10 Common Mistakes in New Startups
A common question among the startup scene is often related to reasons startups fail, or ways to mitigate startup failure. Consequently, the Vizologi team has created a list of 10 reasons why startups fail.
10: Loss of Capital
One of the most common mistakes startups make is exhausting capital too fast. Loss of funds can occur for many reasons, poor planning, lack of market research, poor financial decisions, scrap and rework, and the inevitable unforeseen events. Unfortunately, money is the main driver of industry and can be the fiercest limitation of fresh startups. To prevent a startup from running out of capital, proper planning is necessary during the drafting of the business plan and during the market research. Money does not have to always be the main driver of startups, often timing tends to be one of the most important aspects of having a successful startup; maintaining a budget to keep a startup afloat till optimal product launch time is essential to having a successful startup.
9: No Market Need
Many new startups fail to recognize their product or service already exists in some shape or form. Consumers in these situations are usually satisfied with the current solutions, or there are few lone wolves who desire a different implementation or iteration of the current solution. Situations such as these are risky; attempting to fill the niche consumer market in hopes of gaining the traction from the larger consumer market does not always translate similarly or provide the desired results. Another viewpoint to the market not having the need for the product or service is that the product or service is not currently desired; consumer habits and desires change as time progresses, so delaying product and service launches can often prove to be beneficial to keeping a startup afloat in its youth stage. A prime example of “no market need”, but proper time to market is YouTube. Prior to YouTube’s creation, video streaming was chaotic at best, requiring users to install the correct browser plugins, and websites ensuring videos had been uploaded properly. Many streaming websites suffered during these difficult times, but when Flash Player was released, YouTube utilized Flash Player to allow ease of streaming. Subsequently when YouTube hit the market it became one of the most popular video streaming platforms by reaching the market at the perfect time.
8: Thinking a Product Is a Business
Many startups fail to have a business, and only put forth a product to consumers. Products are one-time solutions. The key to maintaining market position, and a consumer base, is by ensuring not only product is offered, but also business; a set of solutions to continually assist the consumer, and ensure consumers feel a need to return to the business for more solutions. An ideal example of a business rather than a product is music streaming services. Apple Music for example provides not only a single album, but multiple albums. Compared to traditional forms of media such as CD’s, Apple Music seeks to keep brand loyalty by offering music from all genres and by all artists in one common location, on the Apple Music application. By doing so, Apple Music continues to gain and retain customers by having their own unique platform, as well as by “quietly” suggesting brand loyalty. Apple Music, like other streaming services, cannot transfer libraries of songs to other streaming services, so once a customer becomes a user of one streaming service they are essentially tied to a streaming service if they begin to acquire a large library of music, since attempting to transfer a library to a new streaming service is a difficult and time-consuming task.
7: Poor Team Choice
Often, startups are created by a close group of friends. Having a startup company composed of only friends can be as destructive as traditional poor hiring decisions. Poor employees are poor employees and need to be taught how to improve, moved to a different position, or ultimately leave the company. Having a poor team can cause the quality and standard of work to fall, then leading to more rework and higher cost to the customer-value-add time, which in turn yields a higher operating cost. Poor team members can require other members to have to pick up the slack from poor team members. Having a strong team allows more work to be done in shorter periods of time and at a more efficient operating cost. The main benefit of having a strong team is that they are adaptable and flexible to problems and changes that can occur at any moment. A team is flexible and adaptable because all members of the startup will have completely different backgrounds and viewpoints. Having a diverse team can be beneficial for creating cohesive group decisions, as well as for being able to tackle any situation that arises even though not all members may hold the answers or relevant knowledge base to deal with the situation at hand.
6: Not Knowing How to Properly Delegate
Another common issue among startups gaining traction, and new employees, is having leaders that have not learned how to properly delegate tasks to other associates. Many startups are formed with few founders; as these founders gain more employees, the founders tend to dismiss the importance of properly delegating tasks to other associates. A prevalent cause of the dismissal is that the founders refuse to believe other employees can perform a similar quality of work as them or at the same rate, which causes founders to take on even more tasks. Ultimately this can drive founders into burnout, as well as unnecessarily increase customer-value-add and work-in-progress time. From a purely fiscal standpoint, the underused associates are a wasted asset by being allowed to complete even less tasks than originally budgeted for. The job of upper management and founders is to keep the business afloat with calculated decision making, and ensure every member of the crew is properly utilizing time, assets, and capital; none of this can be accomplished without proper delegation of tasks.
5: Thinking Money Solves Everything
Money can iron out an assortment of problems, but unfortunately not all problems. Failures in planning, business model design, and in production decisions can have catastrophic consequences if they allowed to progress far through a startup’s life. Neglecting to address problems before they arise is a typical issue for startup failure; a common ideology is “we will have more capital later, so we can fix the issues we know about when they actually arise because they do not affect us [as a company] yet”. A more appropriate approach would be to address problems as soon as they arise. Unique tools such as Vizo, facilitate the process of finding the necessary answers to problems before they arise, and assist in the successful progression of a startup business.
4: Opting to Not Use New Technology
As the world of technology continues to advance, new tools continue to be invented to replace older tools, complete jobs more efficiently, or reduce scrap/rework/damage. It can be foolish to stick with outdated methods when newer cutting-edge technology can be utilized; new technology is often more affordable, and easier for personnel to learn to use. As problems become more difficult, and the networks of systems more intertwined, it becomes even more necessary to adopt new methods of thinking and new technologies. Unfortunately, some old methods will no longer function properly with new problems that continue to arise in the everchanging world of business and consumer habits and trends. Finding patterns, answers, and exploring the neural-like connections of the various industries is straightforward with the Vizo application’s Cognition as a Service feature.
3: Not Seeking Expertise
Not seeking expertise is directly related to poor team choice. Hire staff that is well versed, or willing to be well versed, with the product or business’s scope. Experienced staff will have seen similar failures and know the appropriate solutions, and can advise on updating the course of action as issues arise, or as new and competing players enter the market or industry. It is not always necessary to have permanent staff, consulting can be beneficial if used as needed. An even more frugal solution, tools such as Vizologi can be used to provide consistent expertise on a monthly or yearly subscription. The unique SWOT analysis provided by Vizologi is an easy, and affordable way to seek expertise without breaking the bank by hiring traditional consultants.
2: Neglecting the Planning Phase
Another common issue with young startups is the neglection of planning. Members of the startup tend to get too tied into the creative process, and focus on moving the business forward without taking time to plan actions, or to research. Every industry uses planning (movies have scripts, shoot sheets, equipment sheets, photography checklists, scene setups; STEM based companies rigorously plan all actions and research; news outlets research from many sources, have several drafts of every story, and then finally plan on how to present said story) so why should startups neglect the planning phase? Time must be spent planning out how to move the business forward when issues arise, research must be done to estimate the best time to enter the market, and also to determine what is occurring in the world of related technologies and services. Vizologi can assist with the planning phase by providing premium data and data analytics to assist in decision making through the Vizo application. Additionally, included is access to advanced search engines with filters, assistance in portfolio management, and SWOT analysis.
1: Mis-Interpreting the Market
New startups often do not realize consumers will not buy your product because it is “great”; proper market research and focus groups need to be conducted to determine if the product or service is something consumers will desire. Mis-interpreting time of consumer desire is another way many new startups fall when attempting to interpret the market (e.g. 9: No Market Need – YouTube’s time of launch).
Time should not be spent reinventing the wheel, there are likely several similar iterations on the market already that already satisfy the varying types of consumers. Pursuing one or two feature changes on a product or service already present on the market through other major market contenders can be a dangerous game, as consumers are often unlikely to adopt a product or service from a new and relatively untried company. However, do pursue technologies that can rapidly change the course of the market, such as sustainable-low cost versions, versions that fill a hole in the market yet to be filled by other players, or that utilize the same technology in essence but where a need already exists and has yet to be fulfilled and can easily be implemented into the market without requiring much disruption to the marketplace.
Another way of interpreting the market in a frugal manner is to see what “big companies” are currently pursuing and not pursuing. These large corporations spend bundles of money on market research to verify what is popular and desired amongst consumers. Frugal minded startups should ensure research is done on “big companies” as they have the capital to fall on new projects. Startups tend to not have the capital for multiple product failures, failed launches, or failures during the design, implementation or manufacturing process. A main factor of startup success comes from proper interpretation of the market in its current/future state, as this often leads to startups entering the market at the optimal or near optimal time. With access to premium data analytics and SWOT analysis, getting all the answers, validating a business model, and creating unique ideas has never been easier with Vizologi.
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