Today, we’ll look at the common mistakes startups make that lead to early business crash. It is no longer a new saying that startups/ business crash within the first 5-10 years of establishment.
Many factors constitute to these business fail from lack of/ insufficient capital challenging market to unfavorable governmental policies. Below are six simple but common mistakes startups make that often lead to their early fall.
- Gauche purpose for starting the business: This is about the most important mistake startups make. The purpose of your business is so vital because it gives a blueprint of your business; it also determines business plan and vision statement. Some entrepreneurs start a business because everyone is doing it; take ‘the real-estate business’ for example. In as much as businesses with proven successes are very advisable to start, you must still have good reasons for starting yours. Therefore, before starting, ask yourself these questions: why am I doing this business? What do I want to achieve? What problems is my enterprise solving and how do I achieve this? What stands me out from similar existing models? Have a definite purpose and develop a clear plan on how to achieve that.
- Running after Investors too early:Your business ideas and plans might be very catchy, savory and interesting; in fact, your start-up might be the next big hit. These are not good enough reasons to look for investors; investors are big game players and would need to be really impressed before thinking of investing. In these early days of your start-ups, instead of running after investors, shift your focus to growing your business, implementing your plans, starting small and building from there. Develop a good business structure/model, make your business valuable (a brand), something that would attract investors to you. Remember, investors want to see results.
- Not understanding the business market/Industry: Most start-ups often make this costly mistake; they start a business without having a full fledge knowledge of the industry under which their kind of business belongs. As an entrepreneur, you must be familiar with the kind business market/industry you are going into. Being knowledgeable about the business industry, would at least give you idea about the nature of the business, your competitors, potential customers or about how to enhance the industry and how your enterprise would fit in.
- Poor/no knowledge of Financial education: Starting and running a business is all about financial education(generating, managing or maximizing finance). Most start-ups don’t have good knowledge of various aspects of your finance such as your cash-flow, profit margin, expenditure, revenues, taxation. Therefore, it is important you understand the financial; aspects of business; endeavor to make financial plans and budgets, cut every unnecessary spending and record all financial transactions. It is advisable to seek expert advice on financial matters;
- Lack of good Marketing strategy: Every business sells either a product or service, but lack of plan on how to boost sales and gain a competitive advantage has crushed many start-ups. Have you set marketing goals? How will you promote your product? Do you have good marketing team or should you hire one? These are crucial marketing questions that need to be addressed before you continue building your business. You must always remember that the business world is very competitive; it the business that sells best that has the competitive advantage.
- Hiring and expanding too quickly: Success can be intoxicating; this point is a big mistake startups make after achieving early success. While it is good to expand, most startups go beyond their capabilities. One of the greatest expenses of any company is its people; employing too employees easily drains the funds. In addition to the recruitment and salary costs, there are additional costs such as cost on acquiring larger office space, equipment, and supplies. The question you should ask yourself is ‘what will happen to your large pool of employees if your company doesn’t grow as you expect? Advisably, you to consider ways to save money on staffing;hire slowly as you grow.