Key Takeaways
- 90% of startup failures are attributed to bad management.
- Many entrepreneurs neglect to validate their business ideas, leading to instability.
- Building a strong, diverse team and communicating effectively is crucial for a startup’s success.
You’ve probably heard about the legendary startup stories of success. You might even know a few people who left their corporate jobs to start their own companies and are now living the dream.
But there’s another side to the story you seldom hear about–many entrepreneurs fail.
How can entrepreneurs avoid startup pitfalls and set their companies up for profit right from the start?
After reviewing thousands of companies in hot water, George Cloutier, our founder, concluded that 90% of failures are due to bad management. Business owners who are fearful or in denial will never run successful companies.
Setting up a business is no easy feat, and entrepreneurs can face countless pitfalls. However, by being aware of some of the most common mistakes startups make, you can set your company on the path to profitability from the beginning.
Most would-be owners, from what we’ve seen, make one or more of the following mistakes:
- Not validating the business
- Not building the right team
- Not adapting
- Offsetting tough decisions
- Not starting with enough working capital
Validate Your Idea
With the prospect of a terrific product or service, some entrepreneurs will jump foot-first into creating a new venture. The problem is they fail to validate if the business has any ‘legs’ to stand on or a solid foundation.
Much like a house, if the foundation of an idea lacks structure, the house could come tumbling down at the slightest nudge. To ensure your business has a strong foundation, write a business plan. When writing your plan, research your ideal target market and determine if your product or service can win over people.
We stress never to go about your journey into starting a business with keeping ideas in your head. DaVinci didn’t study human anatomy by keeping it all in his head, so why should you?
Skipping this first step can prove detrimental to your journey as a business owner.
Building Out A Team
If ensuring your idea has ‘legs’ is the foundation, building a strong team is your scaffolding. Your team is responsible for helping you turn your idea into reality while helping you scale and grow your business.
There are a few things you should keep in mind when building your team:
- Make sure you have a good mix of skills and experience. You don’t want to have a team full of people who are all experts in the same field. Not only is that boring, but it could also hurt your business in the long run. Instead, try to mix things up and have a team with various skill sets. This way, you’ll be able to get different perspectives on problems and come up with more creative solutions
- Don’t be afraid to delegate. As the founder or CEO of a startup, it’s easy to feel like you need to be involved in every decision. However, it’s not sustainable. At some point, you’ll need to delegate tasks to your team so that you can focus on the big picture
- Communicate clearly and often. Since your team will be responsible for helping you achieve your vision, they must know what this vision is. Make sure you communicate your goals and expectations clearly from the start, and continue to update your team as things change
Bad Management
From the inception of a business, bad management can linger around unwanted for a very long time. Failure to establish clear roles and responsibilities for each team member is often seen as a catalyst.
This can lead to confusion and frustration and ultimately cause the team to function less effectively.
Oftentimes, we’ve seen owners have a vision for what they want to accomplish and leave it up to the individual to get there.
Additionally, without clear roles, it can be difficult to hold team members accountable for their actions. This can create an environment where things are not getting done, or where mistakes are being made without anyone taking responsibility.
Of course, establishing clear roles is not always easy, especially in the early stages of a startup. If you are having trouble with this, consider seeking guidance from a management consultant or another expert.
Delegate, Don’t Abdicate
We believe there is too much emphasis on business owners delegating tasks to employees. When running a small business, you should delegate tasks to employees, but you must never abdicate control.
Ultimately, you’re responsible for the company, and you have to stay on top of things. Even after you’ve delegated something crucial to an employee, you have to circle back regularly and make sure you’re getting the right performance in that area.
Don’t blame others for their shortcomings if you didn’t follow them closely enough.
In the New York Times best-seller ‘Profits Arent’s Everything, They’re the Only Thing,’ we dive into this in much greater detail. If you want a free copy, click here to claim yours.
Adapt, & Do it Quickly
You must learn to adapt to rapidly changing market conditions, no matter your industry. This is key to long-term success. For startups, this is especially true, as the landscape is constantly shifting and evolving.
One of the most common mistakes made by startup founders is failing to anticipate how the market will change and evolve.
This can lead to many problems down the line, including an inability to keep up with the competition, a loss of customers, and, ultimately, the failure of the business.
To avoid this mistake, it’s important to clearly understand the current market landscape and what changes within it are happening.
This will allow you to adjust your strategy and plans accordingly, ensuring that your startup can thrive in whatever market conditions.
Secure Key Partnerships
The right partners can help you secure funding, get your product to market faster, and navigate the regulatory landscape.
They can also provide invaluable mentorship and advice as you grow your business. But finding the right partners is only half the battle. You also need to nurture these relationships and keep them strong over time.
That means staying in touch, being responsive to their needs, and being flexible as your business evolves. If you can establish and maintain strong partnerships from the start, you’ll be well on your way to launching a successful startup.
Making Tough Decisions
Tough decisions usually involve confrontations, and most people actively avoid them. You may have heard this as “eating the frog,” but we ascribe to “eating your vegetables.”
Imagine this scenario: Two children sit at a dinner table. With the desire to get back to playing games, they finish eating as fast as possible to resume playing.
One child eats the vegetables first, then devours the chicken nuggets. The other child squirms in their chair, gives the chicken nuggets to the dog, and builds a teepee structure with the green beans.
Is it fair to say one child may have an easier time facing tough decisions than the other?
In business, don’t put off tough decisions. It only delays the inevitable. Because time is money, procrastinating will waste your money. So, eat your vegetables first.
Get Started on Your Business
If you’re considering starting a business, it’s important to be aware of the pitfalls. However, with the right planning and execution, many of these mistakes can be avoided. By following the tips in this guide, you’ll give your startup the best chance for success.
