According to data released by the U.S. Bureau of Labor Statistics, 20% of new businesses fail within the first two years of operation and roughly half of all businesses don’t survive past the fifth year. So how can one successfully launch and run a startup? Starting a business can be very difficult because there are so many decisions to make and complex challenges to deal with regularly. That is the reason many entrepreneurs make serious mistakes during the first few months of operations. Apart from the fact that startups are a long and bumpy road, most entrepreneurs have little to no earlier experiences in the business world especially in complex areas like finance, management, recruitment, legal issues, etc.
With a clear understanding of all the numerous challenges and difficulties faced by startups today, Growexx has identified six most common mistakes entrepreneurs make. The key to avoiding startup failures and ensuring a successful business lies in avoiding these common mistakes.
While it’s necessary to be passionate about your idea, your priority shouldn’t be all about seeking perfection.
Here are the 6 most common mistakes that many startup entrepreneurs make and how you can eventually avoid them:
1. Getting Your Value Propositions Wrong
According to the U.K. government statistics, many businesses go south because they failed to investigate the market correctly. The other reason is that they were unable to write a complete business plan with realistic assumptions.
One problem that these startups face is that they don’t understand what drives customer value. Marketers and sales representatives spend too much time on their product that they become overly obsessed with the features and product development. They often forget how this translates into value for their customers.
It’s rather strange that most startups don’t carry out adequate research to back up the hypothesis surrounding their idea. Sometimes, they completely misunderstand the value proposition that was used in building their product. This simply means that they want to solve a problem which originally doesn’t exist or can easily be solved by applying other clear-cut methods.
As a result, startups need to emphasize what value their product offers customers by first asking themselves some important questions. These are fundamental questions that should initially be tested by surveying the target market. The basic questions include:
- What is the problem?
- How big is the problem?
- Whose problem, is it?
- What kind of value are we creating?
- Who is going to benefit from this value?
- Who is going to pay for this value?
- How much would they pay for the value?
2. The Quest for Perfection
Many entrepreneurs make a common startup mistake in their business’s early stages by trying to be too perfect with their plans or goals. It’s always a bad idea to wait till your product is perfect before publicly launching it. Some people even waste precious time and money, creating irrelevant features that will have little or no impact on the value proposition, thereby delaying the Go-To-Market date.
Delaying a launch because your business/product/service isn’t perfect to your taste is a big mistake because, at the end of the day, you’ll make some needed adjustments on your business plan and strategy as time goes on. Your first product will likely be a little bit ugly, but that’s fine. It’s part of testing your ideas in front of live customers to get their feedback and marketing your product quickly to know how far you’re progressing. When you delay because you want everything to be perfect, you can miss your chance of success. Your competitors will also be the first to introduce a similar product to the market, and there is the risk that you might run out of cash in the long run. Whatever your idea is, rest assured it’s been thought of before so get to work.
The reason is that these people that usually make these mistake lack the basic understanding of what a Minimum Viable Product (MVP) means – it is the minimum amount of work needed to achieve maximum value. The Kano Model (a product development theory classifying 5 customer preferences) and the Pareto Principle (80–20 rule) are the necessary measurements that define what goes into an MVP.
According to the Pareto Principle, 80% of the value is usually created by 20% of the effort. It also takes 80% of the effort to capture the remaining 20% of the user value. Therefore, you should emphasize the most important features that will capture 80% of the user/customer value. So, don’t wait until its perfect, once you’ve got your MVP, get it out there fast!
3. Hiring the Wrong/Inexperienced Team Members
Having the right team means EVERYTHING in the corporate world. Many startups fail because they lack the necessary skills, expertise, motivation or shared vision within a team. That’s why getting the right people and at the right time is very important for any organization. Since different skill sets and backgrounds are needed for different positions, you shouldn’t hire a generalist for a specialist’s role and hire a specialist when you could employ a generalist for the job. Make sure that new hires understand your vision, goals and rate of innovation.
Below, we specifically outline some of the most common mistakes that can hinder building a motivated, focused and experienced team that will align to your business growth:
Unnecessary Time-Wasting Activities: Rather than employing the services of committed partners to deliver the initial requirements, most businesses usually prefer to rely on their in-house skills, leading to time-wasting. Entrepreneurs should learn to use professional partners for technical work, thereby allowing business owners to focus more on the business side of things.
Employing Short-Term Workers to Solve Your Immediate Needs: This is gradually becoming common for most businesses today. When companies hire workers for a short duration, they are likely to fire them immediately the job is done, which can also make other team members feel insecure. Hiring for a limited period can also lead to cash burnouts because funds will be continuously diverted to non-essential activities.
Team Members Being Unable to Contribute to The Product: When your team members or employees are not part of a product’s decision making, they feel marginalized and dejected. This action can kill their creativity, reduce active participation and make them lose interest.
Undefined Roles and Responsibilities: When the roles and responsibilities of your team members are not clearly defined, it results in a lot of confusion and disorganization. As a leader, always ensure that everyone understands their various duties at all times. This will reduce office conflicts and ensure the smooth running of your business.
Dropping Under-Performers from Your Team: You must always search for and eject under-performing workers from your organization. If you fail to do this, these lazy and uncommitted workers can make you lose money, investors and even bring down your company.
Bad Judgement Method: Many entrepreneurs make the common mistake of judging their team members only on their competence and not on the values that are related to the business. They forget that these values are crucial for business growth and sustainability. While competencies can quickly be learned and applied immediately, not everyone can possess these values because they stem from years of experience, professionalism and intuition. While the ideal partner balances you and brings the skills you don’t have, the most important thing you should seriously consider is the alignment of values.
4. Having A False Notion That You Can Easily Gather Numerous Customers as A New Business
Many startups strongly believe that the market is ready to welcome them with open arms; hence they fail to plan and execute their programs appropriately. They fail to correctly define their target market before jumping into a sea of uncertainties that the business terrain is popularly known for. These entrepreneurs also fail to recognize the underlying needs of their target market. Since they are unable to correctly balance the 5Ps of marketing (People, Product, Price, Place, Promotion), they should not expect massive acceptance and success.
One essential part of any successful marketing strategy is knowing your ideal customer, one of the few critical steps to take before start building the product. It is even better to name it. Carrying out proper marketing research is necessary because it will help determine your target users, their possible reaction to your marketing activities, their interest, habits, etc. Another aim of market research is to ensure that you provide exactly what buyers will want and whether your offer is cheaper or better than the competition. It is important to understand your target customer’s demographics and then conduct surveys to determine what they dislike about existing products and the improvements they would like to see. You can even go ahead to ask how much more they would be prepared to pay for the improved product. Furthermore, remember to keep all communication channels open and accessible to customers (phone, email, social media, etc.). Also, monitor your reputation, and listen to feedback from critics and supporters.
Instead of targeting a general market that may not be interested in their product/service, startups should streamline their target market by only focusing on those genuinely interested in improving their value proposition. This can be easily achieved by identifying a few user personas for the product/service and understanding your target audience’s needs, interests, beliefs, motivation, etc. As a result, you’ll be in a position to define the product better, price it properly and sell it using the best promotion and marketing methods at the right time.
5. Trying to Do Everything Alone
Many startup Entrepreneurs believe that having a great business idea will automatically translate into having a successful business, but that’s not always the case. You may have the best business idea in the world but still, fail woefully because having a successful business depends on many things and goes beyond your million-dollar ideas. While there’s only so much one can do at any given time, different parts of the business need different skills and expertise which is not available in only one individual. That is why every business needs a strong team of individuals who are skilled in other business areas.
It is difficult to establish and run a business when you are the only person involved. It’s a daunting task because there are many ups and downs along the way, while only a few tasks can be carried out alone. Founders are also recommended to get a co-founder/partner to share the burden and workload, so you don’t burnout. Don’t make the big mistake of trying to run a new business by yourself. Get 4-5 trustworthy and seasoned advisors to discuss your business ideas and strategy. As a young entrepreneur, it is wise to surround yourself with experts and mentors you can learn from.
Most times, the only thing a founder brings to the table is usually the idea and maybe some passion, motivation and zeal. However, these “wonderful” ideas will be useless, while passion and enthusiasm can easily fade away when faced with difficult challenges or failure. No matter the number of resources you’re bringing to the table, you can’t get anything done on your own but will always rely on others to get things done. For such founders who do not possess good leadership qualities, their founding team may eventually move away to work on something better because having bad leadership skills is actually detrimental to any business’s success.
6. Easily Giving Up
This is arguably the most important point in this section for obvious reasons. Failure shouldn’t make you give up. Instead, try to learn a lesson from your failures and use that knowledge to move forward. Whenever you feel like giving up, think of the many needs that your product will help solve. There are millions of people that may depend on your product to survive. When you’re feeling down, don’t forget why you started in the first place. Remember how you were initially pumped up when you got that big idea. Failure is the key to your success. No entrepreneur is immune to failure, no matter how big their business has grown. It’s part of the drive that makes the successful entrepreneurs successful.
Thomas Edison famously said – “I have not failed. I’ve just found 10,000 ways that won’t work.”