Startups face a number of challenges, and the top of the list is funding. Imagine that you have a wonderful product idea, but lack the required resources to develop and market it, you feel like being crippled.
Securing and managing funds can break you from inside out as a number of founders we come across faced the same situation when no one was willing to fund them right from the beginning. In our engagements with startup founders, we have seen numerous brilliant minds losing hope owing to lack of funds or skills.
If you are also caught in the same, don’t worry. The post is not intended to discourage you from starting a new business that is unique and have a lot of potential. In fact, it is only to help you realize the troubles coming ahead and prepare to fight them.
So before you stress yourself in the long journey of startup and find yourself helpless, I would like to note down some of the mistakes that many founders make – and you must avoid.
1. Stalking for Funding without Objective
Honestly, a number of founders make a poor judgment when it comes to handling and managing the business. They start seeking out for investment without a clear picture of how much capital they require and where they’ll utilize it.
In our MVP Program for Startups, we always advise aspiring entrepreneurs to avoid hasty decisions and focus on planning things before moving to execution. One minute spent in planning saves hours of efforts and pain.
Our advice is to determine how much capital you need to cover the initial operational cost and professional services. The hack is to make sure that your capital is in excess apart from operational and other expenses.
If you are starting from zero, you may look for funds, but before taking a decision, you need to go through next point, where I will discuss the ideal way to raise money.
2. Looking for Investors, Not Customers
The majority of startups are not well-aware of how to utilize funds appropriately and when to ask for funds. They think their idea is great and fundraisers will welcome me with open arms and lay heaps of money in front of them.
Over-worrying about investors and not customers can backfire. ONe of the reasons a number of startups closed down in 2017 was their poor marketing and inability to find customers.
No matter, how brilliant your product or service idea is, if you cannot find a handsome number of loyal customers, the failure is imminent.
3. Undervaluing Your Variable Overheads
Fixed expenses are consistent and you know how much money you have to have on hand to pay off. The variable overheads start accumulating as the level of business activity grows, and so is the frustration level of startups.
For fresh startups who have no experience, my advice is to consider overheads that would otherwise turn your funds into miseries. If you do not consider your overall expenditures, how can you cover them? Set some funds aside in order to secure yourself from running out of money.
8 Deadly Mistakes Startups Should Avoid
4. Hiring People too early
Hiring (too many) people too early after getting funds would just add up the miseries. Not knowing the reason and purpose of hiring, you would add up the expenditures without utilizing the human resources.
I am not saying that you should not hire anyone, for example, you may need an accountant to count on cash inflow, cash outflows, revenues, expenditures and tracking of assets. But how will you justify, if you hire a human resource personnel, when there is no need of hiring.
Hiring is good but it all works well when you allocate and plan carefully. Make sure to plan wisely before hiring and consider how much expenses you have to bear and whether you would be able to afford them or not.
5. Speculating High Returns
Entrepreneurs go through sleepless nights when they are on the verge of planning their startup and start speculating high returns from the first day. I don’t advise not speculating positive financial returns; instead, it is a good approach. But in my opinion, if you are speculating too high, you are going to face sheer disappointment. Make sure to be realistic and try to estimate the lowest returns with the highest spending.
6. No Growth Plan
As an entrepreneur, everyone is aware of how customer acquisition is important, which may ultimately lead to make or break the startup. Many startups ignore the growth and customer acquisition process and focus mostly on product or funding.
However, your fundamental quest should be the study your market, address the pain points, and seek customers. If your product is the right fit for the market, and people are loving it, investors will themselves come over and fund your project.
Conclusion
It is never too late to improve. If you are working on a startup, you might have committed the same mistakes, which is absolutely OK. However, there’s always time to rectify your errors and revise your strategy. Be clear on your goals, stay committed and seek the advice of experts frequently.
If you are looking for product development or seeking a startup growth or funding advice, don’t forget to explore our MVP Program. It is a 12 weeks package that provides support to startups across their lifecycle.
Hi Lisa
Indeed a great article about startup mistakes. You really had shared the major mistakes done in the startups these days and It will be great If you could avoid doing these mistakes.
Most of the young people are now getting into startups but I have seen a lot of them not maintaining the quality of their team members. For a successful startup, It is always important to have a strong and dedicated team and should never avoid any regular mistakes done by any of the team members.
I am glad that you have covered this topic in a detailed manner and Thanks for sharing it with us.