Nine out of ten startups fail. That’s a terribly discouraging statistic for any hopeful entrepreneur. The silver lining? Many of these startups brought the failure on themselves by making poor choices and skipping crucial steps.
These startups do the opposite of setting themselves up for success. They push themselves closer and closer to the brink of failure with each step they do not take. At some point, it becomes just a matter of time before they end. True, not every startup falls to its demise under the hands of its leader. But enough startups do end because their fearless captain failed to take the right steps at enough points along the way that eventually the luck and hard work ran out.
But the good news is, this risk of failure is somewhat in your control! Another way of putting it: by making sure you don’t skip crucial steps, you can improve your likelihood of being that 1/10 success stories. Below are the common steps many startups skip (that end up costing them in the end). Learn from their mistakes!
1. Ensuring there’s a market. The main reason startups fail is they offer a product consumers don’t want (or, at most, feel ambivalent about). The first and most important step is doing your research and confidently concluding that there is in fact a market for your product. What need are you meeting? What consumer desire are you fulfilling? Is there actually a reason to buy your product (or buy your product over your competitor's similar product)?
2. Getting target consumer feedback. Failing to take the time to listen to your potential consumer base will zap time, money, and your chances of succeeding. Consumer research is dry, boring, and time intensive. But the results speak for themselves. You can reap some gems that’ll steer your startup in the right direction. Maybe you’ll discover right away that your name rubs people the wrong way or the killer logo design you thought you had elicits a “meh” response. Better to fix these problems upfront before order thousands of business cards and other marketable products. If you already have a prototype, let customers play around with it. See how user friendly it actually is. FInd out if they are enjoying the aesthetic appeal. Poke around their brain to see what’s missing and what shouldn’t change.
3. Articulating your purpose. You need to know the why behind your what. It is important to clearly and concisely express your purpose. It helps create team unity when people are gathered around a central purpose. It helps your customers know what you are about and how you solve their problems. It helps you on those dreadful days where you are working yourself ragged, wondering why you ever left that cushy corporate job to chase some startup dream. Your purpose will help you time and time again move forward.
4. Seriously evaluating costs. It is all too easy to underestimate how expensive running a startup can be. Even if you are operating out of your home office without any office rental fees or commuting costs, you still are going to end up paying over and over again to keep yourself afloat. Keep in mind the costs of self-employment taxes, employee benefits like health insurance, and the logistical business maintenance tasks like marketing. You got to spend money to make money. Take the time to really evaluate honestly the expected costs so you can better price your services.
5. Spying on the competitors. Yes, there’s only a so many hours in the day. It’s tempting to want to devote all your time to only thinking about your business. But if you aren’t spending some time eying the competition, you’re doing yourself a disservice. Try out all the competitor’s products you possibly can. This will help you pinpoint what sets your product or service apart from the competition, since you will have actually interacted with the competition. Try to see what the current customer experience is like (so you can identify how to improve it).
6. Refusing to think momentum is progress. Just because things are happening, does not mean you are moving forward. Motion is inevitably with startup culture. Each day you are alive is a day you are having momentum. But that does not always equate to success or progress. You finalized your logo? Great, but it does not mean much if you aren’t selling products with the logo or customers aren’t enjoying the logo. You hired a virtual assistant? Great, but it does not matter much if you are failing to delegate what you need to or they are not contributing much to the team. Take the time to ensure the steps you are taking are moving your company forward, not just moving your company.
7. Investing in insurance. Just because you do not have to does not mean you shouldn’t. Insurance is a wise, wise investment. Unfortunately, most businesses skip this step (or fail to invest enough). One study found that 75% of businesses are uninsured by 40% or more. This poses a huge risk to these businesses and their ability to remain sustainable. If something were to happen, from an on the job employee injury to property theft to a password hacking, it could be the end of that business. One small hiccup may end up costing enough that the company has no choice but to close its doors.
Each of these steps is an important one startups need to take. Some of these are most important at the beginning of the startup (like articulating your purpose). But many of these steps are important to continually be taking. After you go through a company rebrand, for example, you are given a great chance to re-evaluate your purpose and see if things have shifted. As your company expands, you may need to take out more insurance. A new competitor joins the block, so you need to monitor them as well.
When it comes to investing in your startup, you know the importance of using your money wisely. Here at 10twelve, we put our best and brightest on the job to build up your marketing strategy. Reach out to the 10Twelve team today.