Pitfalls to Avoid When Starting a Company
90% of success, if not more, is about avoiding missteps. In this post we'll review common pitfalls to avoid in your entrepreneurial journey.
1. Spending Too Much $ Pre-Launch
The quintessential example of this is Quibi who is best known for burning $1.5 Billion+ with little to no traction. Instead, spend a few months building a minimum viable product(MVP) to validate that there is demand for your product/service.
Don't be Quibi. Channel your inner Ryan Hoover, founder of Product Hunt (acquired by AngelList in 2016) who created an MVP in 20 minute & after seeing immediate traction he created v1 8 days later. You can read more his process here.
2. Analysis Paralysis
Perfectionism isn't for entrepreneurs. Within reason, you want to get up & running as soon as possible. Founder of LinkedIn Reid Hoffman says it best,
'If you're not embarrassed by the first version of your product, you've launched too late.'
Checkout Reid elaborate on this topic here.
3. Excessive Overhead
Staying lean, especially in the early days is the key to success. To start with the obvious, your expenses are going to be lower which gives you a longer runway. There are several 2nd and 3rd order effects that stem from being lean which include: learning how to be scrappy, learning how to efficiently allocate capital, learning how to launch a creative marketing campaign on a shoestring budget, etc. I'm not recommending frugality, rather I'm recommending being economical.
Don't: Buy an office day 1
Do: Work from your garage until you are profitable
Don't: Hire excessively day 1
Do: Outsource work you aren't good at or don't know how to do to VAs/freelancers.
4. Failing to Niche Down on a Specific Audience
Too many first time entrepreneurs make the mistake of thinking a bigger audience is better. They'll pitch you saying, 'Everyone & their mother could benefit from this product!'.
You need to own a vertical when starting out. Start by OWNING one. You can always tackle other verticals later. The are many benefits to this approach:
- You can hone in on your messaging & copywriting to resonate with your audience.
- You know who to target in your marketing & sales effort. This helps you avoid 'shooting from the hip'.
- You can become a domain expert in this vertical & build a network effect of referrals
Don't: Launch a software startups for every Tom Dick & Harry
Do: Launch a software product to help HR professionals at Fortune 500 companies hire more effectively.
5. Not Having a Clear Elevator Pitch
You should be able to explain your business in 1-2 clear sentences. Watch this 3 minute video Techstars put together on the topic.
'The market doesn't reward those with the best ideas. The market rewards those who are best at communicating their ideas.' - Jack Butcher
6. Partnering With The Wrong Co-Founders
There is a laundry list of failed start-ups that have tried stictching together a founding team with ex Google PM, MIT PHd, ex-Goldman Sachs, etc.
First and foremost, you need to have some overlap when it comes to your core values. As you will see in our Mission, Vision, & Values page, we take the, 'If you wouldn't work with someone for a lifetime, don't work with them for a day' approach. Ask yourself this question before committing to a partnership.
In addition to aligning on your core values, your objectives should also align. Are we building a lifestyle business to generate a few millions dollars a year, or building a unicorn to IPO in 5 years?
Lastly, find a partner that compliments your weaknesses. If you are a software engineer who loves building products in a silo, go find a sales guru to partner up with who can take your product to market.
Credit: Hunter Owens
7. 'Shiny Object Syndrome'
One of the most common pitfalls among entrepreneurs is chasing the new hot thing rather than staying laser focused on the task at hand. Learn how to find your lane & swim in it.
8. Wearing Too Many Hats
Don't try to spin too many plates. Focus on your core competency. If you are a great salesman, focus on sales & delegate the rest.
Credit: Alec Illes
9. Scaling Your Marketing Efforts Too Fast
Oftentimes, growing too quickly will result in exposing the weaknesses in your business. It will break your supply chain, break your operations, etc. I've had a misfortunate of scaling businesses too quickly which resulted in a death spiral(we'll save this for another post). Slow & steady wins the race my friends.
10. Not Understanding Your KPIs, Unit Economics & Other Core Business Metrics
You don't need to understand accounting inside & out from day one. Ideally you're going to be able to hire a bookkeeper, CPA, & eventually a CFO to handle this for you. But what is imperative from day 1 is understanding your unit economics, how much you can spend to acquire a new customer, lifetime value of your customer, & other metrics we'll divulge into in a future post.
I reccomend identifying your key performance indicators(KPIs) & measuring them monthly, if not weekly. Y Combinator has a great crash course on setting KPIs & goals.
11. Not Treating Your Customers Like Royalty
Without customers, there is no business. Your customers are your life blood. Without them you have nothing. Go above & beyond for them in any way that you can. Send them handwritten holiday cards, buy them gifts, over deliver, make the unboxing/onboarding experience phenomenal & WOW them any chance you get.
12. Not Committing Enough Time
Oftentimes I see entrepreneurs try a new endeavor for a few months & prematurely give up. I'm not saying you should work years on end with no sign of traction. I'm simply suggesting, as an entrepreneur you ought to have realistic expectations & not give up too soon.
The story of the Chinese Bamboo tree is a beautiful analogy to the sweat, tears, & dedication it takes for most entrepreneurs to get off the ground. It takes a bamboo tree 5 years to break the surface of the ground. Once it sprouts after 5 years of tender love & care, it grows upwards of 80 ft tall in a matter of 5 weeks.
13. Losing Momentum
Building initial traction & momentum in your startup can be very challenging. Once you have this momentum, you need to hold on to it for dear life.
Credit: Mark Zhuk
14. Unlucky People
As an entrepreneur you need to be cognizant of who you share your energy, space, & time with. Just as the age old adage goes, you're the average of the 5 people you spend most time with. With this said, you want to make sure your partners, customers, employees, etc aren't going to drain your life force. Avoid these people AT ALL COSTS.
15. Being Married to Your First Idea
Be open-minded to new ideas that stem from your original idea. Be open to pivot & iterate your business model.
The world is constantly changing, you need to evolve or die.
To Be Continued...
This article is a work in progress & I will continue adding more of the most common pitfalls my colleagues and I have experienced in our entrepreneurial journey. If you have any suggestions or recommendations, hit my inbox firstname.lastname@example.org