Starting a company is one
of the hardest things you can ever do – and often the outcome isn't a
billion-dollar exit or even a company deemed successful. The high
failure rate that occurs in the startup world can be attributed to many
different factors, but often, it comes down to these four recurring
problems.
1. You are still building the wrong product. The
biggest mistake you can ever make as an entrepreneur is to build
something people don't need. Once you create a perception about what you
think people will need, you are already shooting yourself in the foot.
One of the best ways to build something people could actually pay for or
use is to involve the end users or prospective customers in the process
– from the get go.
Do your homework, get out
there and talk to people about what you intend to build. Ask your
prospective users if they will use it. Once you gather enough evidence
about the need for the product, you will spend less resources trying to
convince people to use it when it's done.
Most of the great startups
started as something the founders were passionate about. Start with what
you want, validate and focus on making it awesome.
2. You can't adapt or change direction when necessary. If
the founders can't give up the original idea when required and make a
necessary pivot, the business could be heading for a dead end.
Most startups that fail
have specific unchangeable goals they want to achieve. The fast-changing
business landscape demands plans that can be re-visited and altered if
necessary. Roles, leadership, goals and teams should be open for
discussion when things are not going as planned (most of the time they
never go as planned). If you have no idea when to pivot while there is
still time and capital, you are in trouble.
How flexible is your
business goal? Successful startups are the ones that can change
direction and the initial idea in the interest of a better version
people really want. Startups are meant to evolve and grow into a
remarkable company, and there is nothing wrong with making tweaks and
sticking to what sells.
3. Your market isn't big enough. You need an
existing market that is big enough to be successful. How big is your
current market? How do you sustain growth in a market that is virtually
not growing? You could be building an exciting or innovative product,
but if your market is not growing, you will eventually struggle to
sustain your business.
Some entrepreneurs believe
certain markets are underrepresented but primed for growth, so they jump
into that industry. The truth is, there are usually good reasons why
those markets are often neglected. Do your research and stick to markets
with opportunity for significant growth.
4. You are spending too much money too soon. Raising
funds is a tough process and most startups don't get to raise money at
all. Your funding process should start well in advance before you run
out of money. If your startup is spending too much money, and you still
don't know how you are going to raise your next round of capital, you
should be worried. Your business should not run into a scenario where
you do not know how much runway you have left.
If you know your runway and know you are running out of cash, you should be executing a plan to fix the situation. You should be focusing on keeping expenses under control. The funny thing about most startups is that before they raise capital, they stay lean, spend less and keep expenses under control, but as soon as they raise money, everything changes. Suddenly the frugality disappears.
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