Creating a business is fraught with unique challenges that you’ll have to overcome on your own; you reap all the reward, but you bear all the risk. While every successful business is different, failing startups follow depressingly regular patterns. We’ve compiled a list of some of the most common, easily avoided mistakes many entrepreneurs run into; see if any of these look familiar.
1. Being Focused Solely on Raising Capital
It’s not surprising that so many entrepreneurship blogs, seminars, and books focus so heavily on raising capital: money is the life-blood of your business. The problem is that many entrepreneurs get stuck in fundraising mode, and never transition to operations. The trick to appropriately moderating how much time you spend on raising funds is to set goals within a specific timeline. Once you reach a goal that gives you at least the bare minimum to start operations, scale back your fundraising and put more of your focus in your product or service. A viable product will help investors find you which will mean you don’t have to spend so much time finding them.
2. Trying to Grow too Quickly
One of the biggest misconceptions among startups is that they need to grow as quickly as possible. This stems from entrepreneurs wanting to cut-and-run with a check in their hand, having made their millions selling out to a larger company. While this is a perfectly reasonable desire, it more often than not takes time to grow a company, product, or service into something the large competition would find enticing to purchase. Don’t spread your company’s resources too thin too quickly, or you’ll risk burning your company out before it gains enough traction in the market to start attracting attention. In fact, stay as small as you can the first year, using your small size to keep your business model agile and able to change based on shifting markets, trends, and needs of clients.
3. Mismanaging Finances
The difference between a first-time entrepreneur and someone that has been successfully starting up companies for years is an understanding of finances. Veterans will tell you one of the most important initial investments you’ll make is hiring a part or full time accountant to be thinking the bottom line, keeping you free to creatively manage your company and product. Minimizing unnecessary costs is something that comes with time as well, as you’ll learn quickly where you can save money in areas like credit card processing fees, research and development, manufacturing, and advertising.
4. Needing to Always be Right
A basic precept of the scientific method is that you’re not trying to prove your theory correct, but that you are actually trying to prove it wrong. The problem with always needing to be right is that you blind yourself to when you’re actually wrong. Being wrong isn’t a problem when you look at it as a way to improve your service, product, or business plan. Chances are you won’t be right about everything you assumed when you had your initial idea, whether it’s the market, the functionality of a product design, or demand for a particular service. However the sooner you find out where and how you’re wrong, and work on a solution, the quicker you can have a viable and profitable company.
5. Postponing Death
If you’ve avoided the previously mentioned mistakes you’ll have improved your businesses chances for success. However sometimes businesses die, and when they do, it’s important for you as the owner to let it happen quickly. Most entrepreneurs think they always have to be successful, and that whatever their first business is, it has to succeed. The truth is that most successful entrepreneurs have had their fair share of failed businesses, but have seen the writing on the wall, and have saved their precious resources for another venture instead of wastefully dumping all they have left into a dying business. You are not your business, letting one business fail just means that you then have that much more time, energy, and funding to invest into a business that will succeed.
Tara Wagner is a staff writer for TechBreach. She has worked from home for over a decade, and loves sharing news and advice with fellow telecommuting moms and dads. She's fascinated by new tech and new ideas; and when she finds time to unplug, she enjoys long hikes in the mountains near her home. She lives in Denver.
Good read Pete, One of the first thing you think about when starting a new business is how to raise capital. Depending on how you go about it, it can either make or break your business. Thanks for sharing.
You bet Herby. Thanks for checking it out. Cheers – Pete