According to recent business data by the census, in the past ten years, an increasing number of individuals have initiated startups of various kinds. Many other individuals find the notion of entrepreneurship appealing, yet learning how to launch a firm may often be so intimidating that people give up the plan to launch a startup.
Moreover, those who take on this journey feel apprehensive about the tenure of their startup, as stats suggest that 90% of the startups fail, and among them, 10% of the startups fail within the first year. But what is the reason behind such high rates of startup failure?
Let’s discuss the top 12 mistakes entrepreneurs make in their startup phase.
A business plan is the most crucial element of starting a company; It’s been claimed that when you’re thinking about starting a business, you need to write down a business plan. Even when you approach a bank to seek a loan, they will inquire about the formation of your company and your business plan for them to review.
However, the majority of entrepreneurs believe that the business plan should address what product or service you will provide and how much money is anticipated to be created by the company. Unfortunately, this is not all; entrepreneurs need to consider the entire process, from choosing the management team to planning what all platforms companies will cover.
For example, whether the company will have an app or not for which, they will need to hire a mobile app development company in India, or companies will just depend on the website for customer interaction.
If you pitch your plan in front of a bank or any investor by incorporating only these two points, you will surely experience failure. This is the reason it is advised that entrepreneurs should make a blueprint or a business plan, including the following points:
- Vision: Provides a high-level explanation of a company’s existence which should be aligned with the founder’s goal to bring about the change.
- Products/Service: What will you offer: a product or service? If so, what type of service and product will you provide?
- Background: What abilities and skills do you have to run the business?
- People: Who are the players involved, and what will be their role?
- Competition: How are you planning to compete against your competitors? What is your USP with the help of which you will stand out?
- Marketing: What mode of marketing will you choose and why? How much do you plan to invest in your marketing strategy? And what all marketing departments do you plan to have in the company?
- Funding: What is the source of funding for the company? What is your action plan if you plan to ask investors for it?
- Measurement: What criteria do you choose to measure whether the business is going on the right track or not? How do you plan to see if the plan is getting implemented correctly?
- Exit plan: What will be your action plan if your business doesn’t work or if you sold it to another person?
2. Avoid hiring expensive employees
While you certainly want established experts on your team, a startup should avoid hiring experts that ask for a huge salary until you get your company on track with stagnant earnings. Instead, try your best to run your business for the first several months with minimal players.
After that, train your existing human resource to do the maximum work according to their capability, which will help them save expense. To get rid of this problem, entrepreneurs can hire a recruitment agency (like virtual assistant agencies) for affordable assistance. They will provide you with candidates according to your requirements.
3. Too many or too few founders
Even if you start your business alone, sustaining in this competitive market will be difficult without other players. If you try to handle the whole of the company just by yourself, you will get exhausted within a month or so, and then you will eventually look for a partner.
So it is advised that you should start the company with at least one more partner. Try to find a partner who can help you operate your firm or can bear financial expenses if you cannot.
But considering this point, many entrepreneurs make the mistake of having too many founders. In such cases, it becomes difficult for the firm to flourish under different perspectives, and in most cases, startups scatter due to a clash of opinions. So the best thing is to start the company with the bare minimum number of founders.
4. Stay open-minded rather than rigid
Even if you’ve created a strong business strategy, it’s crucial to adapt to the market requirements rather than being rigid according to one’s strategy.
Even some of the largest companies had to evolve and expand as the times changed. Taking the example of Nintendo, the company was first well-known for producing playing cards when it was established in Japan in 1889. But seeing the trend of playing cards washing off and excitement for video games gaining rapid popularity, this brand switched to video games in the 1970s, which made it a hit in the gaming industry.
5. Approaching investors too soon
One of the deadly mistakes entrepreneurs make is going to one’s potential investors without any blueprint or a business plan. In such a scenario, nobody takes you seriously, resulting in your failure to raise funds. This is why it is advised that you should work to attract investors once you have started your operations and you have a full-proof business plan to present.
6. Focus on critical areas of the business
Being overly ambitious with objectives or targets is a frequent mistake many entrepreneurs make in the early phases of operations. Instead, concentrate solely on your company’s critical areas, such as product development or sales.
Put off any unnecessary plans until your company is steady and running effectively, such as switching the server you use or remodeling your workplace. Then, you may focus on more ambitious tasks if the foundation of your company is in order.
7. Lack of target audience understanding
In today’s competitive world, companies need to specify their target audience and understand what their target consumer needs. However, in the process of making the product or service available for the customers, many entrepreneurs forget about taking the feedback, resulting in a lack of focus on product or service improvement.
Therefore, it becomes really important to take feedback from their audience regarding the product and service with the help of which they can make continuous improvements.
8. Do have contracts
When an individual starts a company with their close one, they sometimes neglect contracts or any paperwork. But failure to execute contracts is one of the worst mistakes a business owner or entrepreneur may make while beginning a firm. No matter how strong the bond is, a business may shut down before its launch due to little dispute.
According to a World Commerce & Contracting study, effective contract development and management may help businesses save a staggering 9 percent of their yearly income.
Many startups think that branding doesn’t apply to them; they do not need to brand themselves as they operate on a small scale. But this is a very dangerous notion that entrepreneurs can have. Building ties with your audience through branding paves the way for them to become devoted clients in the future. You can differentiate your company from others by building a brand that consumers genuinely care about.
A well-known brand name indicates that you are here to stay in the market for a long time. It is unquestionably the first step toward becoming one of the most dependable and well-known brands in the sector.
10. Not investing in a pilot study.
Research is the most crucial aspect of any business. Until and unless entrepreneurs carry out the proper research on their product or service, they will face challenges. You will see successful businesses have carried out test and pivot studies at different phases of their startup that have helped them stay in the market.
In a startup, alterations and responses to changes are ongoing processes. So entrepreneurs should not neglect experiments. People can make an assumption, then check it through a pivot study and analyze the result; if the result is positive, they can move ahead with the change, but if it doesn’t provide the required result, one can drop it anytime.
11. Pricing too high or too low
Making a pricing decision for a product or service is never easy. The business will suffer losses in both situations: keeping the price too high or too low.
For example:- Ford introduced the Edsel automobile in 1957 after spending an impressive $250 million on research and development. But the car failed due to its high price. Consumers were not able to afford the car, and thus the sales dipped miserably.
But business owners can easily reduce this possibility by carefully evaluating the market, competition, and their target audience before fixing a price.
12. Not launching at the right time and place
Often, an individual comes up with a great idea that might make a big difference in the life of customers. But if it is not launched at the right time and in the right place, the product or service can fail miserably.
For example, ask.com, earlier known as AskJeeves, is a question answering–focused e-business established in 1996. Even though it had many innovative ideas, including semantic search, it failed because of a lack of search engine backup at that time. It would have been a success if it had been launched later than Google did.
If the product or service is not provided at the right place like town, region, state, or at the right time like amidst digitalization if it’s a digital service, then this could be the major reason for a startup failing.
The startup has to make all kinds of decisions like when to hire app developer in India to build an app that will help the customers understand the business deeply or what marketing strategies to use: offline or online. Sound decision-making will allow the startup to get one step closer to its vision.
But if the brand makes some mistake in this process that might cost them a huge amount, they don’t have to get disappointed but rather have to learn from it to avoid it in the future. But to safeguard yourself from falling under the category of a failed startup, one should always know the common mistakes made by others. As learning from others’ mistakes is the best way to grow and learn.