Of the most familiar statistics in the entrepreneurial world the big ones are about failure.
According to the data:
90 percent of the start-ups fail
75 percent of venture-backed start-ups fail
Behind these failures lie one major agent: mistakes. Sometimes its a few massive mistakes, and at others an aggregate of various small ones, that ultimately cause the collapse of a business. You see, even Titanic had been built as an Olympic-class ocean liner that went down, after meeting what could’ve been avoided.
However, unlike the Titanic, the dead of the entrepreneurial world are buried without any fanfare.
So, if you’re in the process to build a business, here are the five big mistakes you must be watchful about:
1. To sell ice lollies during the Christmas season
What is wrong with selling ice lollies? You may wonder.
The thing is there is nothing wrong with selling ice lollies. But there’s definitely something wrong with selling ice lollies during the Christmas season. This something wrong is: no market for your product.
In a research conducted by CB Insights that asked 101 startup founders to pinpoint the reasons they believed their company failed, the top reason of failure stated by 42% of the founders has been the absence of a market need for their product.
2. To burn more than you earn
Believe it or not, but fewer businesses die because of cash crunch than do because of a poor product-market fit. So here, you can have a breather!
According to the insights availed through data, 29 percent of business burn out due to an exhausted cash flow. A mismanagement of finances is the second biggest mistake an entrepreneur is likely to make.
One of the most important responsibilities of a CEO is the fiscal responsibility to properly manage cash flow and the multiplication of it for the company. To ensure that you do not commit this mistake, remember that a company that is not growing, is shrinking! Make sure that you understand where to invest for growth and where to keep costs lean.
3. To brew discord
With 23 percent of founders blaming their team choices as the mistakes that drowned their start-ups, a wrong team/management is the third biggest reason why start-ups fail. 1/3rd of companies fail because the management was unable to handle issues like hiring, finances, and marketing.
Businesses prosper with adjustment and observation, listening and learning. In case of a team at the helm of affairs marred by constant internal conflicts, there is close to no hope of survival. Among other drawbacks of a poor team, the most hazardous is that it loses the capacity to strategize as well as that of proper execution.
4. To give poor thought to the sustainability of the business model
An unsustainable business model is a question-less suicide formula. Not only that there is no scalable way to acquire customers, the cost of acquiring a customer (CAC) is irrationally high as compared to the lifetime value of that customer (LTV).
5. To get caught in legal issues
While the CB Insights data testifies only 8 percent founders finding legal mistakes a cause of their startup failure, the ratio could be alarmingly high in the local context. Beginning from branding issues to a company’s expansion into new markets, the nature of legal processes is neither smooth, nor there are proper guidelines available. Incorporating a private limited company alone is a months long task.
As can be seen, all of these mistakes are connected, in one way or the other, to lack of leadership. In a nutshell, to develop a sound team and develop a sustainable business model and a thriving brand, a founder is fighting no less than a leadership battle. While lack of finances could be argued as a factor outside the leader’s capacity, the factor in itself is not independent and arises due to other controllable mistakes.