The success of a startup depends significantly on the decisions of the owner. Some decisions lead to certain business failure.
All of us think of owning a business at some point in our life. Freedom and being your own boss are some of the top motivations. However, studies show that half of the startups are bound to fail in less than five years. Business owners can jump the gun by learning from the mistakes of others.
Here are five mistakes to avoid if you want your startup to succeed.
1. Choosing the wrong partner
A business partner is analogous to a marriage partner. That is, if one partner is not committed to the partnership and consequently does not contribute to the attainment of the common goal, then the organization fails.
There is no way of knowing with certainty if a person will be the right partner. However, there are indications such as common aspirations, values, work ethics, complementing abilities, and personality. It is better to go alone if you cannot find a proper cofounder than carry the baggage of an unhelpful teammate.
2. Entering a crowded market without differentiation
Opening an eatery can be a good business idea if you are a good chef. However, that does not mean it is a viable idea, especially if restaurants already flood the area you are interested in. The essential thing to think about is how you will make your startup business stand out. The question you should consider as a business owner is if you have any competitive advantage over your established competitors. If the answer is negative, then you should create one or think of another idea.
3. Seeking funding from VCs early in the business
Venture capitals play an important role in the business sector. However, they are not the best source of small business help. Freedom is probably one of the reasons why you chose to start your small business. Before you seek VC funding, you are entitled to all the success, and you bear responsibility for all your failures.
You lose your freedom and control over your SMB the moment you accept funding from a Venture Capital or Angels. You suddenly have someone dictating why you cannot make a given decision in your business. If the investment is substantial, you become an employee of the VC: you need approvals for some choices, and you will have to explain all your decisions.
However, you can avoid business failure by taking venture capital funding when you need it and just the amount you need to achieve a specific goal.
4. Not counting cost
A startup is an all-consuming venture that comes with a significant amount of hidden costs. It is not surprising that undercapitalization is considered one of the main causes of business failure. While the general expenses such as purchases and fixed cost are apparent, a startup business owner should not overlook other expenses.
You can avoid this by creating a detailed business budget that includes the expenses that you will have to cover before the business becomes profitable. The best way is to provide the startup a lot of time to mature than it will need. Family expenses should also find a place in this plan. You are better working hard on an overestimated budget than lull yourself to bankruptcy with an appealing outlook.
5. Overestimating the demand
It is the second reason after underestimated costs for the failure of most startups. Startup business owners usually overestimate the likely demand for their product in the market. A question to consider before spending your hard-earned savings on investment is whether the product fits into the latest trend.
The benefits of the service to the customer should be compelling and easy to understand. Honest family members and friends will help you test the demand and relevance of your service to the market today and in the future.
A personal business provides an excellent way to freedom and satisfaction. However, these are the result of hard work, learning, and many failures. You will no doubt make a mistake, avoiding the above mistakes increase the chances of business success. Even better is to keep a tab on your mistakes and learn from them.