Avoiding mistakes in your startup's first year
The question of failure is something that many entrepreneurs have a distinct attitude about.
Some will say it’s inevitable; almost expected. Even if you’re idea is good and you have everything in place, sometimes it just doesn’t work out and you’re back at square one. Then there are those people who say failure isn’t an option…
But with the statistic that 50% of startups fail within their first year, we sometimes have to accept that in reality things are quite gloomy.
However, with the right planning and foresight, you can make sure that your business moves beyond this statistic and is able to blow out the candle at its first birthday party.
Getting you idea stolen. Ouch.
Receiving a big laugh for a joke you stole from someone is always a guilty pleasure. Especially if you’re around that person you stole it from when telling it to the other people.
In a business context, this is a different matter. It’s easy to get excited about your business plan – it’s something new that you feel can make a real difference, so wanting to tell people about it is natural. While I’d hope that your best friend wouldn’t do a number on you, there’s nothing stopping them from stealing your idea. If you’re certain your idea is unique, you shouldn’t rush into the early stages of full operations until you’ve protected it.
Protect your intellectual property and trademark your products whenever you can. Don’t let your business lose what makes it unique. Stop the other person from having the last laugh.
On the other hand, you could be the person who’s stealing someone’s idea. If this is their intellectual property you’re in big trouble. Sitting on the naughty step for doing this could bankrupt your company. If it doesn’t, the bad PR created could.
Sure, it’s not always intentional, but by doing your research in advance you could ensure that your business isn’t the one being accused of theft.
Once you understand that not everyone who calls up Who Wants to be a Millionaire? gets on the show, or that the scratch-cards you get free in magazines usually aren’t jackpot winners, you realise how tough it is to come by a hefty sum of money.
Seeking investment can be one of the biggest risks for a startup – especially if you’ve bet everything on being able to secure this outside funding.
Outside funding can be a problem even for the most hardened entrepreneur, so if you’re new to the startup world, chances are that finding an investor willing to take the plunge for you is going to be difficult.
Perhaps you can overcome this by requesting a lower amount of funding in your initial stages. This may obviously not always be an option, but a bit of modesty and not overvaluing your business goes a long way. You’ve got to make sure your capital raising approach matches the stage that your business is at. Another option worth having is an alternative business plan - one that tells you how you’re going to fund your business go it alone.
Unfortunately, if you succeed in raising capital it’s not the end of your financial woes (sorry).
Cash flow problems plague every business. Customers can default on your invoices, the cost of your materials could increase, or, if your business has more of an appeal overseas, poor exchange rates could reduce your net profit. Increasing interest rates can also raise the cost of your working capital. These factors are normally out of your control, but it’s important to account for these potential pitfalls and work out how your startup would deal with them.
Passion is good, right?
A trait of most entrepreneurs is their unshakable confidence for their idea. Sometimes though this passion can cloud judgement. As well as being too financially invested it’s easy to also be too emotionally invested. This is something that founders are often oblivious too. It’s a situation that can lead to a business slowly being eaten away at from within.
Tied to the point above, founders can fall into the trap of counting on too much immediate investment or just not being realistic about where their business stands financially as a whole.
Not accepting help or being open to criticism, as well as not allowing something to go through before its been approved, are also common features of the ‘founder’s trap’.
The problem of having invested so much emotionally into a product or service can also make founders get ahead of themselves. Believing that their product is going to reach world domination purely because of a ‘buzz’ around the business isn’t enough. Are the people creating this frenzy going to be paying customers? What about other competitors on the same scene as you? It’s important to draw any positives out, but is this clouding the vision of where your business is realistically at?
Scrutinise your business idea and remain open to suggestions. Remember that many years down the line a successful business may look very different to how it was first envisioned…
The team that work for you are both your greatest asset and liability. People are unpredictable.
Bringing together a team that has a balanced level of expertise in all the necessary fields is the key to success. One thing that can really affect a business in its early stage is the divisions that can appear between employees. Especially if it’s over disagreements about the direction of the business. Working in a space with a bad atmosphere is the worst.
In its early stages, your team will be small and filled with people who know exactly what the deal is. Losing these individuals in your business’ formative years isn’t great. So what can be done?
It’s a tough one, as you don’t want to come across as a drill-sergeant to your employees. Anticipating confrontation and situations where the more reserved employees aren’t going to be overwhelmed by big characters can be a good approach though. While you’ll never be able to prepare for everything, keeping a close eye on your employees and making sure disagreements don’t get nasty can prevent you from reaching a stage of regret at not saying anything sooner.