7 Common Mistakes All Startups Should Avoid

7 Common Mistakes All Startups Should Avoid

According to a study, results of which were published by Bala Iyer in Harvard Business Review in June 2016, modern-day businesses need to see information technology as an essential component for effective communication and interaction with all stakeholders of a new venture. This new way of thinking that emphasises on the importance of IT, including but not limited to all the latest digital marketing tactics, has not yet synced into the minds of many of the young entrepreneurs of today; which is why, despite the presence of numerous resources at hand, we see many startups failing to survive in their first fiscal year, let alone grow.

Bram Krommenhoek, an entrepreneur at heart and featured writer on The Mission and The Startup, states, “Most entrepreneurs think they’re building the next big thing. In reality, over 90% of them fail.”

Why do these startups fail? What mistakes are they making? Let’s take a look at 7 common mistakes all startups should avoid.


1. Making unworthy investments

Many young entrepreneurs, out of their excitement to start running operations as soon as they have a business idea, and lack of exposure on how the industry actually operates, go on a spending spree to renovate and open a fancy office (or retail space), develop a full-stack complicated SaaS website, hire more staff than needed at the initial phase, and perhaps get luxury transport for themselves to look like a boss. Not to say that these are not required for a business to run, but making this kind of investments too early on makes them unworthy. What’s the point of starting the monthly rental expense of a lavish office when you don’t even have any customers yet? What’s the point of launching a website without any sales funnels to drive traffic to it? It’s the sequencing of the budget you choose to spend that makes the whole difference.


2. Locating the business in the wrong place

New business owners often underestimate the importance of choosing the right location for their business. While they’re too caught up on perfecting the interiors of the office, they overlook checking if their targeted customers would be able to get to them easily. Opening up an office in an isolated area could even make it difficult for the staff to make it on time everyday. If a business is located in the wrong place, all the money spent on the security deposits, renovation, rentals and utilities goes to waste. No matter how strongly it builds its online presence, a business still needs to be geographically and physically accessible to at least it local customers.


3. Not knowing who the ideal customer is

Besides knowing what your business is selling, it’s even more crucial to know whom exactly are you selling to. Failure to identify the demographics and characteristics of your potential customer base can lead to huge cost overruns and delays in ROI, as money is wasted in advertising to irrelevant traffic and uninterested people. Every business, before running any marketing campaign, should define its targeted niche and observe the trends in the circle of its ideal customers.


4. Hiring too soon

Based on a research study conducted by a management consultancy, the Brandon Hall Group, and commissioned by Glassdoor, we know that about 95% of organizations recruit the wrong people every year, and they know it. In most cases, this refers to hiring people who are incompetent for their designated roles; but in some cases, it could also mean hiring well-qualified people at the wrong time, perhaps too early on when a business is just starting up. According to Joseph C. Kunz, CEO of Dickson Keanaghan, among the biggest mistakes startups make is hiring too many employees too soon. It is usually more cost-effective to run a new company with sub-contractors and part-timers, as opposed to full-time staff, until the company is able to build a sustainable stream of income.


5. Being afraid of marketing

According to Nitesh Agrawal, a common factor in many startups is that they are started by “a person with crazy zeal to solve a problem he/she is obsessed with”.

Unfortunately, many of these persons are afraid to expose themselves (or even their idea) in the beginning, which results in lack of strategic marketing efforts to get the business pass through the survival phase. They’re not sure what to say or how to explain when asked what they do for a living. Sure, they can hire expert marketers to do the job for them instead. The problem is, since they don’t understand the value an effective marketing plan can bring for their business, they wouldn’t be willing to allocate a reasonable amount of budget for it. Even if they employ a very competent digital marketing specialist for the role, little can the employee do without approval on his/her proposed amount of marketing expense, to be able to drive forecasted sales and calculated ROI. In the process, they end up losing out on numerous business opportunities and potentially interested clients.


6. Failing to build a solid company culture

Many startups fail to work out simply because the owner is unable to build and maintain a solid company culture. Due to lack of experience and expertise to hire based on cultural fit, they end up taking in people who do not find the company’s work environment conducive, which badly effects their productivity. In most instances, new business owners do not have a properly structured hierarchy in mind, and keep on assigning job roles and authority to new hires randomly. This results in friction among the staff, especially when a much more experienced and competent employee is placed at the same level as a fresh graduate. (Yes, I’ve seen that happen!)


Photo by Yanalya on Freepik

7. Avoiding contracts and legal agreements

New business owners sometimes act too naïve in taking in business partners and building collaborations. At times, even the deal among the co-founders is not so clear. Some get too excited when they start landing few clients, and overlook the necessity to get a standard form contract signed for every deal. Some startups encounter HR related problems when they fail to maintain adequate employee documentation.


For a startup to be successful, entrepreneurs need to learn fast, move fast and break any obstacles that come in their way. It is better to learn from the mistakes of others than having to go through the negative consequences of those mistakes yourself before learning a lesson.


This article was originally published on Medium.

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