The world of startup is not as rosy as we perceive it to be. We only get to hear about the success stories but the thousands of startups who fail to deliver never step into the limelight. Many startups fail on a daily basis but there are only a few reasons that lead to the downfall of most of these startups. If you talk to entrepreneurs who failed to launch their enterprises, you will come across the same reasons for their failure.
To ensure that you do not fall into the same trap again, here are eight death traps every entrepreneur needs to be wary of.
Scaling Quickly Too Soon
You might have heard the adage “Slow and steady wins the race” and the story associated with it. This also applies to startups. Do you know that around 75% of the internet startups with huge growth potential failed just because they made a mistake of scaling. Although, this might seem trivial to many but if you try to scale too soon, you will have to put all your resources to the cause and that’s not possible because you do not have access to infinite funds and allocating all of the funds can hinder your day-to-day operations.
Some startups even run out of money in the quest of scaling too quickly and fail to survive in the long run. It is highly recommended that you start small and focus on taking baby steps by winning customers and building good reputation instead of jumping on the scaling bandwagon that early.
Following the Latest Trends
In their efforts to make an impact on the market, most startups tend to ignore emerging market trends and follow them. Some might have succeeded by jumping on hottest trends but there are many startups, which failed as soon as the trend faded.
Following latest business trends could go both ways and is quite risky especially if you do not have required knowledge about forecasting future trends. If you want your startup to survive long, then have a clear business strategy that enables you to be adaptive to changing dynamics of the market.
Underestimating the Power of Data
New startups do not take technology and data seriously and have to pay a hefty price for this ignorance. Use project management software to streamline your operations. Co-founder of BlogHer, Lisa Stone said, “Magical thinking can kill any business”. Initially, Lisa Stone faced criticism that a large number of women would not blog, later on, her data analysis revealed a different story so she pursued her dream and stuck to her goals and eventually managed to make it come true.
Consider data as your friend and analyze it to extract relevant information that would help you to bring improvements in your business. What this data does is that it identifies the loopholes in your system, areas for improvement and gives you a sneak peek into the future.
Micro-management is a NO-GO Area
The concept of a one-man army is applicable only in fiction and has nothing to do with what happens in the real world. You cannot do everything on your own. Entrepreneurs need a team that can assist them in achieving business objectives. Surround yourself with the right people instead of trying to do everything yourself. Most startup fails because they follow this philosophy of micro-managing everything. Assess how many people you need in your team and then commence the hiring process. Make sure you pick the best bunch hailing from diverse backgrounds, a team of people who would complement each other.
Holding On To a Wrong Idea for Long
Another trap many young entrepreneurs fall into is clinging on to a wrong idea and pursuing it for too long. As mentioned before, this happens when you do not put much emphasis on research and data analysis.
Go with the evidence not with your instincts. Track progress and evaluate how your idea is doing and what the future prospects are. Before commencing, always come up with multiple ideas through brainstorming or crowdsourcing and use split testing to test the feasibility of ideas that are generated. Analyze the results of the testing phase and the select the best idea for execution.
Not Raising Enough Money to Fuel Your Startup
Securing funding for your startup is the biggest challenge for entrepreneurs. Startups can get the financial impetus their startup needs from multiple funding sources. Every source has their pros and cons which means that you need to be careful when selecting the funding method. Irrespective of which funding source you use, it is important to have a well-rounded business proposal that highlights the growth potential to secure funding for your startup.
Wrong Marketing Tactics and Pricing Strategy
Some startups also make the mistake of pricing their products and services wrongly. To add insult to injury, they employ obsolete methods to market their products. Pricing is an art and it is critical for the success of your startup to set the perfect price. Unfortunately, new startups price their products and services too low or too high, which lead to their undoing.
Not Taking Care of Yourself and Your Employees
The first thing that comes to your mind when you hear about a startup is too much work with low compensation. Taking care of your health and health of your team members is critical. Remember, “All work and no play makes Jack a dull boy.” Maintain a healthy work-life balance, give your employees some time to relax, and have fun. Celebrate milestones with your team members and give them credit for success. This will make them feel involved and empowered and they would give their best efforts.
Consider your startup as a plant. As a plant requires protection against too much exposure to sunlight or over-watering, in the same way, your startup also needs a clear business plan. Do not be impressed by the latest trends or try to scale too quickly. Nurture your startup like a plant and let it grow.
If you want to make your startup successful, you cannot do it on your own. You need a team of talented and dedicated individuals who can help you to turn your dream into reality. Take advantage of digital tools and data to fix the problems quickly. Analyzing data critically will also tell you which ideas to hold on to and which to drop. Neglecting data altogether could prove to be disastrous for your startups. I’m sure if you’ll be wary of the traps that we have discussed above, you’ll witness your brainchild attaining the success you dreamt for it when it was just an idea, a seed.