Most startups will fail before they ever gain traction. That’s a fact that could make any potential entrepreneur run to the safety of the nearest stable job. Fortunately, there are ways to avoid becoming one of the many failed startup founders.
You just have to know the missteps that are most likely to lead to failure, and then avoid those. To get started, check out these startup-killing mistakes.
It’s tempting when launching a startup, to take money from any source that is willing to give it to you. Unfortunately, by doing so, many founders have landed in the unfortunate position dealing with an investor who doesn’t share their vision or who tries to exert influence in unhelpful ways.
This is especially true if part of the investment contract includes giving the investor any level of control over day to day operations.
Passion and excitement about the product or service you have to offer the world can result in some tunnel vision. Many startups have crashed and burned because their founders were so in love with their own ideas that they refused to see the need for making adjustments. Remember that people are going to buy the things that they need, not the things you think that they need.
One of the first steps to planning a startup is to create an effective marketing plan. If that isn’t done effectively, it’s impossible to gain the initial customer base that is required to create growth and profits.
The most effective marketing efforts are those that are targeted to the group of people that has the biggest need for your product or service and that is in the best position to purchase it. If you fail to identify that group by creating an ideal customer persona, your marketing is likely to be too generic to be effective.
For most startup founders, money is tight. Because of this, it can be tempting to launch in a location where rent and other costs are lower. Unfortunately, there’s often a reason why costs are lower in an area. This might include poor infrastructure, lack of traffic, and lack of incentives from local governments.
In addition to this, many startups fail to research their targeted geographical location when it comes to predicting whether or not there is a local market for their product.
Debt is a scary enough thing when you’re earning a profit. The idea of accumulating debt when you aren’t making money can be downright panic inducing. Unfortunately, unless you are already flush with cash from other ventures, going into debt is part of launching and growing your startup.
Getting a good line of credit, and a business loan will allow you to purchase inventory, cover monthly expenses, pay slotting fees, and keep you afloat.
While there’s nothing inherently wrong with offering investors an equity stake in return for their funding, giving away too much equity can cause problems.
First of all, even if you offer it up in small increments, giving away equity is giving away control. When that control is spread over multiple investors, chaos can result if investors cannot come to an agreement about the things that need to be done to produce growth. In the meantime, you might find yourself with a startup over which you have very little control.
The idea of teaming up with friends and family members to come up with a great business concept, and then teaming up to launch a startup is a wonderful fantasy. After all, who wouldn’t want to spend their days working with people that they like? Unfortunately, the results are often not as rosy as you might think.
It can be difficult to navigate disputes when dealing with friends and family. It can also cause a challenge when it comes to defining roles and responsibilities.
Many startups struggle or even fail because the teams behind them only score enough funding to get started. They don’t take growth, market shifts, or potential disasters into consideration. Then, when something happens they are scrambling to find the funds that they need.
Norman Arvidsson is a passionate author who was born in Sweden but then moved to the United States with his family. Now his goal is to share his experience with others through blogging.
He is familiar with such areas as web dev and design, marketing, blogging, freelancing, startups, small business, self-development, and eLearning. Considers personal growth as the main goal in his life. You can contact him through his Facebook, Twitter, or Google+.