No matter whose statistics you look at, the longevity numbers for business startups are grim. The first few years are the hardest, with about 45% of all businesses failing within five years and at least a fifth of businesses failing in the first year alone.
Business fail for lots of reasons. Not enough capital, customers or planning are the usual causes.
So, as you set out to make it through your first year (with many more years ahead, hopefully), we will walk you through some common mistakes that can lead to your business being one of the many that cannot find enough income to pay the bills.
Needless to say, the first year in any business will consist of some mistakes and a steep learning curve. The objective should be to react quickly to pitfalls that pop up along the way, but also to avoid simple mistakes by planning ahead.
5 common mistakes entrepreneurs make during the first year of business, and how to avoid them:
- Assuming they can do everything themselves
A typical entrepreneur will start out with limited resources and growth targets to hit for the year. This often leads to a desire to reduce costs by doing everything themselves.
Unfortunately, there just aren’t enough hours in the day, and entrepreneurs wind up stretching themselves too thinly over core parts of their business. A lack of focus and expertise in key areas of an enterprise will hinder any meaningful growth in the first year.
How to avoid being overstretched: Identify the most important areas of your business that you cannot commit enough time to or don’t have enough expertise in. Recruit the right skills for these areas, and always aim to hire people that are more knowledgeable than you in those areas. Although you’ll have increased costs, you’ll drive more growth.
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- Thinking they can work longer than everyone else
Competitive advantage in business is what every founder is looking for. A simple way of achieving this is to work longer hours. Entrepreneurs are naturally driven to get results, which means getting as much done in a day as possible.
Working 14 hour days does have an impact, but only for a short while.
Burning the candle at both ends leads to many negatives. Being tired means you are not at your best; and being at less than optimal means less than optimal performance.
You can become significantly more efficient when you are well rested, relaxed and happy. Fourteen hour days are the enemy of all those things.
How to avoid lack of efficiency: For one, working smarter is better than working long hours. Short, concise planning sessions at the start of the week will give you and your team more focus on the most important tasks that need to be completed. Learn about agile planning for further information.
Reduce time killers like long meetings by having set agendas for them, prioritizing who needs to be involved and what outcome you are looking for. Also, make sure necessary information is shared before the meeting for attendees to read in advance, so the meeting will be quicker. Can a summary email be sent out to the rest of your team after the meeting?
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- Persisting with cold contacts
Startups lack the authority of a larger company, and will often have fewer industry contacts. Often, founders will consistently send LinkedIn messages to connections they haven’t previously spoken to, or fire out email campaigns that are clearly cold contact efforts.
Not only does this waste time, but the people you want to speak to are likely not going to fall for these tactics.
How to avoid the cold shoulder: There’s no perfect formula for skyrocketing response rates. However, start investing time in your personal networks and current business relationships. Once you have targeted the people you want to message, find a shared connection you have with them in the industry; maybe someone you met through an event or through an ex-colleague.
These warm connections will allow you to borrow authority from your current network, making your efforts to get in touch more trusted and, likely, more successful.
- Delivering on your success
A common problem for startups (which is a nice problem to have) is overselling. When you go out all guns blazing to make sales or drive traffic, it’s easy to forget to ensure you haven’t gone too far. Too often, owners will be eager to increase revenue, without taking into account the issues faced with exponential growth.
Imagine you nail five meetings and get orders from all five. You need to make sure you can fulfill all five. Have you got enough stock? If not, can you re-order and manufacture quickly? Can you get it to the buyer in time if you can?
How to avoid biting off more than you can chew: Obviously, you aren’t going to turn down a sale, so that’s not how to solve this one. Look at your pipeline from start to finish and understand choke points. What will cause you an issue if you oversell? Make sure there is enough flexibility and efficiency in your business to deliver quickly.
Secondly, always know exactly what’s happening with your product. Investing in software that can track availability of products in your warehouse, for example, would be relevant if you were an e-commerce business.
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- Not enjoying the small victories
The startup world is a fast paced environment where pausing for a self congratulatory pat on the back does seem like a luxury. There is a harsh reality to keeping a young business growing that pressurizes entrepreneurs to skip over pivotal milestones in their business.
However, a common misconception is that reveling in one’s successes can breed complacency. Quite the opposite. Enjoying the journey as much as the destination will not only make the work feel easier, it sets up a positive culture within the business.
How to enjoy the process: Plan in time for team socializing. Celebrate award wins and major product releases with a company lunch. Take one afternoon out of every month to plan an activity that is in no way associated with your business. When something goes well, enjoy it!
