Steering Clear of the Most Common Startup Mishaps
Starting a business is an extremely difficult process, and the road to success is an extremely risky one. Business owners that are not careful in the way that they get their companies off the ground are almost definitely bound for failure in the short run or long run. Having a company that takes the right steps in moving forward and expanding can be difficult but extremely profitable. For those business owners that hope to make it big one day, here are the 9 biggest pitfalls of starting a small business.
Startup Pitfall #1: Moving Too Fast
When people hear the word “startup,” their minds often jump to think about people like Mark Zuckerberg, Jeff Bezos, and Larry Page. Sure, these three digital business giants (Facebook, Amazon, and Google respectively) may embody the goal of most people entering America’s competitive entrepreneurship game, but the notion that success can be achieved within a month or even a year’s time is frankly absurd and represents one of the biggest pitfalls of startup companies.
Even these three billionaires patiently spent time in development and launch before they began to rake in the big bucks. America has become obsessed with the idea of fast money to the extent that everyone and his mother is calling themselves an “entrepreneur,” but the truth of launching a business is that there is much more gruntwork and waiting for things to happen than these success stories might suggest. Consequently, one of the biggest mistakes to avoid when starting a business is falling into the “get rich quick trap.”
This will be bad for your company not only because you may become frustrated and disappointed with your lack of explosive income growth, but also because moving too fast and attempting to scale your business rapidly is one of the most common small business mistakes made by new owners. Conclusively, while it is good to reach for the stars, remember that it took the human race thousands of years before we ever even got to space.
Startup Pitfall #2: Bringing On Too Many Investors
Paying back loans is never fun, and outstanding debts can be haunting to those who are starting a new business on limited capital. For this reason, taking on angel investors can be an extremely attractive proposition for those who are hoping to raise money without owing anyone funds that they might not have in the future. Startup owners should be wary of this strategy, though – bringing on too many investors is one of the biggest mistakes made by small businesses.
By bringing on debt-free money you are sacrificing equity in your company. This can have two adverse effects. First of all, you will make less money per dollar of your company’s profit; if you sell 20% of your equity, you will only make 80 cents on the dollar instead of 100. Second, you will lose some of the power that you have over your company, as the other owners now also get a say in what happens. So long as they are handled in moderation, giving up some equity and some power can actually help to expand your company’s potential, as you are not only getting money but also the advice and interest of another person who may very well be more experienced in dealing with startups that you are.
Simultaneously, you may come to regret giving up 10% of your company for $50,000 if the business ends up making this much money every week. This is obviously a good problem to have, but it definitely must be considered as a possible future outcome of your business’s expansion. Companies that are being run by people with unique skills or who do not want to cede any control to outsiders may want to consider other forms of financing that do not require such a potentially large sacrifice.
Startup Pitfall #3: Taking It Easy
This common mistake made by startup owners is the opposite of #1, but is actually equally as dangerous. Businesses that are just getting off of the ground are not at all like other companies, and their owners must remember that those hoping to begin a new enterprise must work significantly harder than people running companies that have already gotten their footing. It is impossible for a business to enter markets where up-and-running companies are already competing without putting in the work to get up to speed with everyone else.
Unless a business is planning on operating on a very small scale, its owners and workers are going to have to play a game of catch-up to become competitive and also be innovative in order to gain an edge. The unfortunate truth of the startup game is that it isn’t as glamorous as many believe it to be, which leads business owners to make one of the biggest mistakes made by startups: trying to function like an already established business and waiting for the money to come rolling in.
Startups must focus even more on the networking and advertising that is already so important to companies that have a longer history, as they want to make a name for themselves that does not already exist. Sure, the upside potential of working with startup companies is enormous, but only those that are innovative, disciplined, and intelligent will be able to expand their company to a size that can bring in serious profits.
Startup Pitfall #4: Trying to Handle Everything on Your Own
Anyone who has founded a business of any sort will tell you that it is impossible to do so without any outside help; after all, startup founders that are following rule #3 will most likely have so much to do that they will naturally begin finding people who can assist them in getting their company off of the ground. One of the most common startup mistakes to avoid is making an attempt to singlehandedly do everything. While this doesn’t necessarily mean that you have to bring on other owners for your business, you should hire people who specialize in various necessary tasks to your company: perhaps an administrative assistant, a marketing specialist, a sales representative.
Not only will this lighten your workload and allow you to focus on the things that you must attend to as the manager of the company, but it will allow the tasks that you are delegating out to be handled by someone who may have greater expertise than you on that particular subject. Working as a team (of which you are the leader) will help you avoid one of the most common small business mistakes, that being an overly controlling and DIY attitude of the owner.
The word “company” implies that you will be surrounded by company when conducting business, and those who properly delegate work (but keep the managerial things to themselves) will often see success in their business that could not have otherwise been achieved.
Startup Pitfall #5: Taking on Loans
Mark Cuban, one of the most successful entrepreneurs in the world, once said, “If you start a business on a loan, you are a moron.” While Cuban’s statement may come off as slightly abrasive, the point that he is making holds true; one of the most detrimental and biggest mistakes made by startups is acquiring debt that runs the risk of destroying the company’s balance sheet. Not only are there other forms of funding that do not put the company in so much danger, but many new businesses, according to Cuban, do not even need the funding that a loan would provide at such a high cost.
Do not simply go out and get a loan because you think that that’s what new businesses do; outstanding institutional debt can be the thing that puts an end to your company (or at least sets you back significantly). Remember that all money has a cost, and that those who are lending to you will end up making more back than they initially gave. Before getting any kind of funding whatsoever you should think carefully about what your business really needs, and whether or not it is likely that you will be able to pay back the money long-term.
Bank loans can be helpful in giving a company the money it needs to expand, but taking on unnecessary loans is one of the biggest mistakes made by small businesses, especially in today’s world where startups are idealized to an extent that causes owners to believe they will undoubtedly be successful.
Startup Pitfall #6: Attempting to Begin Multiple Ventures
We have all seen a person whose LinkedIn profile uses the word “founder” in five different places for five different companies. Not only does this delegitimize the companies that this individual is attempting to jumpstart (if the ideas behind the first company were good, why did they start more?), but it also draws the question of if any of the companies are going to be able to last.
There are only 24 hours in a day, and if at least 6 of them are spent sleeping, a hard-working businessperson can only focus on a few of them with hopes to become successful. One of the most common startup mistakes is to spread energy over multiple companies/projects at once; because startups require so much attention, focus, and time in the beginning, people who are trying to diversify themselves with the hopes that one company will explode is most likely lowering their chances of becoming very wealthy.
Even the most wealthy, intelligent, and successful people on the planet are primarily focused on one venture at a time, so those who are hoping to establish themselves as significant in the startup world should follow suit instead of attempting to balance multiple things at the same time. Besides, once you have figured out what works by running your first startup venture, it will be much easier the second time around to make things work in the way that you hope they will.
Startup Pitfall #7: Going in without mentors or advice
It is a simple fact that one cannot succeed completely independent of advice or mentorship; one of the most common mistakes made by small businesses is not taking advantage of resources that could direct the company towards success.
No matter how innovative or original a company may be, others have traveled down the same road before and know what does and doesn’t work. Even the people who are at the top of their respective fields have advisors that can help them make important decisions, and most likely had mentors who taught them how to make the right calls on their own when they were getting off of the ground.
Consider the fact that other companies use consultants and advisors for much of what they do, so forgoing these opportunities for your own company can be seriously detrimental to its potential for success. Although hiring professional consultants or advisors can be expensive, it is probable that you or someone in your organization knows people that can help you with the things that might be tricky at first.
Even if you are the sole owner of your organization, it is important to remember that those who decide to go only off of their own intellect and knowledge are making one of the biggest mistakes made by small businesses, just as it is unwise not to delegate work to the other people that are working at your company. Take advantage of the resources that are available to you, and even if you want to maintain control of your business, never allow your pride to cause you to think that you always know the best course of action.
Startup Pitfall #8: Not using personal networks as an advantage
Even businesses that are hoping to eventually go international must start somewhere, and disregarding the people that you already know in an attempt to expand your network outwards is just downright silly. Not surprisingly, it is also one of the biggest mistakes made by startups, as it can make getting off the ground quite difficult.
Utilizing social media and word of mouth advertising via friends and family is both free and incredible helpful in spreading the news that your company is doing business. Especially if your business is digital, having people that use your product and leave reviews regarding it’s performance can do wonders for getting more downloads and uses, so getting those that already know you to work as brand representatives for you will allow their own personal networks to hear about the product as well.
Startup Pitfall #9: Not listening to customers
So long as you have a job that involves exchanging a good or service with someone else for money, not listening to the customers (or worse, being rude to them) is potentially the single biggest mistake for small businesses. The customers that you have are not only your current source of revenue, but they are also free to write reviews of you online if they are particularly happy or unhappy with your business.
The unfortunate truth is that most of the people who are compelled to write reviews about an experience they had with a business are doing so because they are unhappy with the result. With this in mind, try to keep the amount of annoyed customers that you have to a minimum.
This can be accomplished not only through having a good product that does what it is promised to do, but also listening to the customers empathetically and attempting to change what went wrong for them so that they come back again and do not slander your company. On the other hand, keeping your customers happy can get them to come back themselves and also even recommend you to a friend who is faced with the problem that your company is trying to solve.
The last thing you want is to become a company that has a bad reputation regarding customer service and troubleshooting, so ensure that this potentially disastrous risk to small businesses is kept as far away from your business as possible.
Getting Started the Right Way
Although starting a small business can be fun and exciting, figuring out how to make ends meet at the very beginning can be quite the challenge. Taking on investors and loans may not be the right way to handle funding issues, especially if your company is not hoping to expand on a large scale. Fortunately, invoice factoring is a debt-free financing option for small businesses that need money quickly in order to continue doing business or fuel expansion. Call Factor Finders today for more information on how your small business can begin getting the money it needs.