Building a business from scratch is no easy task. That especially goes if it is your first startup. There's so much room for mistakes.
No wonder most startups fail within the first five years. The news is grim, but one must know all the important facts before diving into the world of entrepreneurship.
Having a great idea is essential, but it's not enough to propel your company. Learn from the mistakes of others. Avoid common patterns that lead to failure.
In most walks of life, simplicity is key. The world of business is no different. Think of it like packing a suitcase. If you're like most people, when preparing for your vacation, you're probably tempted to pack your whole closet.
That's not very rational, is it? Put a list of things you think you need for your business. Then, remove half! It may sound a bit over the top, but it's sound advice that comes from the founder of ExitStrategy and Timehop, Jonathan Wegener.
Inexperienced entrepreneurs like to complicate matters a bit too much, from leases and financing to structuring partnership agreements. Use the popular show Shark Tank as inspiration. It's all over in minutes!
Some aspects of your business are not the place to exercise creativity. Be transparent and follow the norms. That way, everyone will be on the same page. Keep it simple.
Guarding The "Big Idea"
Your idea is precious to you, understandably. You may be "helicopter-parenting" over it like it’s a poor, helpless baby. You're making everyone in your proximity sing ten-page NDAs. take a step back.
You may feel like your one-of-a-kind idea is all you have, but it's not. And, it might not be as unique as you think. It's easy to fall in love with the thought that you were the first to come up with your little gem.
Rest assured someone has thought of it before, whatever your idea is. Secondly, an idea is not a company. Everything that comes after the idea makes a business. It's all about how you execute your idea.
And that's not something you can do alone. Seek guidance and help from more experienced people. In order to do so, you must learn to be comfortable with sharing your big idea.
Chasing Investors Instead of Partners
Startups are always in need of cash. At first, a startup can give an impression of being a bottomless pit that devours money. Many are wary of putting in the majority of their savings in their new business, and rightfully so.
But, putting all of your effort into networking with investors is not the way to go. Incessantly pursuing VCs is not the best way to secure a meeting. Having a talented and well-connected co-founder that the VC has already invested in will get you further.
Choose your partners carefully. Be on good terms with funded entrepreneurs. Every venture capitalist is much more likely to meet with a company that its existing portfolio rounder recommends. Sure, you should invest time and effort into finding investors, but not too much.
Don't spend all of your energy networking through email and LinkedIn, seeking angel investors and venture capitalists. Instead, try to win over co-founders that have been successful in securing investments. Their seal of approval is a valuable asset that can score you great points with potential investors.
There's also the option of being your own investor. And that doesn't necessarily mean squeezing out your piggy bank. Make your money work for you.
Learn about investment opportunities that can help you grow your funds. Seek out and ask trading and investment experts about the option you have, or, even better, partner up with a savvy trader or investor.
If you lack funds, you should try to solve the issues on your own. And there might be bigger issues that you should solve before pitching to investors. Securing funds by yourself will allow you to keep more equity.
Not Hiring the Right People
People are not the most important asset in your company. The right people are. Startups are generally a team of three to four people. If one of them is a bad apple, the 1/4th of your company is not working right.
That is why it is important to have a culture code in place. They should be equipped with the proper skills and knowledge, but they should also fit the company culture. The core team should share a similar mindset.
While skills can be though, the mindset can't. At least not so easily, but you don't really have time for that. For example, you can hire a bad programmer and train them. You can't hire the wrong programmer and expect things to change for the better.
That doesn't mean you should have an echo chamber of yes people. Your employees should be able to offer other perspectives, but also understand your rate of innovation and adhere to it. In a small startup, one employee must fit a lot of job descriptions.
Many entrepreneurs think of hiring extra people as a luxury. Administrative efficiency is important and is not a waste of resources. If you fail to hire people you need, it will cost you more down the line.
Stick to the golden rule: hire your weaknesses! You're not the best at everything. Hire people who are great at what you are not.
A new business endeavor is an adventure with plenty of ups and downs. Don't let it be a downhill ride. Think ahead of the curve.