Running a business is one of the most difficult things a person can do. Getting a successful startup up off the ground can be even harder. 9 out of 10 startups fail. It’s not a heartening track record.
While many startups do fail, some have gone on to become some of the biggest successes in the business world. This includes companies like Uber, Snapchat, Airbnb and more that began as startups and went on to become to wildly successful companies. However, to find that kind of success, you need to know what common startup pitfalls to avoid. With that in mind, here are some common startup mistakes you must be aware of.
Not Having a Solid Business Concept
As with any failed business, the source of the failure of a startup can often be traced back to the earliest steps of its formation. If the concept is bad, the business idea, of course, will never take off. Often this is the result of bias. Just because the founder has an idea that he or she thinks is the bee's’ knees doesn’t mean actual consumers will care for it at all.
To make sure a business idea is sound, you must first perform some decent market research to determine that demand for your idea exists or could be created. This can help save you the trouble of pitching ideas to investors that were doomed from inception.
Not Choosing the Right Investors
Investors are very important to the success of a startup. In fact, this is even more so the case than with regular businesses. Without angel investors, your idea will never be transformed into a working company. The average startup requires $1.5 million in funding. However, just because you are desperate to obtain some cash flow to get your business idea up off the ground does not mean you should be reckless about which investors you choose to work with.
Be careful about the angel investors you choose to let into your startup. If they don’t share your exact vision for the company, they could eventually cause significant problems. They may even try to wrestle control away from you if they don’t like the way things are going. Instead, make sure you choose angel investors that do agree with your vision for your company and will work with you to make that vision into a reality.
Scaling Too Quickly
One of the top reasons new companies fail is due to scaling too quickly. This is indeed a problem that plagues startups.
This happens when a startup gets a strong influx of cash from angel investors. The money is then spent very quickly on things the owners think will help to quickly grow the company such as expensive marketing campaigns or hiring a lot of stuff. However, once that money is spent, it can be gone for good if the company doesn’t actually begin raking in revenue. Instead, a more gradual process of expansion based purely on revenue forecasts is the much smarter route to go.
Ignoring the Details
While startups sometimes lose focus, the founders can also become too focused in on the big picture to the point that they lose an eye for smaller details that must be addressed to insure the company’s success.
If you need to employ a fleet of vehicles, obviously looking for cheap car insurance quotes is something that must be done. However, if you’re too focused in on other parts of the business, you may neglect such aspects and overspend on things like car insurance that could have been acquired for much cheaper.
Startups are inherently risky propositions. However, just because that is the case does not mean you should go about launching your business idea haphazardly. Use caution during each step of the process to help insure that your startup company is able to create a profit.