- How to Staff a Strong Culture on a Shoestring Budget - June 9, 2019
- 7 Fatal (and Common) Mistakes Threatening Your Startup’s Success - April 3, 2019
Most startups fail. It’s the nature of business—there isn’t enough room for everyone. And as anyone who has founded a successful (or unsuccessful) business can attest, there are about a thousand different ways to crash and burn. But someone has to succeed, and that someone may as well be you. After all, you’ve got a brilliant idea and a solid business plan. What you lack in experience you make up for with grit, passion and hard work. What could stop you? Lots of things, as it turns out. In my experience mentoring entrepreneurs (and making my own early missteps), I’ve discovered seven common deadly mistakes that can limit—and even kill—your startup’s success.
Here’s what they are, and how to avoid them:
- You haven’t done your due diligence
Before you go to market, and before you pitch to a single investor, you need to make sure your legal agreements are airtight. This includes your corporate agreement, equity plan, patents and trademarks (if necessary), as well as your buy-sell agreement and exit strategy, should you decide to sell.
It may seem early to begin thinking about these things, especially if you haven’t yet made a single sale. But many founders make the mistake of putting off necessary legal agreements too long and, when the business becomes successful, things get nasty.
- You don’t understand your market
Before you start putting together code, investing your money, and quit your day job, you first need to validate your idea. Unfortunately, many entrepreneurs think they know their market based on anecdotal evidence, but they haven’t done their homework. They don’t understand the barriers to entry, haven’t thoroughly researched their audience or other players in the field, and haven’t put themselves in the shoes of their target buyer.
If you don’t take the time to become an expert in your market, you risk putting a ton of time, energy and money into a product or service no one wants or needs.
- You’re undercapitalized
There’s no way to get around it: you need capital to sustain your business until it’s self-sufficient. Plenty of bright ideas will never see the light of day all because they’re under-funded. That’s because while passion and ambition are essential, they’re no substitute for cold, hard cash.
One mistake I’ve seen is entrepreneurs powering forward with reckless abandon and underestimating the amount of money they’ll need to not only launch their business but keep it running until it’s successful. Capital goes fast, and once that’s gone, you’re essentially screwed. Instead, you have to develop a cash flow statement based on real business costs to determine how much money you’ll need, and then decide how you’ll raise those funds.
- You’re trying to solve too many problems
There’s a reason they say a jack of all trades is a master of none. Take it from me: trying to do too many things at once is a surefire way to stretch yourself thin and set your business back.
When I first started my company, we tried to tackle too much. We developed tons of tools for tons of markets, but we weren’t providing a single great solution to anyone, and it set us behind.
Our company developed a fully automated, web-based customer support solution years before our leading competitor. But while we were wasting time trying to appeal to everyone, our competitor launched a solution targeting a specific niche and reached success much sooner.
If I could go back 10 years, I would tell myself to stop and focus on solving one problem for one market.
Put blinders on if you have to, so you can focus your resources on being the best at solving one issue before you begin tackling anything else.
- You aren’t asking for help
Entrepreneurs are often Type A personalities who want to forge their own way. Our stubborn independence is one of our greatest strengths, but also one of our most critical weaknesses. For many of us, asking for help feels unnatural. But believing you can launch a successful startup without help is naive and dangerous. After all, even Tiger Woods has a coach.
If you’re struggling, get support. Reach out to your network, bring in outside experts and invest in the right tools. And remember, nothing you’re facing is unique—there’s always someone else out there who has been where you are and can offer guidance and advice to light your path.
If you don’t have a mentor, find one as soon as possible.
- You aren’t an expert
“They” say you should do what you know, and I think that’s one of the most crucial pieces of advice an entrepreneur can take. If you’re going to invest your time, money and emotional energy in something, you have to make sure it’s something you enjoy, are passionate about and have an expertise in.
I always caution entrepreneurs to develop their expertise before they take their idea any further. Better yet, do something in which you already have a decent amount of interest. Otherwise, your passion and drive will fizzle.
I’d never tell someone not to follow their dream, but I do advise you to learn everything you possibly can about the market and the vertical before you dive in head-first.
- You’re in business with the wrong people
Launching a startup can be brutal. I’ve seen businesses destroy friendships, end marriages and cause rifts between family members all because people chose their business partners for the wrong reasons. Just because you enjoy being around someone all the time doesn’t mean you should go into business with them.
Before you get into the trenches with your partner(s), you need to understand their quality of work and how they behave in difficult situations. You have to be in sync, and you have to be on the same page about the future of your startup.
When someone asks what to look for in a partner, I suggest three things:
- Find someone who complements you. Look for a partner who offers talents and strengths you lack. For example, if you’re an engineering whiz, but you can’t stand the thought of sitting in a board room negotiating, find someone who is gifted in business.
- Find someone who shares your morals and ethics. You should never compromise your values, and it’s critical your partner doesn’t, either.
- Find someone at a similar life stage. If you’re young, single, willing to live off ramen noodles and work 80-hour weeks for the next 18 months to get your business off the ground, you’re probably not going to want to partner with someone who is married with children and can’t work round-the-clock.
There’s no such thing as an entrepreneur who doesn’t make mistakes. But it’s much better to learn from others’ pitfalls than to make the same errors yourself. By avoiding these seven fatal mistakes, you’ll be much better positioned to achieve lasting success.