By John Lie-Nielsen, an entrepreneur and investor specializing in financial services, and the CEO of One Park Financial.
So, you thought gathering up the courage and resources to finally launch your own startup was the worst part of the “make it on your own” journey? Wrong! That was only the start.
The truth is, you haven’t reached first-class yet, and trust me, it’s going to be quite a ride: unpredictable, tiring and sometimes nerve-wracking. In fact, 9 out of 10 startups won’t make it. But I promise it’s worth it.
Here are five common startup mistakes to watch out for before you venture out on the open market road.
1. You don’t have an efficient and constructive strategy.
Yes, you have the destination. But have you mapped out a realistic and cohesive strategy to see how you’re going to get there?
If you want your strategy to be efficient, focus on your main priorities: developing your startup and talking to potential and current customers to identify market needs. That’s it. Don’t lose track of these objectives by getting caught up on details that won’t make a difference in the end.
Once you have this, simplify and break down your plan. Draft out your goals into an attainable step-by-step strategy you can actually follow. First, write down your main goals and objectives. Then, set up tasks that require a specific set of actions. Your strategy needs to be realistic.
Think of it like driving with a clear and easy set of directions. It allows us to feel more secure because we understand how we’re going to get there, and thus, it keeps us moving forward.
And remember, realistic means that you are taking into account that it’s an unpredictable market. So have a consistent methodology, but always leave room to pivot.
2. You only follow your gut; you don’t listen to your customers.
Most entrepreneurs start companies with an idea for a product that they think people will want. That right there is where they fail. In fact, 42% of startups fail because they didn’t solve a market need.
So yes, get an idea, but an idea backed up with market research. Learn to pivot. Your gut feeling is not always right. When you make decisions about your startup, ask yourself if you are listening to the customers or yourself.
Start researching the market, and get to know your potential and current customers. Ask prospective customers what they want and, most importantly, what they don’t want. Your questions should be brief and to the point.
Here are some questions you might find useful: Is my service or product attractive to you? How much are you willing to spend on it? What can we do to improve the quality of our product?
And sorry to hurt your ego this way, but your own ideas are less valuable than ideas from prospective customers. Don’t take it personally! You can’t always get that pat on the back. It’s not about that anyway. Embrace and learn from the feedback.
3. You underestimate the amount of capital you really need.
Before you start, get your finances in order. Don’t kid yourself; you can’t be optimistic about this asset. Figure out exactly how much money you need. Consider the number of months you’ll be able to operate before you run out of money and the amount of credit available for emergencies.
Get enough to make it through the burn. Covering only the initial costs of your startup just won’t cut it; you’ll also need to factor in unknown challenges or delays in your calculations and create financial safety nets to avoid any hardships down the road.
When it comes to financing your startup, find the option that suits you best. Consider bank loans, private lenders, angels or the right financial partner to back you up.
And most importantly, keep track of your capital. Make a spreadsheet to break down your monthly expenses. On one side, write down all the overhead costs and on the other, your revenue. Include your variable and fixed costs. It’s simple math: Profit equals revenue minus expenses.
4. You’re a one-person team.
Don’t expect to run a successful business alone. Find and integrate at least one person into your project — if possible, from a different discipline. This will bring steady richness to your startup and your experience.
Find that trustworthy person you can lean on — someone who understands where you are and where you want to go, and most importantly, somebody who can learn to work with guidance, but also on their own.
The best part about startups is working on something you believe in with people you can learn from. They can pull you through the bad days and celebrate when you finally make it. That in itself is worthwhile.
If you choose to venture with another associate, remember, a co-founder relationship is like a marriage. You’ll be partners in one of the most stressful, rewarding, terrifying, confusing journeys you’ve ever been on. So choose wisely.
5. You don’t prepare for failure.
Between the thrills, enthusiasm and determination, your startup will be epic — but at most times, an epic mess. Starting a business is more complicated than you think. Hard times will come. Are you prepared for failure?
When a difficult situation comes, accept and deal with it. Learn from your mistakes, and pivot your business model as needed. Acquire constant feedback so you can tweak your product to better meet customers’ needs. Don’t be afraid to try out new ideas.
Your startup success might take longer than you thought, but don’t get frustrated if you don’t come in first in the market. Your goal is to create an attractive product or service that meets the customer’s needs better than the competition — only this way will you be able to generate cash flow in the future.
As the wise 19th-century writer Oscar Wilde once said, “What seems to us as bitter trials are often blessings in disguise.”