Four Fatal Startup Mistakes You Should Avoid
Running a startup is exhilarating and intimidating. On the one hand, starting a company on your own is a tremendous feat, but on the other, running a business is almost always much harder when you’re putting your dreams into motion. Startups are especially vulnerable because they’re new on the market, and need to position themselves as better than their competitors in a noisy commerce world. With that in mind, here are four fatal startup mistakes you should avoid.
1. Product-Minded Obsession
It’s not uncommon for startup founders to become obsessed with their product. After all, there certainly is plenty to be proud of: creating a product or service from scratch is a tremendous feat. However, there are many instances where the founder gets tunnel vision when it comes to creating their solution, and forget that instead of being product-based, they need to pivot to customer-based.
Furthermore, founders need to understand that just because their product serves a purpose and has a solution, it doesn’t mean the problem they’re solving is important enough to have a market. Thorough market research is crucial to avoid failure. After all, failing to understand a market is one of the biggest reasons that half of all new businesses fail within the first five years. During these early days, give yourself more time to talk to your potential clients and customers and figure out what they want.
2. Falling Victim to Feature Creep
Feature creep happens when production feels forced to speed up as new features are requested. While this is more common for startups that have investments secured, it can still happen during startup heydays, too. Many founders become feature-focused, and hone in on adding as many features to their software, service, or product as possible.
When you’re creating something new for the first time, you should aim to push a simple product that’s intuitive and easy to learn. If you bombard your product with too many features, it’s easy to see how the learning curve grows significantly bigger, which can be off-putting. For instance, instead of rushing to Octopart to order more hardware pieces for your prototype, consider how you can simplify the product and reduce the learning curve.
Additionally, if your team has seven major features to focus on, you might find that some features aren’t getting the same attention and quality assurance that others are. Get the most important features right, push the product, and continue building and improving from there. This is the founding principle that guides the continuous integration/ continuous delivery method. Invest in high-quality DevOps tools and emphasize improvements over time.
3. Hiring Fast
Bad hiring decisions can break a company before it even has the traction to go on to something bigger. And unfortunately, those early hires truly shape the company, set the foundation for culture, and make a huge difference to the progression of a brand. In corporations, hiring the wrong people costs companies millions every year—but in the startup world, it can derail a company completely.
As a founder, you may feel pressured to get more done quicker. However, this is a great time to take advantage of the freedom and flexibility of running a company without stakeholders breathing down your neck of deliverables and deadlines looming in every corner. Take your time to search for the right people who will be as invested in the success of the business as you are.
Instead of hiring fast, you may opt to hire freelancers or temp employees to help you handle your day to day tasks in the interim. And lastly, don’t forget to offer valuable options to your first employees, such as stock options and generous vacation packages.
4. Finance Mismanagement
Finance is a touchy subject for startup founders. A study from CB Insights found that 29% of startups fail because they run out of cash. Naturally, new startups are attempting to operate on a lean budget. But being cheap isn’t the same as being frugal, and careful decisions must be made when it comes to prioritizing areas of the budget. For starters, you should be setting clear goals and recording every penny spent. By maintaining your records, you’re able to accurately get a full, realistic overview of how your business is handling money and what you can do to improve spend moving forward. For example, you might find that seemingly small fixed costs are adding up at the end of the year, and may not be necessary.
Furthermore, you should also be aware that raising money too fast puts you at a greater risk for making unnecessary or poor spending decisions. Knowing when to search for investors requires careful consideration, and you should talk to mentors and other business owners before you make major business decisions.