9 Common Mistakes New Startups Make – And How To Avoid Them

Everyone knows the success and failure rate of startup companies — around 50% don’t make it to their fifth birthday… not super encouraging — but few people ask why this is the case. Rather than just cosmic forces doing their thing, startups can fail because they make one or more errors that severely compromised the robustness and prospects of their company. While every company will make errors, it’s important not to make the ones that will cause serious problems. Below, we take a look at nine common mistakes you’ll want to avoid.

1. The Planning Stage

It’s easy to get carried away when it comes to a new startup venture, but keep in mind that rushing can lead to early problems. It’s only once you’re up and running that you’ll realize how many dimensions there are to a business. If you’ve planned properly, then you’ll be able to take them in your stride; if you haven’t, then you’ll find yourself coming up against issues that you hadn’t predicted. While you’ll be eager to get things up and running as soon as possible, it’s recommended to take time to create a plan of action. The more you’re prepared, the less likely it’ll be that failure comes your way.

2. No Consultations

Whether you think your business is a good idea isn’t really important. What matters is what your potential customers think; they’re the ones who are going to determine whether your business is a success or not. As such, one of the most important aspects of setting up your startup is market research, consultation phase. If you get the opinion of the people you classify as your “target audience,” then you’ll be on the way to success. It’s when you just guess what they want that you run the risk of running into trouble. In an age where it’s never been easier to get people’s opinion, there’s little excuse for not finding the answers to the crucial questions that’ll dictate your success.

3. Overcomplicating The Business

One issue that many startups run into is believing that they have to offer more, more, more. The company can be founded on one good idea, but then quickly become too convoluted once more products, services, and the like get added on. It’s much better to just focus on one core offering, at least to begin with. Once you’ve perfected that and you feel comfortable taking on more work, you can look at adding more. Also, you’ll want to look at simplifying everything about your venture, especially the payment systems. Some companies offer so many service levels that it comes across as unnecessarily complicated.

4. The Funding Issue

You don’t need to have all that much money to get your startup underway, but it is true that the more money you have, the easier it will be. Before you get too deep into your planning, think about how you’re going to fund the venture. You might use your savings, a traditional business loan, or a P2P loan. Once you’ve figured out how much cash you’re going to have, you’ll want to think carefully about how you’re going to spend that money. Spending it on the latest and best laptops, for example, would be a waste of cash. If you’ve never had to spend money on a new business before, then take a look at financial plan templates — they’ll help to give you an idea of the areas where you’ll want to spend the money, and which can be overlooked.

5. Legal Matters

You might be focused on doing your thing and creating a company in your vision, but it’s important to keep in mind that your business is also going to exist in the wider world, and that means that there are rules that you need to follow. As the laws surrounding startups can be complicated, it’s recommended that you work with a startup lawyer; they’ll help to ensure that you’re fully legal in the eyes of the law, and can also help with issues such as employment matters and registration of trademarks. If you don’t take care of the legal aspect of your business in the early days, they’ll only come back to haunt you further on down the line.

6. Lack Of Flexibility

You might begin your startup with a clear vision of where you want to take your business. However, you shouldn’t be overly attached to this idea. Your startup is like a living organism that’ll grow and develop over time; if you’re too rigid with your own mindset, you’ll end up being closed to potentially positive changes. You’ll be keeping your startup in a cage. While the core mission of your company will stay in place, the nuts and bolts and how you go about working towards that mission will change over time. Don’t try to resist these changes — take a “go with the flow” attitude instead.

7. Hiring Hands, Not Employees

You’ll likely begin your startup with just one or two people, but eventually, you’ll need to look at hiring employees. How you approach this issue can greatly affect the success of your startup. Companies, especially new ones, thrive on ideas and innovation. If you’re just hiring “hands” — as in, people just to do whatever task you assign them — then you’ll be missing out. When you bring someone on board, invite them into the family, and give them space and freedom to work to the best of their ability. You never know what ideas they might come up that’ll push the business forward.

8. Cutting Too Many Costs

Money is going to be tight in the early days, but you should avoid cutting too many costs, or trying to save too many pennies. Sometimes, you just need to spend the cash. It’s worthwhile figuring out which areas are worth investing in, and where you can cut back until you have more money.

9. Fearing Mistakes

Finally, remember that every startup makes mistakes, and they should do, too — it’s an important part of ironing out the kinks. So don’t play things too safe and avoid taking chances — you need to roll the dice every now and again.

This is a contributed post.