10 Common Mistakes Early Stage Startups Make And How To Avoid Them

Entrepreneurs are different–not everybody has the mettle for the risky world of startups. Especially when a majority of them fail to survive beyond their fifth year of business! 

You need more than passion and a good idea to set up a viable business. How you execute your plan has a significant bearing on your chances of success. If you’re an enthusiastic entrepreneur with an innovative idea, we’d hate to see you forced to fold. 

Early-stage startups are in the phase where the seed of the idea has begun to take shape in the form of a minimum viable product (MVP). Founders are performing validation experiments and tweaking their products based on user feedback.

You can avoid startup failure by not making these 10 common early-stage startup mistakes:

Avoiding contracts

You may find it unnecessary to draw up contracts with your co-founders, investors, and team members during the early stages of your startup because you’re busy.  

However, as your startup grows, these relationships could sour due to miscommunication or misunderstanding. 

To avoid legal hassles and funding issues, do not depend on verbal commitments. Put pen to paper and keep documentation ready so that everyone is on the same page.

Not delegating work

Your early-stage startup is your baby, so, understandably, you do not easily trust anyone else with it. But you’re not superman or superwoman–you cannot be good at everything! 

Building a startup involves a variety of tasks and takes time. Pick the task that you’re good at and delegate the rest of the responsibilities to other people. 

Beware of burnout, which is a real medical problem with long-term consequences for health. 

A diverse core team with different skill sets improves the chances of success. Team members also keep each other in check to ensure that no aspect of running the business is getting ignored. 

It’s no surprise that the third-most common reason for the failure of startups is that the founder did not put together the right team. 

Outsource administrative tasks like HR, payroll, and recruitment wherever feasible. Seek assistance and counsel from experienced people when you need it so that you make fewer mistakes. 

A word of warning when choosing your core team — they should align with your vision and goals. You do not want to waste time and energy minimizing friction and disharmony within the team later on.

Not performing enough market research

A big mistake many entrepreneurs make in their haste to get their idea off the ground is not taking the time to study the market or potential customers.

Many founders are too close to their venture and feel that their product is unique and customers will be queuing up to buy it. 

Thorough market research will ensure that you’re offering customers something they really want and are willing to pay for. 

Market research should consist of the following:

  • Conducting focus groups and surveys
  • Speaking to potential customers
  • Performing a SWOT analysis of competitors
  • Identifying your product’s unique selling proposition (USP)
  • Understanding barriers to entry 
  • Devising pricing strategies

This will also help you develop a realistic business plan that you can execute, thereby keeping investors happy. 

Trying to please everyone

If you try to sell to everyone, you will end up disappointing all of them. 

In the early stages, your resources are limited so if you stretch yourself thin by attempting to cater to more than one type of user persona or market, you’re likely to disappoint them all.

Keep your focus on building one product at a time and avoid getting distracted or tempted by opportunities that are not right for you. Solve one customer pain point before you move on to the next one.

Early-stage startups need to pay attention to early adopters, people who are most interested in their products and are most likely to buy from them. 

Rushing to build 

Don’t be in a rush to build more functionality into your product. In the early days of your startup, you will receive feedback from various sources. This could help you improve your product and polish it into an even better offering.

“As you consider building your own minimum viable product, let this simple rule suffice: remove any feature, process, or effort that does not contribute directly to the learning you seek.”

— Eric Ries, The Lean Startup

The lean startup methodology advocates validating an idea quickly and cheaply before creating a technical prototype. You can create a proof of concept (POC) or a proof of principle to demonstrate functionality and determine if the concept can be achieved in development.

In fact, running out of cash is the second-most common reason for startup failure so it would be wise to allocate funds judiciously. Verify that there is a demand for each feature of your software before you start development.

Offer an MVP with basic functionality to potential users. Later on, add features that are required based on their feedback.

Rushing to market

A CB Insights study that interviewed founders of failed startups discovered that the most common reason for startup failure was a lack of product-market fit.

You may be solving an interesting problem with your software, but is there a demand for it?

  • Will your potential customers be willing to buy it?
  • Is the design user-friendly and intuitive?

You can push sales for a while with aggressive marketing, but your customers will not return and your revenue growth will slow down. 

The early-stage startup phase is where you keep your customers close, solicit continuous feedback, and perform many iterations of your MVP to get the right market fit.

Thus, avoid rushing to grow revenue as soon as possible unless you have determined that there is a market need.

Ignoring the needs of customers

Entrepreneurs often find it easier to assume what their target market wants than gather user inputs and adapt to their needs. A lot of money and effort is spent building something that isn’t solving a problem.

You can roll out a variety of features that you think are great, but your product will flop if it doesn’t meet a need or solve a burning problem. Do not assume that customers will come just because the product is good.  

“The product that wins is the one that bridges customers to the future, not the one that requires a giant leap.” 

Aaron Levie, co-founder of Box

You have to find a way to connect the benefits of your product to the needs of your potential buyers. Hence, before you build, take the time to speak to your potential customers to get practical insights. 

Another point to note is that not all customers are the same in terms of lead stages. Some may be interested to know more, whereas others may be actively engaging with your startup. So your communications should be adjusted based on customer interest to boost conversions.

Unrealistic expectations for time and cost

Entrepreneurs often underestimate the capital expenditure and time required, thus taking much longer than anticipated. 

Remember to factor unexpected delays, costs, and challenges into your plan. It is good to be positive and unafraid of failure, but it is also prudent to be realistic. 

  1. Hiring a team too soon

A common mistake that entrepreneurs make is spending money on unnecessary hires or expanding the team before you’re clear about who is essential. 

This can adversely affect you in two ways:

  • You’re spending resources that could be put to better use elsewhere. Remember that your startup idea is yet to crystallize into its final form.
  • Who you hire now will impact your business six months down the line. Unless you and your team share the same risk appetite and agility, you may find yourself struggling to stay afloat.  

Related caveat: Do not hand over equity too easily to investors, employees, or partners because it dilutes the value of your product. Your actions should be well-thought-out and should factor in long-term consequences.

Comparing with the wrong industry

Building and nurturing your startup is a risky and high-pressure environment. There’s no need to add to it by benchmarking yourself against companies or industries that are not comparable.

For instance, the success metrics of an embedded iPaas solutions provider like APIFuse will be different from a non-SaaS company. 

The right strategy calls are crucial to the success of your early-stage startup so be sure to analyze the right set of peers to get correct insights.

Conclusion

Building a startup is a risky endeavor, but that shouldn’t prevent you from working on your innovative ideas. To reduce the chances of failure, you should focus on establishing product-market fit before you build, attempt to go to market or expect profitable revenues. 

Now that you know the most common mistakes that entrepreneurs tend to make in their zeal to launch their startup, we hope you can sidestep them. 

Guide your startup to success by applying the principles of lean startup – make something customers actually want, quickly and cheaply!

Carl Torrence

Carl Torrence

Carl Torrence is a Content Marketer at Marketing Digest. His core expertise lies in developing data-driven content for brands, SaaS businesses, and agencies. In his free time, he enjoys binge-watching time-travel movies and listening to Linkin Park and Coldplay albums in the loop.

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