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No Blunders! Avoid These 5 Startup Mistakes

Why do startups fail?

Is there a recipe for success for your new and exciting business venture?

Unfortunately the answer is no. There is no way to guarantee success in your new business.

While there may be recipes (or templates) you can use to help you on the path to success, it’s also useful to know what things you should avoid as a startup.

A groundbreaking idea alone, the one that will transform the market, won’t have you climbing the ladder of success especially when you’re running your business single-handedly.

And failure is hard, demoralizing, painful, and embarrassing.

But let’s look at it another way. Failure is also an opportunity to learn from the big mistakes that are usually made by so many new entrepreneurs.

Today we’ll discuss some of the most common pitfalls for new entrepreneurs so you can avoid them.

Mistake #1 – Lack of Emergency Funds

You have dreams. You have goals. And you want to get started really quickly!

But be careful. Don’t spend like there’s no tomorrow.

Many new businesses fail to manage their funds effectively while investing in and running the different parts of their business. And as such, these budget mishaps often lead to losses which demands the availability of backup funds.

In research done by U.S. Census Bureau in January 2015, nearly 5.2% of companies closed because of inadequate cash flow.

Try to understand your business financing options and keep a track of your monthly burn rate. This will help you know how long your business can survive with your current funds. And don’t forget to keep some reserve for unexpected expenses.

Goal Investor suggests setting up a personal emergency fund to pay your daily living expenses as well as one for your business.

But how much should you put aside? That’s a tough question to answer. As with so many questions in life, the answer is “it depends.”

It depends on your needs and your business expenses. Many financial advisers recommend at least 3 months worth and some suggest as much as a year.

Mistake #2 – Lack of Planned Strategies

The famous American educator, Michael Porter said it so right –

“The essence of strategy lies in what not to do.”Click To Tweet

While it’s important to remain flexible, frequently changing your strategies causes confusion and will actually hamper the growth of your business.

Do a little more research before you jump onto something new and give your plan time to see if it reaps you the desired benefits or not.

As a solopreneur, you have the advantage of doing strategic planning in isolation which has often proved successful for many entrepreneurs.

Have your strategies listed in great detail while keeping in mind where you are right now and where you want to go.

Then set target dates for accomplishing each of your objectives and brainstorm solutions for potential problems.

Ensure that there is a cohesiveness between the devised plan and the day-to-day business operations. Moreover, your plan must bring out the complexities that need to be confronted.

Mistake #3 – Lack of Effort

Just because something seems like a good idea doesn’t mean that you should work on it.

Pursue what you are actually passionate about. Starting a company takes full determination and not just the mere input of few hours.

It is advisable NOT to start a new business alongside a job, as many of the new entrepreneurs make this mistake.

Success demands commitment, and you can put true commitment into something only if you’re truly passionate about it, because this is what keeps you going!

“The game has its ups and downs, but you can never lose focus of your individual goals. And you can’t let yourself be beat because of lack of effort,” said Michael Jordan, the famous American former professional basketball player.

With each successive step, you’d need to put an added level of devotion. No casual attitudes please!

Mistake #4 – Failure to Understand Your Audience

Do you know if anybody will care for your potential product before you spend millions of hours developing it?

Market research is crucial to understand who your prospects are. Failing to validate the product or service you’re offering to your customers often results in startup failure.

Picture it! If nobody wants what you’ve developed, then you’ll end up wasting your time, money, and efforts. Ensure that your product fits a proven need before you start working on it.

Based on an analysis of 101 startup post-mortems, it was found that “no market need” was the primary reason for why startups fail to succeed with 42%.

Analyze these four factors crucially:

  1. Market size: Know an approximate count of customers in your target audience.
  2. Market wealth: Does your target audience have enough money to purchase your product.
  3. Competition: Is your target market already filled with numerous competitors?
  4. Value proposition: Will your product be able to stand out of the crowd?

With this, you can gain insights about the ongoing demand, standard costs and competition.

Moreover, this might sound counterintuitive, but you need to understand that not everyone is your target audience.

A simple example just becauss you’re developing a mobile app, everyone with a smartphone isn’t your target audience.

Mistake #5 – Failure to Cope With Legal Challenges

Legal complexities are another big reason behind shutting a startup down.

Not complying with the standard legal terms can put you and your business in trouble. Some common blunders made by inexperienced startups include failure to consider the IP protection steps in order to save their unique product or service from infringement.

Also, not taking into consideration the tax issues or maintenance of employment documentation are some of the common legal mistakes made by new entrepreneurs.

Learn From These Mistakes!

As you gear up for your new business venture, you need a good road map to track your way. Each and every move you make determines whether you meet realistic mile markers or not.

By doing your homework and learning how to avoid the above mistakes, you will surely be well ahead of the game. Here you go!

Have you made any mistakes in your business? What lessons have you learned from failures? Or maybe there’s a mistake you’re afraid of making that’s stopping you from moving forward. Share your thoughts, stories and concerns with us in the comments below!

About Kanika Sharma

Kanika Sharma works as a writer at ProofHub. She writes about cutting-edge technology and life. When not writing, she can be found in the abode of Himalayas, rising early and basking in the morning sun. Kanika enjoys sketching, cooking, dancing and spending time with her family and folks. Follow Kanika on Twitter.

10 comments

  1. Great article, any way of following you? Might be obvious but i am not seeing an option to do so. Will have to get my mindset straight as well as my priorities, this article should help me to do so.

  2. I am just beginning a copy writing business. I was hoping to have it up and running now, but I made one of the mistakes that you mentioned above. Learning as you go is fine, but I was flitting between strategies. I am on the right track now with what I need narrowed down. This was an extremely helpful post for anyone trying to find their way in their first business. I will be keeping a close eye on what I do from here on in. Thanks.

  3. I wholeheartedly agree with all of these, especially the emergency funds. I also think a lot of people give up too soon because of pressure from family to “make real money again”. It can be a huge challenge to explain to our spouses and loved ones exactly what we are doing, and why it’s worth it, aside from the income potential. We are entrepreneurs for so many other reasons.

    Also, thanks for the links to some of my previous posts on Firepole!

  4. Great post Kanika,
    I couldn’t have agreed more on your points here. Indeed, these are most of the common mistakes startups makes that usually ruin their business.

    Its very good to know exactly what you’re going in for before starting because you mentioned, changing strategies often while on the process can really be confusing. Even though you can still take action and start without having all the facts, its still good to know the basics before starting. This will enable you to know where you’re heading to and how to get there.

    Also, knowing your audience from the on-set is a must. If you do not know them, who then are targeting? You can be doing a guess work on this one, you need to know whom you’re going for and this by carrying out a very serious research on your niche. This will make the process much easier for you.

  5. Hi Kanika,

    Great post. Running a start up is such a hectic thing to do, it really takes a team to make sure it all doesn’t collapse into a heap. I think one of the major problems is that people who do start ups try to do everything themselves, which never turns out well.

    For example, I love writing and creating content. I could do it all day. If I wanted to build a business, I would need to get really good at marketing or find someone who does it better than I can.

    The biggest skill that shows the success of a start up is being able to step away and analyze whether the business would survive without your involvement. If it can’t, you’ve basically just “built” another job for yourself.

    Thanks again for this article and hope to see more from you in the not-too-distant future! 🙂

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