Are you ready to start your own business? You have probably heard that nearly 90% of startups fail in the first year, which is an absolutely terrifying thought. However, if you understand the reason so many start up fail, you can put you and your business in the best position to succeed.
65% of startups fail due to interpersonal problems between the founders. Start by considering who your fellow founding members are going to be. The most common configuration is family and friends, these are the people you know the best and the most likely to take a chance with you but this type of team is the least stable. The key is making this situation work for the betterment of the business.
How do things go wrong? For starters, it is difficult to make the best decision for your start up when that decision is not the best for your personal relationships. Another common problem is the fact that you have a lot in common with friends or family, which means there may be gaping holes in the team because your skill sets are so similar.
In order to make a startup work with your brother, best friend or even the in-laws, everything needs to be business when you are at work. This means decisions have to be made early on about the direction of the company, possible routes and all roles need to be clearly defined as do the future rewards.
Money, Money, Money!
You have a fantastic idea and plenty of startup cash (this may be rare but it does happen), so the temptation is to spend yourself to success. When you are starting a business, the only money spent should be absolutely necessary. Look, you are going to run into unexpected costs all along the way so instead of a state of the art phone system perhaps you should keep the money in the bank to cover these types of situations.
Think of your business money as the lifeblood, you never want to give away too much at one time if you want to maintain life.
Invest into your startup with whatever means necessary, make sure to do your research beforehand online on the best small business investments on a tight budget available, things like Facebook advertising, Free Twitter and Instagram exposure, Linkedin Sub-groups, Forum posts, and more.
What is your guidance plan? Do you have a plan? There is nothing simple about a business plan, and for that reason too many startups either delay creating one or forget it altogether. If money is your lifeblood think of your business plan as the brain, it instructs all the parts on when and how to move in order to move the entire thing forward. Do not skimp on the business plan.
Understanding the Competition
Who is your competition and what is their market saturation? You simply must know your competition as well as you know your own business. These are the companies that are doing what you plan to do and by knowing their strategy, both good and bad, you are in a better position to offer a better solution. Markets do not die and fade away, they merely change and the business that can stay ahead of the curve on these changes is the business that will make it past the startup phase.
These are but a few of the pitfalls to a startup, but they are a few of the top reasons a business will never fully get off the ground. Do not take these pitfalls as a reason not to start, look at them more as hazards to avoid on your journey to the top.