Starting a business is easy; running a business is more complicated. If you have a great business idea, it’s smart to plan ahead and avoid some of the most common pitfalls and concerns, so that your company can easily survive the big problems that tend to plague businesses over their first two years.
Here are six mistakes that can kill your startup in the first couple of years:
1. Cash flow problems
Difficulty with cash flow might be one of the most common problems for new businesses. You haven’t yet learned your cycle with busy and slow times, you may need to purchase more inventory or stock than you will in later years, or you may have spent most of your initial capital in getting set up.
To make sure your business does well over the first few years, you should either have plenty of capital held in reserve, to cover any lean times that arise, or you should plan carefully for all potential slow periods, and make sure that you have what you need to get through them, budget-wise.
2. Personality mismatch
You might have decided to go into business with your spouse, your best friend, or a buddy from college. But as you start to work together, you find out that the two of you just work in such fundamentally different ways that you struggle to find common ground.
How you handle this problem depends on how serious the issue is. Do you just find that your friend’s chewing with his mouth open is seriously disgusting, and you wish you never had to look at it again, or is your spouse’s inability to stop talking about work at home starting to affect your relationship? Taking a serious look at the problem and its source will help you know what to do. Consider carefully: Which is more important, your business or your relationship?
3. Heavy focus on funding
On the flipside of the overextending problem, companies can become so focused on going through rounds of funding and trying to be seen as a unicorn that they completely forget to deliver a functioning product. Plus, companies that give away all of their assets in early rounds of funding can find that they have seriously devalued their companies before they even get started.
Also Read: Startup funding in 2017: A different game?
If you can save up the cash to get your company off the ground on your own, that is always going to be the best way to get started. Save funding rounds for when you have something to show. You’ll get a better deal and be more successful as well.
4. Doing it all Yourself
One obvious way to cut costs when you’re bootstrapping a startup is to just take care of things yourself. It makes sense, after all. Handle the books, combine the content marketing and SEO, design the product, get the website up and running. It’s a good way to get moving, but it’s no way to run a business over the long term.
To avoid getting stuck managing everything at your company, make a list early on of what you’re good at, and what tasks would be best outsourced. Then, as your company begins to gain traction, outsource those pieces one at a time. What you need to offload first is going to be individual.
Some entrepreneurs are more than comfortable managing the books for years, but want to outsource social media the very second they can afford it; some prefer the reverse. The important thing is to focus on what you’re good at, and delegate the things that you’re not good at.
Many bootstrapped businesses end up running through their early years mostly on credit cards. While this is certainly a solution, it is far from the ideal one. It places a great deal of stress on the entrepreneur to make the business succeed, which can actually be counterproductive. Also, if credit is the company’s only real source of capital, what happens if they run out of credit?
To help avoid this problem, exhaust every possible source of capital before you look at credit cards as a viable option. Try local banks, small business administration loans, credit unions, and more. Be very, very careful any time you put up personal assets for business money.
6. Failing to pivot
Absolutely no business or endeavour goes according to plan. A business plan should be a strategic document that lays out the crucial aspects of your company, but it should also give you a roadmap to flexible functioning. If your business plan is rock solid, but offers no room for change, it is not serving you as well as it could.
What are the biggest mistakes you see in new startup businesses?
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