Top 9 Mistakes Startups Make
What is one of the most common mistakes startups make?
To help you identify and avoid common mistakes that startups make, we asked startup founders and established business owners this question for their best insights. From not having a business plan to trying too many things at once, there are several mistakes that you should avoid when starting a business venture.
Here are the nine most common mistakes startups make:
- Not Having a Business Plan
- Trying To Do Bookkeeping Yourself
- Poor Focus On Hiring Processes
- Making Decisions Based Only on Cost
- Not Focusing On the Right Metrics
- Failing To Validate The Business Model
- Not Planning Ahead for Delays in Take
- Failing To Legally Set Up The Business
- Trying Too Many Things at Once
Not Having a Business Plan
Of all the mistakes, not having a plan is the biggest and most expensive one you can make. A business plan helps you go from point A to point B, follow certain steps and to make sure you stay within budget. When you don’t have a plan you start trying too many things, you lose your focus, and you stop seeing results. You can refer to a business plan as a blueprint, that not only helps you achieve your long-term goals, but also short ones. It gives you clarity, more structure, and it’s a big asset you can have and show potential investors. People will likely not want to go on a business venture if you don’t know what you’re doing or going to next. Especially if they come in with their money, so it’s important to be prepared.
Andrei Vasilescu, DontPayFull
Trying To Do Bookkeeping Yourself
Many startup founders think they can do the books themselves - don’t! Hire a high-quality and attentive bookkeeper. If your books are not in order everything in the future will be more difficult. You need up-to-date books for everything from quarterly/yearly tax reporting to evaluating business performance to attract investors.
Jason Reposa, Good Feels
Poor Focus On Hiring Processes
Startups, particularly those experiencing rapid periods of growth, often make the mistake of not focusing heavily enough on hiring processes. This can result in a lack of productivity, poor company culture, inefficient business practices, and a range of other core issues.
Whilst undoubtedly cliché, it's hard to argue against the fact that people are the fuel that drives almost all startups. Poorly planned and hastily executed hiring processes often lead to people being hired who, despite their qualifications for a role, might not be a perfect fit for your business. I highly recommend ensuring that you hire people that you can trust to delegate tasks to, even when it might feel like it's extremely difficult to relinquish control over a core aspect of your business. This trust is commonly built by hiring people who are great cultural fits that also fill your gaps in knowledge, something that's determined through multiple interviews and clear communication of expectations.
Teresha Aird, Offices.net
Making Decisions Based Only on Cost
When cash flow is tighter, it is common to make cost cuts or changes in the number of employees. Although it is a tempting strategy from a financial perspective, your company may end up being 'punished' in the future. Cutting company expenses just to keep profits can lead you to many administrative problems. Always consider whether there is a real need for cost-cutting at such times.
Ricardo von Groll, Talentify
Not Focusing on The Right Metrics
As a startup, you need to track your progress and measure your success. However, it’s important to focus on the right metrics. Too often, startups focus on vanity metrics that don’t give them an accurate picture of their business. For example, they may focus on things like page views or social media followers instead of more important metrics like customer acquisition or revenue growth.
While it’s important to track all metrics, you need to be sure you’re focusing on the ones that will give you the most insights into your business. Consider what metrics will help you make decisions about where to allocate your resources and how to grow your business. Then, make sure you’re tracking those metrics closely.
Igal Rubinshtein, Home Essentials Direct
Failing To Validate The Business Model
One of the most common mistakes startups make is failing to validate their business model. Often, startups focus on building their product or service without first testing whether there is actually a market for it. It can lead to years of wasted effort and millions of dollars down the drain.
The best way to avoid this mistake is to focus on customer development from Day 1. It involves talking to potential customers, understanding their needs, and figuring out how your product or service can meet those needs. Once you have a validated business model, you should start working on building your product or service. Even then, you should continue to talk to customers and get feedback to iterate and improve your offerings over time.
Kev Tilley, Mortgageable
Not Planning Ahead for Delays in Takeoff
In the beginning, I had no idea how long it would actually take to get my business running. Once you have the idea for your business in your head, it's easy to think that the product or service is so new and different that the business will create itself. Unfortunately, as many entrepreneurs learn, regardless of how good your business idea is, without the proper planning any business is destined to fail.
I wish I had prepared myself for how long it would take for my business to become functioning. In the end, it worked out, but I could have saved myself a lot of worry and stress had I had a better plan in place for those starting days.
Chandler Rogers, Relay
Failing To Legally Set Up The Business
Many times, people start doing business without legally establishing their business. Business owners must identify the legal structure of the company and then contact the Secretary of State (SOS) or Internal Revenue Service (IRS). Social Security numbers can be used but you want to protect your identity. Sole Proprietors should contact IRS to obtain an EIN which is a free service online here.
Did you know that once you are assigned an EIN that this is the one you will always use for any of your businesses with a legal structure of Sole Proprietorship? Limited Liability Company (LLC) and other structures will complete paperwork with the SOS. Remember, as an LLC the owner cannot speak for the company - your book of records will speak for you. There are numerous costly mistakes that can be avoided by conducting research and hiring a professional.
Robin Hughes, R Hughes & Associates
Trying Too Many Things at Once
Starting your own business can be exciting and nerve-wracking at the same time. This can often drive entrepreneurs to get carried away by their potential growth which is why they end up trying to juggle too much at once. This isn’t necessarily a bad thing. But if you are understaffed and underprepared, it can totally backfire. For example, your employees may feel overworked and burnt out, there may be a lack of strategy and you are more than likely to miss out on crucial details.
Although these are all probabilities of running a business, they can impact a startup a lot more than they would an established business. Therefore, it’s vital to focus your effort on a limited number of goals and tasks to make the most of your resources, especially during the early stages of your business.
Chris Roth, Highline Wellness