Kevin Johnson — December 5, 2016 Follow @redhotkevbot
These days, it seems like almost everyone wants to go into business for themselves.
The thing is, launching your own startup is no easy task. While business failure rates have certainly declined over the last few years, the statistics tell us that the odds are certainly not in your favor. In fact, over 70% of startups fail within the first ten years of operation, while 50% fail within their first four years.
Is this a problem? Absolutely—especially since many of the pitfalls that cause startups to fail are a result of the choices you make in the early stages of launching your business. Avoiding the following common startup wrongs could ultimately make all the difference in whether or not your company is able to go the distance.
1. The Wrong Product
The product or service you have to offer—and its quality—is without a doubt one of the biggest determining factors in whether or not your startup will be successful. A detailed analysis of failed startups found that 42% of the failed businesses floundered because there was “no market need” for their product or service, while 17% also cited having a “poor product” as a direct contributor to their failure.
This is why it pays to really hone in on what your business is trying to offer. Sure, you may have a unique solution to an everyday need, but you need to consider whether or not what you have to offer is something your target market actually wants. Are you offering a service that will help customers with a problem they’re actively trying to solve? Even more importantly, does your product solve the problem effectively? Is it worth your customers’ money?
Conducting thorough research of your target market and actively testing and tweaking your product are essential if you wish to avoid investing money in something that has little to offer.
2. The Wrong Finances
Startup leaders need to pay attention to the details—especially when it comes to finances. Mismanaging your finances in any regard will be deadly. From poor record-keeping and borrowing practices to shoddy marketing and “living too high” to make your business seem cool (Entertainment 720, anyone?), financial mismanagement will kill your business quickly.
Successful startups need to deliver a high-quality product or service to their customers in a cost-efficient way, utilizing the limited resources they have in a non-wasteful manner.
Remember, your business processes can’t just be a “set it and forget it” affair, and this is especially true of your financial practices. Regardless of the niche you operate in, the market is constantly changing. Your competition is always looking at ways to become more efficient and profitable.
And you need to adapt as well. Whether you’re reexamining your marketing KPIs, tweaking your marketing platform, or finding more cost-efficient production methods, adapting your processes to keep up with a changing marketplace and better manage your company finances is vital for survival.
3. The Wrong Location
An often-overlooked startup issue is choosing the right location for your business. Sure, plenty of startups begin life in someone’s basement or garage, but if you plan on growing into a sustainable company, you’ll eventually need to expand your workforce as well. And this means navigating the murky waters of selecting the right business location.
When selecting an office space, be aware of the issues that could hurt your bottom line and decrease employee motivation. A bad landlord could cause your rental costs to go through the roof, while an obscure location could make it difficult for employees or potential clients to reach you. In addition to renting the office space itself, you’ll also need to purchase desks, chairs, computers, and other supplies—and don’t forget about the snacks or ping pong table to keep your employees happy! You need to be careful to not dig yourself into a financial pit with these expenses, but a bare, rickety office won’t impress potential clients or help you retain employees.
Of course, today’s technology enables many companies to employ a mostly-remote staff, reducing the need to lay down cash for expensive office needs. Keep in mind, however, that working with remote teams introduces its own set of challenges, including potential difficulties with communication, retention, and accountability. Build remote teams with caution, and make sure you can handle the nuances of managing a remote workforce before you try this option.
4. The Wrong People
Building off the previous point, the individuals you hire will also play a large role in your startup’s eventual success or failure. As Business News Daily notes, the popular mantra of “slow to hire and fast to fire” can be difficult to stick to when you need to make quick hires for your growing startup.
Startup employees need to be passionate. They need to do well with delegated responsibilities so you can focus on your company’s long-term goals. They need to respond well to your management style. And of course, they need to provide excellent work.
Unfortunately, finding these motivated individuals seem near-impossible at times. So how can you avoid making bad hires? Start by using the connections you’ve already developed in your years of professional experience. Maybe a former coworker would be interested in joining your team—or maybe she can provide a top-notch referral. In some cases, it may be worth bringing someone onboard for a short “trial” period before extending a full-time offer.
Regardless of whether you use referrals or a well-written job notice to attract potential employees, you still need to make a good impression on your future hires. While you shouldn’t go overboard (remember your finances), be sure to provide an attractive salary and benefits package. Make your expectations and needs as clear as possible during the hiring process, and show potential hires that you know what you’re doing in effectively managing your startup. Doing so will make it much easier to attract top-tier talent.
Conclusion
Building a successful, long-lasting startup is much easier said than done. And the sad truth is that many businesses that do their utmost to avoid these common pitfalls will still fail to gain traction in their marketplace. But as you conduct your research and plan effectively so you can avoid these common startup “wrongs,” you’ll be better equipped for survival.
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