New figures state that 50% of businesses with employees will survive their fifth year in business.
That’s a little bit better than the previous baseline rate of 50% failure in four years of business. Still, for anyone looking to launch their own startup business, that’s a lot of pressure on your shoulders.
There are so many factors that go into running a successful business startup, having a great idea is a bare minimum. There are a lot of great ideas out there, even game-changing inventions. You see them all the time on Shark Tank, for example.
Getting that great idea into the perfect business environment that has all the tools of success is the hard part. Don’t make the same mistakes that hundreds of other startups have already made. Learn from these seven lessons early on to avoid the same pitfalls.
1. Prioritize Research
Driving purely off of passion for our own dreams and goals is where accidents happen in the business world. Yes, passion and dedication get recognition, but when you’re the new startup on the block, you don’t want to be competing with already established juggernauts.
Research your product, it’s similarities, your demographics, location, and pending patents out there. Startups should also be doing a lot of internet and social media marketing research to know how to allocate resources.
The number one reason startups fail is that there is no market for their offering. You might believe that your product or service is the greatest thing since sliced bread. That doesn’t mean everyone else will.
2. Have a Business Plan
The worst thing you can do with your startup is rush into business logistics without any experience. Anyone can launch a Shopify account and source manufacturers, but the numbers need to make sense. Scaling a business is not for the faint of heart.
Consider investing in a professional business manager who can manage your accounts and investments. Your startup should never be reactionary. You risk stifling or sabotaging your growth if you don’t have a business plan in place.
3. Prepare for Long Hours
Launching a startup by yourself is a lonely affair. You’ll be missing out on a lot of personal time, so make sure this is something you’re willing to sacrifice. Remember, most of those around you aren’t going to be able to help or even relate to the pressures of running a startup.
This is where hiring consultants can help alleviate some of the burden and stresses of running a new business. If you can afford it, definitely consider hiring someone who can handle most of the discovery process. Those long work hours can lead to cracks in your personal relationships.
4. Prioritize Cash Flow
Running out of cash is the second most common reason that startups fail. Cash over credit should be your priority. Securing a line of credit isn’t difficult for promising startups, but cash is going to be the litmus test for profitability.
If you’re stuck in a situation where you can’t pay your clients or employees, things can turn sour very quickly. Borrowing from Peter to pay Paul is a neverending cycle of debt. You won’t be able to grow if you don’t prioritize managing your cash flow.
5. Wrangling the Ego
Don’t let your ego blind you from customer feedback and analytics that tell you to switch gears. No matter how good your product is, customers and investors aren’t going to eat off potential alone. There are plenty of Kevin O’Leary’s out there and customers who demand more from your startup.
In today’s corporate culture, what you represent politically can also make or break your success. The key is in staying humble and accessible to everyone. Don’t try to get away with being the Godfather within the first few years of a successful business launch.
It’s also a good idea to keep your options open when it comes to potential collaborations and mergers with bigger entities. Missed opportunities due to having a big ego can make or break small businesses.
6. Trying to Do It Part-Time
The first years of your startup business are so crucial, you can’t afford to do it part-time. Quitting your day job and running your business full-time is the only way to control your own destiny. Time and money are both very valuable resources to new businesses.
If you want to reach the point where you don’t have to spend 18 hours of your day working on your business, you’ll need to build it up. You’ll need to work long hours without paying yourself because whatever profits you do make should be going back into the business.
Stunt the growth of your business or take that $50k and buy $200k worth of inventory? The choice should be obvious, but we’re not saying it’s going to be easy.
7. Don’t Expand too Fast
While we’re on the top of reinvesting capital, startups that bite off more than they can chew may spell doom. Ordering way too much inventory without checking the numbers can tie up a lot of capital unnecessarily. Expanding too fast digitally can also take its toll.
If you’ve outstretched yourself on social media, running accounts for every major platform, it’s easy to lose a lot of your day. You can automate a lot of digital marketing, but not all of it if you want to generate strong personal bonds. In the beginning, you need to have as many brand loyalists as possible.
You won’t get there if you’re trying to do too much at once. Remember, everything should be vetted, researched, and analyzed before any major expansions are planned.
Run a Checklist for Your Startup Business
Against all odds, your startup business can succeed even if you don’t have a unique product. Plenty of new businesses open up offering the same menus, apps, or personal services that already exist. Some of those startups achieve their success off of clever branding, client acquisition, or digital marketing that makes all the difference.
If you’re trying to build a winning strategy for your startup business, start with this Ultimate Startup Checklist. In it, you’ll find everything you need to get your startup off the ground and running. It will help you avoid making these same mistakes covered in this guide, as well provide you the confidence to tackle any challenges when it comes to running a small business.
