Making it in the competitive world of startups and entrepreneurship is incredibly difficult. If you don’t have all of your ducks in a row, you are going to fail. If you want to build something that will last you need to research the market and create a solid business plan.
Navigating your first startup is not easy. Tools such as incubators and mentors may help guide you, but it’s ultimately up to you to succeed. I’ve been working with and for startups for several years and I’ve noticed the red flags to a falling company. If you want to turn your idea into a profitable product or service, there are 5 major things you should be aware of.
These tips are tried and tested. If you want to build something that can survive the harsh journey of entrepreneurship it’s important to first know what you should stay clear of. Below are the 5 kinds of startups that are likely to fail, read this list to make sure you won’t be one of them.
1. When you have no real need in the market
Today, almost anyone can start a company. Take a look at businesses that provide services. They are simple to create since it’s based on the founder’s skills and knowledge that already exist. This method actually works much better for freelancers than for entrepreneurs.
Developing a long lasting business is a lot harder than providing a service. If you want to establish your startup you will need to be hyper-aware of what is happening in the market. More importantly, you need to expose a real pain point that your product or service could solve for.
Once you find a way to service that paint point all you really need to do is find good people to build your solution. From here you can focus on starting a company with the ability to thrive. Take a look at Amazon. Jeff Bezos quit his successful job on WallStreet to start an online bookstore–something that was unheard of in the early 1990’s. He found a way to serve a pain point in the marketplace and Amazon has since become the go-to place for online sales.
2. If you didn’t find a market niche
If you want to succeed you need to have a need and a niche in the market. Who is your audience? From the second the idea pops into your head, to the moment you sit down with investors, to the time you hire your first employee you need to: take time out of every day to check other offerings and trends in your space.
This is crucial to staying aware of the what’s valuable in your market. It will provide you with the information to help you decide what your services/products you can offer, and at what price point.
This isn’t just a freelancer job, or a work from home gig… it’s you’re company. You need to be strategic and really pay attention. The market will decide the value of your startup. So, it should naturally be a part of your startup…it’s the air it breathes.
Once you find your niche, sample it to early adopters. This can build credibility to your startup in the market. If you have people using your product or service you are able to figure out (and show them) how it is original and different from your competitors. Finding a niche in the market will help you in scaling your company.
3. When you aren’t providing the service you say you will provide
I once worked for a startup that was a press company for other startups. It was a great idea with not so great execution. Because it was such a good idea the company was able to stay afloat by gaining new clients. But, since the idea wasn’t well executed nine out of ten clients would break their contract with the company. Meaning the startup never had a good estimate of projected income or workload. This also meant a lot of clients left unhappy–which is never a good thing.
It was a press company who couldn’t get the kind of press their clients wanted. They couldn’t provide the service their clients expected them to. And because they never solved for this, they never thrived. Yes, they were able to gain new clients, but never long lasting clients. If you want to build a startup that will succeed the execution of your idea should be well done. Your product or service needs to be valuable to people.
So, if you want to start an online or an e-commerce business first make sure you know how to make money online.
4. If you didn’t give yourself enough runway or you had too much overhead
Money–and the mismanagement of it— is a huge reason why so many startups fail. When it comes to building a company it’s incredibly difficult to be profitable, especially at first. Even if you have a great product and team when you start out you’ll most likely be breaking even instead of making a profit.
This is why it’s so essential to ensure you have enough runway for you and your team to launch something meaningful.
Another thing you should make sure you do it to minimize overhead costs. And yes, this includes the salary you pay yourself. Outsiders pay perceiver startups to be cool Facebook-like offices, with innovative seating arrangements and game rooms. This is not how it should be when you are getting started. This wasn’t what the Facebook office looked like when it was first getting started.
Do everything you can to minimize your overhead costs, even if this means you don’t get to have an office–let alone a cool office. Can you make money working from home? Yes. Can you build a company working from home? Probably.
Another misconception is that founders get to drink champagne and ride around on private jets. This is not how life is when you’re building a company. You should actually be cutting yourself a small paycheck so that the company can thrive.
5. When you treat your company like it’s your child
Don’t get emotionally attached to your startup. So many founders treat their first successful venture like it’s their child. That kind of thinking could actually be detrimental to the survival of your company. I know from experience.
Last year, I was building a tech startup that connected refugees to coding education. This project literally gave me life. I was obsessed with it and deeply attached to it. I was so excited about the ways my team and I were going to be able to positively impact society. This all seems pretty normal for a founder, right? Well, it shouldn’t be.
I learned the hard way that being so attached could actually be bad. My team and I weren’t always able to make the right choices or the hard decisions. Our startup inevitably suffered because of it.
It’s really hard not to get attached to your startup. So a great way to distance yourself is by giving yourself some space from your company. Most founders live, breath and sleep their startup. Instead, take time to yourself so that you stay grounded. This is especially true when you need to make big decisions. Step away and give yourself some space (and some perspective) so you can make clear-headed choices.
Creating a company should be based on logical and strategic decisions, not emotional ones. When you start to think of your idea or product as your “baby” you start to lose sight of certain things. This could also lead you to take thing personally, and not make the right choices. Your company is not your baby, it’s your work… it’s your job.
Building a company is hard enough as it is. Use these tips so that you are able to navigate it better. Knowing what to look out for will help you be able to make better choices. Creating a startup is a really delicate process. It’s also a huge learning process.
When you choose to go all in and follow your dreams, do it the right way. Make sure to evaluate your need the market and always take the time to find a market niche. Always stay true to your company mission, and provide the services and products you promise you will provide. Be cautious with your money. Ensure you have enough runway before starting and that you don’t throw it all away on unnecessary overhead costs. And always approach decisions from a sensible and grounded place. Keep yourself on track by avoiding these common mishaps and you’ll be much more likely to succeed.