
- Part-time working day, free schedule, remote job. When you are dealing with a fast-flowing (or even extremely fast) project, it is vitally important to do your best when working on this project. Obviously, when you have another job or work on startup just a few hours a day, you can lose your motivation and startup won’t grow rapidly anymore, leading to an apparent death of the whole project.
By following these advises your are definitely avoid a variety of pitfalls, therefore making your startup project more reliable and perfectly balanced. Don’t forget your luck at home and happy hunting!