What are the most expensive mistakes that startups make?
Running out of money is the number one reason that startups go broke and shut down. The key to championing this critical part of the business is to know what not to waste money on, and where to invest it instead.
There are many, many small things that the vast majority of startups consistently burn money on necessarily or at least do inefficiently. Those things can add up and eat you alive over time. They can be targeted by regularly evaluating finances, deploying business cost-cutting measures, and iterating. More importantly, there are the big and expensive pitfalls that startups fall into.
A very high percentage of first-time startup founders underestimate the cost of these mistakes. Which is likely why there is such a high startup failure rate. Check out this list to avoid them, and be one of the few success stories, while enjoying the journey even more.
Not Completing Competitor Research Upfront
When thinking about the most expensive mistakes that startups make, keep in mind that financial failure is often a side effect of the big mistake of not completing research upfront.
A surprising amount of startups end up finding there is no market for what they are making and selling, or they overlooked the competition. This will doom you to failure from the start. Even if you end up raising millions via startup fundraising and spending years chasing a losing mirage.
Keep in mind that in fundraising storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
Some don’t even spend five minutes on Google search to realize their idea has already been done identically by others. Others mistakenly believe they won’t have any competition. That is never true.
If you succeed, then both big established corporations and other new startups will want in on the game and will compete with you. Some with bigger funding and teams. Others will be able to operate more cheaply and faster. You need to establish your sweet spot upfront.
One of the most important metrics is market size. This will determine whether you are fundable by investors and if there is even a big enough opportunity to become a real business. Or at least one that is big enough to deliver on your dreams.
Not Having An Urgent Problem
There are a few frivolous luxury products that appear to have done well and this is something to consider when discussing the most expensive mistakes that startups make. Yet, the best startups with the best odds of success are those who are really tackling an urgent problem which is really painful for their customers.
Think hair on fire emergency problems and the things which keep people up at night worrying about them. These are the things people will be willing to actually spend money on and will have the motivation to take action to buy. So, is your idea a nice to have, or a must-have?
Not Tailoring The Solution To Their Customers
Everyone needs clothes. There are some great clothing stores that offer great essential and fashion items. Even at incredible discounts. Yet, some of them are notorious for rarely having sizes that fit most of their customers. You might need and want new clothes. You might love the look and the price. But if it doesn’t fit, you aren’t going to buy it, right?
The same is true for many startup businesses. There is a lot of talk about getting the problem right. Which is important. The other 50% of this equation is tailoring the solution, product, service, and experience to fit your customers intuitively.
Beat this by spending a lot of time talking to your customers and putting yourself in their shoes before you start building anything.
Time is the most valuable resource you have as a startup and entrepreneur. Time is precious for your company, labor costs, and personal time. Don’t waste it. This is one of the common most expensive mistakes that startups make.
Many waste enormous sums of labor working on the wrong things or at least inefficiently. Many solo entrepreneurs think they are saving by juggling more roles themselves, only to be a fraction as productive as hiring someone for it. Others just take their companies on very long detours or spend months and years trying to vainly perfect things that will never be perfect.
Critical to this is knowing your top priorities and working your tasks in the right order. As a young startup, you only need a one-page business plan, and a handle full of numbered bullet points on your action plan and a to-do list at any one time. Consider everything else as an expensive distraction.
If you can’t afford to hire well, you can’t afford to hire cheap. This is one of the repeated and most expensive mistakes that startups make. You can not cut corners when it comes to talent. It will come back to you in a negative way.
It’s all about the ROI on your staffing dollar. A cheap hire might seem inexpensive on an hourly basis, but they may be costing you critical time, many lost customers, and a lot of brand love and credibility.
The big companies and business leaders you respect and admire don’t have the best teams because they are so big. They recruited the best teams, and then got rich, famous, and supersized as a result of that.
Not Starting With The Right Vision
The most successful repeat entrepreneurs say they now value putting the vision, values, and culture first, and focus on hiring for a match with those things.
Most first-time entrepreneurs delay these things, thinking they are a luxury they can punt down the road. Then again, most fail. Take this insight from those who have made it.
Not Having A Strong And Accurate Marketing Strategy & Plan
90% of your success as a startup relies on marketing. The most expensive mistake startups make is to just rush to copy what they see others doing, and then waste thousands of dollars and months on losing tactics. Invest in a customized strategy and plan upfront, and base it on real data, not assumptions.
Hopefully, this post gave you some perspective as you are looking into the most expensive mistakes that startups make. You may also find interesting the video below where I cover in detail the top reasons why startups succeed.