from our blog

Start-ups Should Avoid These Mistakes to Increase Odds of Success

 

It’s 2 AM and you’re lying in bed struggling to fall asleep. Then BOOM!…An idea sparks that you think would work phenomenally well for a start-up. You’re extremely excited about this and eventually fall asleep only to have it fizzle out once you wake up in the morning. We’ve all been through this. But there are a few of us who actually follow through and act on that spark to begin their start-up. There are about 627,000 businesses that open each year. But interestingly, of those start-ups that open up, 595,000 (that’s roughly 90%) end up shutting down. Moreover, 10% of those close down within the first year. What causes so many businesses to collapse as quickly as they started? There can obviously be hundreds of reasons a business fails, but there are a few extremely common mistakes, and we could all learn a lesson or two from others’ experiences.

Here are five of the most common mistakes that entrepreneurs make…

Poor or Lack of Financial Planning: This is by far one of the biggest reasons start-ups collapse. About 38% of new businesses fail because they’ve run out of money (CB Insights). Most start-ups begin with very little in the first place. According to Small Business Trends, one in three small businesses begin with less than $5000. A commonly known fact about owning a start-up is that you don’t start “making money” immediately. It takes time. How does one sustain the business in the meantime? Plan ahead. It doesn’t matter how much money you have. Financial planning is extremely crucial. 

An effective way of avoiding this pitfall is finding yourself a good business incubator. An incubator is someone who’d not only invest in your business financially, but also provide the knowledge and experience to help your business grow. Most incubators have been entrepreneurs themselves, which makes them able to understand the business and market situation much better than others, and help plan your finances better. They will work with you and guide you through experiences they have had, resulting in better odds for success.

A Product/ Service with no Market Need: A close contender to the reason above, lack of market needs remains one of the top mistakes that start-ups make. You have a great idea and a plan to execute it, but have you stopped to ponder over the actual need of your product or service? Apparently, many don’t! About 35% of businesses make this exact mistake. This is not to say that your idea, product or service isn’t good, but simply that there is no need for it at the moment.

For example, if you were to start a business that makes and sells digital cameras or video cameras, that would be a classic example of a lack of market need. We are in the era of highly efficient smartphones that can do it all. Unless the cameras you’re selling do magic, there is not going to be many people willing to spend a load of money to do something they can do with their smartphones. This example is a bit extreme, but the point is that you should always check if there is a need for what you are offering. Take advantage of market research, understand your geography and target audience, and tailor it based on these factors. 

Bad Pricing: Pricing is one of the most crucial aspects that could make or break a business. About 15% of the businesses make the mistake of selling their product or service for the wrong price, leading to the failure of their business. You will need to price it in a way that covers all your operational costs, sustains your business and also makes a profit. It is imperative to find a price point that is not too high or too low, but finding this delicate balance is definitely not a walk in the park. 

Wrong Team: Lastly, but certainly not least, did you know that around 14% of the businesses hire the wrong team?. According to Society for Human Resource Management, it costs $4,129 on an average to hire an employee and it takes about 42 days to fill a position. With that kind of cost and time involved, you need to ensure that adequate effort goes into hiring your team. If you are not putting in the required effort and time into finding the right members for your team, more often than not, you’re wasting your money. They are either going to leave the organization soon, or they will end up being an absolute misfit. Even if it takes a bit longer, wait and find an appropriate team. The rest will flow seamlessly. Read our blog post, ‘5 things to consider before you build you work team’ for tips on hiring your team.

Evolve is a hands-on business advisory that is passionate about helping small businesses and start-ups globally. We develop and execute operational and marketing strategies that will expand our clients’ business, increase their revenue, and set them up for long-term success. With over 25 years of experience helping entrepreneurs meet their expansion goals, we are also fully adept in understanding the various mistakes start-ups make and how the odds can be improved. Evolve is here to provide the horsepower that your business needs in order to Change, Transform and Grow. Book a discovery call with us, contact us at +1 (905) 257-9696 or info@evolvebusinessadvisory.com.