Seven fatal startup mistakes (and how to avoid them)

by Startacus Admin

Many startups fail before they have a chance to fully establish themselves. Here are seven mistakes those startups are likely to make and importantly, how to avoid them.

By James Ker-Reid, CEO of Sales For Startups, a specialist consultancy founded in 2017 and built on over a decade of experience in enterprise sales selling both technology services and products.

While starting your own business can be a scary endeavour, it clearly hasn’t stopped thousands of entrepreneurs launching companies every year, with tech startups in particular hitting an all-time high in the UK in 2018. And while many of them will succeed, a great deal will ultimately fail, many of them before they have a chance to fully establish themselves.

But it’s not all pot luck. Mistakes are often common ones, so any ambitious founder should be mindful of the obstacles to success that might scupper best laid plans. Here are seven of those common mistakes, and importantly, how to avoid them.

1)    Lacking sales focus

When first starting a company, it’s very easy to become distracted and while there is a lot of value in planning, you should never let it be an excuse for lack of action now. The distraction could be concentrating on the development of a new product or service line, or hunting for investment, but as a young enterprise the one thing you need above all else is focus on core aims. After all, to achieve the goals of a new service you still have a responsibility to drive revenue with existing products and customers. 

In any sized business having a clear client acquisition and partner strategy is important, but in startups, it is critical. Any of your team members will undoubtedly have to perform multiple roles due to limited resources and there is nowhere to hide when someone doesn’t pull their weight. Having a clear strategy for clients and partners means no matter who is responsible, your approach will remain consistent.

2)    Not listening to your customers

Your customers provide the best resource for feedback and collaboration in your entire business, yet often founders overlook what their customers are telling them. They can see things that we can’t see and importantly they are the buyers of your product/service, so it will pay dividends to listen to their feedback. 

Furthermore, startups are often poor at collating the feedback from existing customers, a problem which extends to prospects, too. This missed opportunity of the cumulative learning and compounding effect of feedback in your marketing, product development and sales efforts can cost you dearly. Taking the time to truly listen to your customers also gives you the ability to pivot quickly and make huge in-roads into a market, or even expanding into new markets given to you by your existing customers. 

3)    Failing to delegate 

One of the most common mistakes that startups make is when the vision and foresight of the founders turns into “I need to see everything first”, which slows down processes and can have a negative impact on morale. Tim Ferriss came up with an excellent way of reviewing workloads and cutting away the wasted processes and time with his D.E.A.L. techniques.

Elimination and Automation are key aspects of his framework discussed in his book 4-Hour Work Week that will help startup founders most. In order to survive and grow as a startup, you have to have clear breathing space to think strategically. If you are not using the collective output and talent of your team then you will ultimately struggle to grow at the rate you want to, or at all. This is seen at scale with founders trying to make the move from founder-led sales to sales-team led sales.

4)    Lacking clear roles for Founders

In the early days, founders will often find themselves doing multiple job roles before they have the ability to hire staff to help them. However, there still needs to be clearly defined roles as much as possible to avoid the skills and talents of company founders not being matched to a specific job role or function. Everyone wants to know that their expertise, time and interest is spent on the areas where they can add most value to the company, so be sure to make the most of the time and talent of your founding team.

This issue will become an even more pressing concern when you hire additional people to your company, and working out who they will report to, for instance. If you don’t have clarity you could face confusion, crossed wires or even lies and deception regarding workloads. Furthermore, having clear roles helps investors and other board members understand the running of the business more and know where to direct any specific questions they want answers for. 

5)    Hiring (and keeping) the wrong people

Hiring the right talent is no easy task and there is no way of guaranteeing the success of a new employee or an existing member of the team. It can be incredibly difficult for company founders to let go of staff, as in a small team they will have invested a lot of time in energy in attracting, securing and onboarding a recent hire. Yet the cold fact is that you cannot grow your business without the right people.

In a recent Forbes article by Falon Fatemi, The True Cost Of A Bad Hire, Fatemi cites from the U.S. Department of Labor that a “bad hire costs at least 30% of the employee’s first year salary.” Zappos CEO, Tony Hsieh goes even further and said that bad hires had cost his company “well over $100 million”. Ouch.

Focus on getting the right people for the specific role needed, and looking after them by really understanding what is driving their behaviour, both positive and negative. You might be able to iron out the creases together, but if it isn’t working out, draw a line under it and move on. Recruiting another new team member might cost more in the short term, but you’ll see far better results over time.

6)    Scrimping on marketing

Startups need to become known in order to grow, yet too many scrimp on marketing, and what they do spend they tend to spend on traditional forms like promotional posts, basic email marketing or events. Often this doesn't deliver results and wastes what budget they have. Startup businesses should instead focus on inexpensive but expansive methods of marketing such as referrals from investor network, client referrals, LinkedIn lead generation. 

The crucial point is to identify a micro-niche and direct your marketing and prospecting efforts towards that profile and account type. Then once having gained traction you can expand that niche into a neighbouring niche, larger or smaller account types, or whichever area makes most business sense for you.

7)    Overlooking the importance of a CFO (or company accountant)

When it comes to which startups succeed or fail, it often comes down to which have created a sustainable financial structure that can easily be expanded, and those that still have an ingrained small business mindset. 

A non-executive CFO is a prerequisite for most startups once they have taken on investment or have expanded to at least £150,000 or more, with a range of options now available to companies to have an interim CFO or a retained CFO that is simply paid a monthly fee, share options or a day rate. 

This appointment will help you when wanting to attract investment, apply for tax credits, review invoice factoring, compare booked against invoice revenue, maintaining good cash balances and simply ensuring your company will still exist if it hits some bad turns in the road. As far as staff investments go, it’s a crucial one.

 

 

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Published on: 8th March 2019