Starting a business can be exciting and rewarding. Yet, it can also be fraught with daunting challenges and possible potholes. Many entrepreneurs make mistakes at the startup stage that can hinder their progress or even lead to failure.
One needs more than passion, a creative idea, or unwavering determination to set up a viable business. How well the entrepreneur executes his or her plan has a significant bearing on his or her chances of success.
Starting a business is challenging, but there are many areas you can focus on to help ensure that the business stays afloat beyond its initial stage and continues to succeed. According to the United States Bureau of Labour Statistics, over 18% of new businesses fail during their first two years of operation, and over 55% of all businesses don’t survive past the fifth year.
Even though the aforesaid statistics are based on the United States business environment, in my long experience in the Sri Lankan business sector, I can safely presume that the figures can be applicable to Sri Lanka as well.
During the startup phase, you spend your time meeting people, getting advice, doing research on target clientele, market feasibility, and so forth. At this point, you would be getting to know the market and how to generate enough profits to sustain a business. Therefore, let us explore the biggest blunders first-time entrepreneurs must avoid at the start-up stage.
Most new entrepreneurs intend to start and run a business venture simply based on a plan they form in their minds. This does not work. Any business, regardless of size, requires a business plan, even if it is just one page. The plan must contain as much information as possible on related basic aspects such as start-up capital requirements, running costs, sales forecasts, profit and loss assessments, and, more importantly, the market feasibility of the product or service.
At least a simple risk assessment at the time of initial planning is as important as a business plan. In fact, it is an integral part of your business plan. In a business environment, risk assessment is a crucial process for estimating an unanticipated loss that can occur to the business in the event of an unfavourable situation.
Strong position
Identifying potential risks in advance in the areas of financial, operational, and marketing can place the entrepreneur in a strong position if such unexpected situations arise after launching the business. Risk evaluation is important not only at the time of starting up but also in every subsequent business decision-making circumstance throughout the life cycle of the business. Entrepreneurs must remember that their own, borrowed, or, perhaps, their investors’ money is at risk in the event of a detrimental instance.
Starting a new business is not as easy as forming creative ideas mentally. It requires more than merely dreaming about a business. While a starting-up entrepreneur needs both creativity and dreams to succeed, he or she should take time to find out whether the product or service intended to be sold has a readily available market. Many newcomers fail to sustain themselves because they do not understand the market available to them or potential customers related to such a market.
Unless proper and updated feedback from current and potential customers is on hand before the first investment, the start-up can have detrimental results sooner or later. Even if you have a great product, it cannot be transformed into revenue if there are no buyers. Hence, a market feasibility analysis is compulsory.
Anyone who thinks of starting a business is customarily creative, decisive, and possesses the audacity to take risks without fear of failure. Therefore, most of the time, they attempt to act on their own rationale. This can be a grave mistake at the start-up stage. It is always better to obtain advice and guidance from those who are more knowledgeable and experienced. Therefore, surround yourself with subject-matter experts and mentors you can lean on and learn from.
However, the crux of the matter is that you must choose such advisors intelligently because wrong, tactless, or inappropriate advice can affect the entire process. More importantly, such advisors must invariably be reliable and trustworthy.
Some start-ups make the mistake of not recognising the importance of managing the available capital before the commencement of the new venture. Often, whether derived from investors or from your own coffers, the start-up capital is limited and must be managed tediously. Instead of utilising minimum possible funds diligently, some entrepreneurs lavishly spend money on pre-launch advertising, hiring too many staff members instead of the right people, posh offices, furniture, and office equipment. This can deprive the entrepreneur of useful investment in essentially required resources.
Awareness campaigns
Some entrepreneurs make the mistake of launching before they are truly ready. The old saying “done is better than perfect” may not work in a start-up. You must be completely aware of the related business processes and, more importantly, the potential clientele before the launch. Your awareness campaigns must be near perfect prior to the launch.
You and your staff must be able to respond positively and truthfully to any inquiry from the start. If not, initial inquiries from the market may damage the customer’s perspective of the new business, product, or service. After all, the prospective buyers are the most important stakeholder in your business, and you cannot let them doubt you.
The early startup phase is where you keep your customers close, encourage continuous feedback, and perform many repetitions of the minimum viable product to get the right market fit. It is always advisable to test-market a product to obtain feedback before going full-scale. Thus, you must avoid rushing to grow revenue unless you are completely aware of the customer’s behaviour and the current market trends.
Hiring the wrong recruits is a costly mistake for a start-up. Although building a strong team is vital, recruiting people with the right skills and the right attitude is a critical factor in the beginning. If the wrong people are employed, the limited and crucial capital can suffer because salaries and other staff-related expenditures go to waste.
Similarly, hiring too many people too soon is a big mistake. The new entrepreneurs must recruit the minimum amount of staff at the start. Instead of overcrowding, outsourcing talents and hiring part-timers is a safe strategy initially. Rather than setting aside salary and other expenses, deploying outside skills and knowledge is a sensible thing to do in a start-up.
The road to entrepreneurship is often filled with unexpected detours, pitfalls, failures, and bad decisions. Although occasional start-up mistakes are inevitable, by staying motivated, the entrepreneur can take the long-term and overarching goals to a more advanced stage.
Starting a business is a learning process, and making mistakes is a natural part of the journey. However, being aware of common drawbacks can help you avoid major hindrances and improve your chances of startup success. Stay open to learning, be flexible in your approach, and seek guidance from experienced entrepreneurs or mentors to navigate the challenges of the startup stage successfully.