Hi, startupper. Hope you liked our previous article about accelerators. Today, we would like to highlight the Top 10 startup mistakes to avoid getting to Acceleration. And for sure, if you would avoid them, you would have much more chances to succeed.
So, Did you know that nine out of ten start-ups fail?
Starting a business is not without its challenges, and the statistics on start-up failure rates can be daunting. According to Failory, 90% of start-ups eventually go out of business, with a 20% failure rate in the first year of business. While these numbers may seem discouraging, it’s important to remember that many businesses do succeed.
Table of contents
- Top 10 startup mistakes to avoid
- 1. Not having a business plan
- 2. Not being able to flex
- 3. Doing everything by yourself
- 4. Not having a unique product or service
- 5. Pricing too high or too low
- 6. Wasting money is also a startup mistake
- 7. Scaling too quickly
- 8. Launching in the wrong place or at the wrong time
- 9. Ignoring customers (our favorite startup mistake)
- 10. Giving up too soon
- In conclusion – risk management and risk control are the keys to avoiding common startup mistakes
- Frequently Asked Questions (FAQ)
- Want to avoid common startup mistakes? Give us a call
So, what can entrepreneurs do to increase their chances of building a successful and sustainable business? First and foremost, it’s crucial to have a solid business plan in place. A business plan serves as a roadmap, helping to guide decision-making and identify potential challenges and opportunities. It’s also essential to conduct thorough market research to understand the needs and preferences of your target audience and to ensure that your product or service is well-positioned to meet those needs.
In addition to having a solid plan in place, it’s also important to continuously monitor and adapt to the changing market. This may involve adjusting your product or service offering, revising your pricing strategy, or exploring new marketing channels. By staying agile and open to change, businesses can better navigate the challenges they face and increase their chances of success.
Top 10 startup mistakes to avoid
While the start-up failure rate may seem high, it should not deter you from pursuing your entrepreneurial dreams. By taking the right steps and staying focused, you can increase your chances of building a successful and sustainable business. Don’t let the fear of failure hold you back from following your passions and turning your business ideas into a reality.
In no particular order, here are the top reasons for start-up failure, and how you can ensure that you don’t make such common mistakes:
- Not having a business plan;
- Not being able to flex;
- Doing everything by yourself;
- Not having a unique product or service;
- Pricing too high or too low;
- Wasting money;
- Scaling too quickly;
- Launching in the wrong place or at the wrong time;
- Ignoring customers;
- Giving up too soon.
Let’s go through each point in detail.
1. Not having a business plan
The number 1 in our top 10 startup mistakes to avoid is not writing a business plan. You can also call it having a poorly written plan. Both of these points are some of the most common start-up mistakes you can make.
If you were traveling somewhere for the first time, you would take a map with you to guide the way. If you didn’t have one, you’d potentially never get to your destination!
Think of a business plan as a road map for your start-up. It lets you understand the purpose of your business, who your target audience is, who your competitors are, and how you will gauge success. Without one, you won’t know which direction to go in.
You can reduce the risk by creating a business plan before you launch. It doesn’t have to belong or be overly formal, as long as it gives you the guidance you need to make the right decisions. So, don’t ignore it to cross off one more point from the common startup mistakes list.
2. Not being able to flex
Even though you may have written a solid business plan, it’s essential to be able to pivot and change direction where necessary.
It may be the difference between surviving and being sent to the start-up graveyard. Unfortunately, we know a list of startups that ignored this and failed because of such common startup mistakes.
Even some of the biggest businesses out there have had to adapt and grow with the changing times. For example, take Nintendo. The company was founded in Japan in 1889 and was originally famous for making playing cards. When interest in cards began to decline in the 1970s, the company made a move into video games, which is what it is known and loved for today.
You can avoid this common startup mistake by being as flexible as possible with your fledgling business. If your original plan falls through, what else can you do to make your start-up a success?
What will your backup plan be?
3. Doing everything by yourself
When you start your business, you may be tempted to do everything yourself to save costs and keep control. However, this is not always the best move.
Working on a start-up is hard graft, and founders are expected to wear many different hats. Not only are you in charge of the business, but you are also the senior salesperson, lead marketer, and chief accountant! And while you may be an excellent programmer, you may hate having to go out and sell your business to potential investors.
Doing everything yourself can also cause stress and burnout. This can cause you to fall out of love with your start-up and want to close it down. According to Business Insider, one in two start-up founders experience burnout at some point in their lives, with one in three eventually suffering from depression.
The best way to avoid failure and stress? Get a co-founder on board. Two founders increase the odds of a start-up succeeding and increase the likelihood of investment by 30%.
Even if you aren’t in a position to bring in another founder, getting support from family, friends, and colleagues can make a big difference.
4. Not having a unique product or service
Not being able to offer value to customers is a surefire way for your business to fail. If your product or service is too similar to what your competitors already provide, then customers won’t have any incentive to buy from you.
For example, take Nirvanix. The cloud storage system business couldn’t compete with Amazon Web Services, Google Compute Engine, and Windows Azure and had to close as a result. Their services (and price-point) were just too similar to stand out in an already crowded market.
You can avoid this common startup mistake by carrying out thorough competitor research before you launch. Ask yourself the following questions:
- Who are your competitors?
- Where are they based?
- What marketing channels do they use?
- What prices do they charge?
- How does your product or service differ from theirs?
- What is your unique selling point – what do you do that your competitors don’t?
A SWOT (strengths, weaknesses, opportunities, and threats) analysis can be really useful here.
5. Pricing too high or too low
It’s always tricky deciding how you are going to price your product or service. Too low and you won’t make a profit, too high and not enough people will buy.
You can control the risk of this happening by conducting thorough research. For example, what are your outgoings as a business, and how much money do you need to make to cover all of your expenses?
Having a thorough pricing plan in place can also make you more likely to win an investment. A potential investor will want to see what your financial position is, and how likely they can expect a return on their investment.
If you are offering your product or service for free (for example, a mobile phone app), you need to look at alternative ways to make money, like selling advertising space.
Even some of the biggest companies can make mistakes, as demonstrated by the failure of the Ford Edsel in 1957. Despite investing a significant amount of money, $250 million, into research and development, the car did not sell well due to its high price point. Customers were not willing to pay the price, and as a result, not enough cars were sold to cover the costs.
This example shows the importance of understanding the market and customer demand when launching a new product. It’s essential to conduct thorough market research and consider the price point of a product before bringing it to market. By ignoring these crucial steps, a company can risk investing a lot of resources into a product that ultimately fails.
The Ford Edsel serves as a cautionary tale for businesses of all sizes. It’s crucial to carefully consider all aspects of a product or service before launching it to ensure the best chances of success. By learning from mistakes like Edsel, companies can avoid similar failures in the future.
6. Wasting money is also a startup mistake
Whether you have got funding or are bootstrapping your start-up from scratch, it’s essential to keep a tight hold of your money and ensure you don’t spend it on the wrong things.
The best way to avoid this pitfall is to think carefully about what you need. For example, do you really need a fancy office, costly advertising, or luxurious staff perks while you are still starting out? Or for instance, we were faced with a list of startups who ordered development from a cheap development office and asked us “just to fix some bugs”. If only that could work, but the tech world is made in such a manner that you need to start from scratch. Here you go – one more point in our common startup mistakes list.
If in doubt, bringing in a good accountant to keep control of your finances may be a worthwhile investment.
7. Scaling too quickly
You may think that growing quickly is a good thing for your business, and it can not be related to common startup mistakes, especially if you are just starting out. However, scaling too rapidly can have disastrous consequences.
Growing too soon can result in two painful scenarios. Firstly, you can’t keep up with demand, and you start to fail your customers and investors. Secondly, the demand just isn’t there to sustain you, and you rapidly lose market share.
For an example of a start-up that scaled too soon, take the cookie delivery service Doughbies. This small business quickly earned $670,000 worth of funding, which was unprecedented at the time. However, Doughbies found that there wasn’t a large enough market to justify its presence and had to close down.
As Tech Crunch said at the time: “(It) should have been a bakery, not a venture-backed start-up.”
You can avoid this happening to your start-up by keeping an eye on your business and your KPIs. These are all signs that you may need to slow down:
- You’re failing to meet your metrics;
- Your staff is starting to experience burnout;
- You’re ignoring customer feedback, or they’re starting to complain about your services (more on that later);
- You’re losing business opportunities;
- Your profits aren’t growing as expected.
Scaling is a great thing for all businesses, but it needs to be organic… not forced.
8. Launching in the wrong place or at the wrong time
You thought you had the perfect idea for a start-up… it’s just failed because your timing wasn’t right.
It may be the case that you have launched your product or service too early, and people don’t understand it, or the technology hasn’t been invented to sustain it.
It may be that you have launched your product or service too late, and the market is over-saturated.
You may be in the wrong town, city, or country for your product or service to work.
As an example, take AskJeeves. Although it had a lot of big ideas like semantic search, the technology wasn’t there to back the search engine up. If it had launched, later on, it might have been more successful.
Thorough research is the key to ensuring your start-up launches at the right time and place, as well as an ability to pivot in ever-changing times.
9. Ignoring customers (our favorite startup mistake)
You may think that your start-up is doing brilliantly, however, take the time to listen to your customers, and it may be an entirely different story. That’s a key to avoiding a list of common startup mistakes.
Acknowledging customer feedback to grow your start-up and prevent it from stagnating is crucial. Ask yourself the following questions:
- What features are customers using?
- Which products and services are they buying?
- What questions are they asking?
- What’s the customer churn rate like?
- What common complaints are being received?
- What scores are customers giving in satisfaction surveys?
For an example of when user feedback yielded dividends, take Instagram. The photo app initially started off as a mobile app called Burbn, where users could check into venues and upload their photos. However, the founders discovered that customers weren’t using it to check in but loved the photo-sharing functionality.
A few tweaks later, Instagram came into being!
10. Giving up too soon
The last point in our top 10 startup mistakes list is giving up. When you start a business, failure and setbacks are commonplace. Things don’t always go the way you want them to go.
We know a list of startups that gave up too early when in hindsight, they could have kept going.
While at Yale University, a student called Fred Smith pitched a business idea to his professor. His professor gave him a failing grade, saying that the concept would never work. Fred ignored his professor’s criticism and went ahead with the business model anyway.
Fred Smith is now the CEO of FedEx, one of the largest delivery services in the world! So, don’t make the widely known startup mistake – just don’t listen to haters and keep going.
Although the life of an entrepreneur can be challenging, it can sometimes be worth sticking with things. For example, if you are frustrated because you feel unsupported, there are lots of forums and groups you can join for friendly support and advice.
In conclusion – risk management and risk control are the keys to avoiding common startup mistakes
When you launch your start-up, you want to do all you can to ensure it doesn’t fail. You can mitigate most start-up failures by doing your homework.
A thorough business plan and comprehensive business analysis will allow you to identify your weaknesses and what you need to do to ensure success.
And remember, if your start-up does fail, it isn’t the end of the world. Don’t be afraid to learn from your common mistakes and try again. We’ve prepared another article to encourage you, check it out: 20 Myths About Custom MVP App Development: Busted
Founders who failed the first time have an increased chance of succeeding the second time around.
Frequently Asked Questions (FAQ)
Startups often fail due to various reasons, with statistics showing a high failure rate. Having a solid business plan is crucial as it serves as a roadmap, guiding decision-making, and identifying potential challenges and opportunities.
The top 10 startup mistakes to avoid, in no particular order, are:
– Not having a business plan
– Not being able to pivot
– Doing everything by yourself
– Not having a unique product or service
– Pricing too high or too low
– Wasting money
– Scaling too quickly
– Launching in the wrong place or at the wrong time
– Ignoring customers
– Giving up too soon
Not having a business plan is considered the top startup mistake because a business plan serves as a roadmap, providing clarity on the purpose of the business, target audience, competitors, and how success will be measured. Without a plan, entrepreneurs may lack direction.
Even with a solid business plan, startups need to be flexible and open to pivoting when necessary. Adapting to changing market conditions is crucial for survival. Being as flexible as possible and having a backup plan can help startups navigate unexpected challenges.
While founders often wear multiple hats in a startup, trying to do everything alone can lead to stress, burnout, and ultimately, failure. Having a co-founder or seeking support from family, friends, and colleagues can alleviate the burden and increase the odds of success.
Having a unique product or service is essential for success. Thorough competitor research, including identifying competitors, analyzing marketing channels, pricing, and conducting a SWOT analysis, can help startups differentiate themselves and offer genuine value to customers.
Pricing is a delicate balance. Pricing too high may result in low sales, while pricing too low may lead to insufficient profits. Thorough research, understanding business expenses, and having a well-defined pricing plan are crucial to finding the right balance.
Running out of money is a common reason for startup failure. It’s essential to manage finances wisely, avoiding unnecessary expenses and focusing on essential needs. Bringing in a good accountant can help maintain control over finances.
Scaling too quickly can lead to challenges such as failing to meet demand, causing customer and investor dissatisfaction, or growing without a sustainable market. Organic growth, guided by key performance indicators (KPIs), is essential for successful scaling.
Thorough research is crucial to ensure startups launch at the right time and in the right location. Understanding market demand, technology readiness, and conducting ongoing analysis can help avoid launching prematurely or in an unsuitable market.
Ignoring customer feedback can lead to stagnation and missed opportunities. Listening to customers helps identify product features, preferences, and potential issues. Successful startups use customer feedback to adapt and improve their offerings.
Persistence is key in entrepreneurship. While setbacks are common, giving up too soon can hinder potential success. Learning from failures, seeking support from forums and groups, and staying determined can increase the chances of long-term success.
Risk management and control are essential for startup success. Thorough business analysis, a well-defined business plan, and learning from common mistakes contribute to effective risk management. Entrepreneurs should not fear failure but instead use it as a learning opportunity for future endeavors.
Want to avoid common startup mistakes? Give us a call
We will work with you to get your start-up up and running, navigating you through all the potential risks.
We are here to ensure you grow and succeed