Falling in love with their solution, not the customer's problem.
I had 3 startups until now and here the mistakes I would have loved to avoid in my first startup:
- Hoping all will be 'just fine'.
It simply won't. Statistically you will fail. The sales you hoped would explode will not. So plan for small milestones, small successes on the way to big success. Don't plan to sell 1 000 products, plan for the first 10 and define what are the next steps to get to 1 000 after you sold the first 10.
- Spending big money before qualifying a Minimum Viable Product in front of consumers and the trade.
- Being dependent on long production time or high minimum order quantity. I was dependent on both, they forced me to produce A LOT of stock, which I didn't sold profitably at the end.
- Having high production costs for each product.
This capped the free sampling we could do with key influencers and celebrities.
- Having a high number of SKUs (product's shapes and color combinations). This increased the complexity and put pressure on the level of stock we had to have.
Naturally, even in my first startup we did many things right, like Branding, creating a product people wanted, the PR campaign, building an automatic logistic and shipment platform...
If you have a startup and want to talk more/ would like a mentor, give me a call. I'm currently mentoring 3 startups.
I work in online advertising and meet with a large number of new startups. The most common problem I have observed is a lack of solid business plan and/or revenue model. Often theses startups will come in and ramble on about their idea and how it will change the world but they haven’t really thought about it from a business standpoint. How are you going to produce the product? How are you going to market it? How are you going to make a profit? What does the competitive landscape look like? How will you attract investors?
Sadly, many of theses startups are already into their business and haven’t answered these questions. Many of the founders have quit their jobs and began burning their life savings. Money goes fast in a startup, especially if there is no practical revenue model. My suggestion is to throughly vet your idea internally. Figure out how you will make money and come up with a good plan for getting to market. I would also suggest finding some experienced advisers and mentors, people with business experience to review and provide feedback on your plan before you get started.
I wrote a blog post about this recently, in fact, 5 lessons that start-ups would do well to listen to, regardless of what their business is:
1. Be clear on your mission
You’re going to be working long hard hours on this project so you’d best have a compelling “why” for doing so. Are you in it for the money? Are you passionate about solving a particular problem? Do you want to reach millions of people with your offering? Having a clear vision, a fundamental objective as to what you’re ultimately trying to achieve, will keep you going when things get tough but just as importantly it will help you to make decisions on how to run your business. Having a bigger sense of your company purpose will also help to attract and retain motivated employees, as well as customers.
By definition, you’ll have limited resources when you’re first starting out – you’ll have a small team, a tight budget, and most of all you’ll have a limited amount of time. You may have grand ideas of all the different uses for your product, all the different customers who could benefit, all the different channels you could market through… but you simply won’t be able to do it all. Strategy is fundamentally about CHOICES: do you do this or that? target this consumer or that consumer? Having a clear mission should help you here: what do you value above all else, is it making as much money as possible, doing good, reaching millions…? whom do you ultimately want to serve? what do you want to stand for? Then prioritise your activities accordingly.
3. Know and understand your customer
Something else that will help you to focus your resources is an understanding of who your ideal customer is. What are the insights you’re tapping into? Which problem are you solving? What do you know about their behaviour? Where are they active and when will they be receptive to your message? Again, you can’t serve everyone and you certainly can’t market to them all. Technology now allows you to get hyper targeted – but for this to be effective you have to know whom you’re targeting! You won’t be able to afford expensive quantitative research, so think creatively about how you can get the information you need. Look at the general trends in your target demographic; imagine yourself in your customer’s shoes; look at your web analytics or send out surveys to understand the behaviour of your current customers; go out into the street if you have to.
4. Create value for that customer
There are bound to be others doing something similar to you, if not today then some time soon. What makes you stand out? What’s your unique selling proposition? What are your points of difference versus your competitors? Describe in one sentence why your customer should choose you over all the others. And by the way, this proposition can never be about money, you should never try to compete on price. Instead, think of the value you’re creating. What are you doing that no one else can do as well as you can? What does your brand stand for? Are there particular customer segments that will favour you over your competitors? How can you deliver more benefits at a lower cost (but not a lower price)? How can you make the customer experience extraordinary?
5. Know what you don’t know
This is perhaps the red thread that runs through all of the previous points. You and your co-founder(s) will be coming from a particular background and you’ll have certain skills and strengths where you will really excel. Recognise where you lack the required experience and find the people who do. If you try to micro-manage the business and your people and you’re putting far too much pressure on yourself to do everything, you probably won’t do any of it very well (or it’ll take you a lot of time) and it’ll never be scalable. You’ll be much more successful if you delegate to someone who knows what they’re doing and free up your time and energy to focus on the things you are good at.
Get in touch if you have any questions!
I wish I had assembled a versatile and complimentary team a little sooner! I was trying to do it all for a very long time as I was set on bootstrapping (still a big believer in that) but I have since learnt that there are definitely ways to partner with professionals and not break the bank. There is so much to do and so much to learn that I could have leveraged my time a whole lot better! My advice - focus on doing what you know how to do best and delegate the rest to trusted partners and professionals - don't kill yourself over trying to create Powerpoint slides!! :-)
Best of luck - it's an awesome adventure!
Thinking of spending big like any large corporates for Infrastructure, People etc., Without the Sales coming in you can't burn the cash which is in your hand (if you have limited resources).
Startup is like a baby need to be treated with utmost care and needed to feed/care what is required to grow best.
The topmost factor that can lead to a startup death is lack of idea scalability. It happens when you move on without doing enough research before building up your business idea. Next slip-up that failed startups have committed is the lack of focus. This is the common mistake made by all the growing websites that shut down sooner or later. As a startup business you need to understand, It doesn’t matter how large or small your business is, during initial phase, progress will come at a snail’s pace.
I will recommend you guys to read this awesome post written on startups: http://www.fatbit.com/fab/biggest-online-startup-failures-read-learn/
Underestimating the time, effort, sacrifice and passion required to reach success.
In the end, your success will come from these factors, not from the brilliance of your idea. Most truly successful startups have ideas that seem pretty straight forward in hind-sight....it is the execution and persistence of the founders that creates the success.
Poor choice of domain name.
Startups may make bigger mistakes. But that's the big mistake I most frequently see.
Cutting corners on the domain is not without cost. Frequently the company will pay very large sums of money to upgrade later. Why do they change their minds later? They leak traffic, lose money, and miss opportunities.
Frequently the cost to obtain the desired domain later on (after VC funding) is much higher than it would have been if the startup had locked down the domain early on.
And sometimes the optimal domain turns out to be unobtainable, forcing a startup to change horses in mid-stream with a rebrand that eats up time and marketing resources.
Really, it is often possible to secure an excellent domain without paying a fortune up front. Startups have no excuse, in my opinion. Just inattention or short-sighted haste.
Plan ahead, guys. Your brand name / domain isn't just a place holder.
Having their leaders fall prey to Entreprenurial A.D.D for one and not hiring business consultants with actual knowledge.
1. Underestimating their costs
2. Overestimating their value
3. Losing focus and dreaming too big instead of getting one thing right
4. Not knowing when to ask for help