4 Mistakes Hindering Startups

The startup idea is an entrepreneur’s baby, and it should be. It is your dream you’ve nurtured, worked on, talked about, and thought about. Instead of crying to wake you for the 2 AM feeding, it wakes you to make notes, do research, and the various tasks to feed your baby.

It is the time to set blind enthusiasm aside and begin to move forward strategically and realistically to avoid the mistakes that can euthanize your project.

In nearly forty years of working with startups I’ve seen great ideas become multi-million, even billion, dollar businesses and great ideas slaughtered, most before they launched. For various reasons, as an independent consultant I don’t work with every potential client that contacts me. In fact, I turn down more than I agree to work with.

My mantra to startups is first be sure you want to, can, be an entrepreneur it can be the hardest, most thankless job you will ever have. “Work for myself” is a myth. Everyone works for someone, the higher you go up the corporate ladder the more people you work for. The CEO of a public company works for the shareholders. Bosses of the owner of a small business are its customers. The more successful you are the more bosses you have. Secondly, once you’re sure you want to be an entrepreneur pursue the fastest path to cash (revenue).

The top 5 mistakes founders make right before their startup goes up in flames:

Lack of Urgency

This touches several aspects of a startup.

You may have a unique idea. In time someone else will do the same or similar thing. Being first to market provides numerous advantages. There is a big difference in being first – the only one – over being second and having to convince people why they should use you instead of who was first. Worst case, the market passes you by, what once filled a need becomes irrelevant.

Every startup needs money. The majority need money to launch. Raising money for a startup is a grind. It must become the main priority of the founder(s) and their team.

Often prospective clients proudly declare how many years they’ve been working on their concept as if it were a badge of courage when in most cases it’s a red flag.

In today’s rapidly changing fast moving world progressing from concept to launch is not a marathon, to win, it’s a sprint. Too many can’t make the change in mindset from dreaming the dream to thinking strategically and implementation.

Waiting Too Long to Launch

I agree with the school of thought that says “if you’re not embarrassed by your first product, you waited too long to launch.” Granted you don’t have to be, nor should you be embarrassed when you launch, and after you are successful and look back your product(s) when you launch should make you wince.
As an executive for a NYSE company we launched new locations and product offerings that were profitable and deemed successful. A few short years later we determined it took the same amount of management time to manage locations making a few hundred thousand in profit as those making millions. Locations that were once deemed to be winners were then closed because they didn’t meet our profitability bar.
The point is, as you grow and succeed your vision, strategy, and product should be refined and improved to the point the product you launched wouldn’t meet your updated and refined standards.
 
Arriving at a minimum viable product or MVP is often torture for founders. There’s nothing worse than having to trim down your product’s features before the big reveal. It feels like the product must be perfect before you can launch. When the opposite is best.
Think Hyundai. When Hyundai launched in the U.S. they offered one model of the most basic car at the lowest price capturing only 4% of the market. Today Hyundai is one of the bestselling brands in the US with 35 models of cars, trucks, and vans.
The cost of delay is often too great to recover. No matter how great your big idea may be the end result will not be as good or as marketable as your MVP improved over time by customer input. Too often the MVP is more marketable than the perceived ‘perfect product.’ Improving the MVP through customer input affords greater opportunities to innovate.
Most importantly, MVP is the fastest way to cash (revenue) which is easy for potential investors to visualize and lends credibility to your business plan. Remember an investor axiom is “projections do not equal revenue.” The easier they can visualize you attaining revenue the better chance you can move them to a decision to risk their money on your dream.

Loss of Focus

Too often while pursuing the perfect product founders lose focus of their core business. Because they want to commit the mistake of launching the perfect product they get off track by deciding they will make the widgets that are part of their product in the name of quality or protecting trade secrets. There are numerous reasons this is fatal. First they are talking about an entirely different business sometime a different industry, it would often require more money than the launch of their business, and it adds complexity and cost.

Lean operations and outsourcing have become expected. By conducting due diligence and competent vendor identification and selection you can find reliable, reputable, vendors to meet your needs and, in most cases, for less than it would cost to do it yourself.

Loss of focus also includes spending time and money on areas not directly related to launch and fastest path to revenue. For example, searching for personnel that may be needed down the road, unnecessarily hiring lawyers for work you can do yourself. You can quickly and easily incorporate or form your business entity online for less than a big law firm will charge for a couple hours work.

Spending Money in All the Wrong Places

I’m a big believer in lean organizations for startups for many reasons; however, two of the top reasons are: once funded, a startup should focus on growing revenues, profits, and stakeholder returns. The more people you bring on board the more time and money you spend on people and less time selling widgets. Secondly, you can outsource most functions for less money than doing it in house. As a business you need accounting and CFO functions. Until you’ve grown to the point it makes sense to have them in-house. We have a resource we recommend to all startups that provides all accounting, bookkeeping, and CFO functions for less than the business can staff in house. A client with $20 million in revenue increasing every year still uses the service. The service and deliverables are world class.
Startups should strive to cut costs and increase efficiencies where possible and it’s important to see where outside firms can quickly complete tasks to a high standard versus building a great team and risking a wrong or bad hire. A good rule of thumb is to outsource tasks that will help you learn and launch faster.
Odds are you don’t need a dedicated branding agency at launch. Even more so you aren’t ready for a bleeding edge video production or a big name high price law firm.

In Conclusion

Launch as quickly as you can using best practices, be flexible, make it easy to get immediate customer feedback, and let them drive your iterations which drives innovation and enjoy your success.