The 6 Mistakes That Kill Startups
Alejandro Cremades, Contributor to Forbes.com
Read the entire article here
Business success requires business preparation. You don’t have to be a master tactician, but you do need to have a plan in place. This plan will act as a foundation for everything you want to achieve. In my book, The Art of Startup Fundraising, I discuss how being alert to potential mistakes, and tackling them in advance is smart when it comes to clearing the path to thriving and achieving success. Below is a list with some of the mistakes that most likely will cause entrepreneurs to fail in 2018.
1) Too Many Members on the Founding Team
Giving equity is a great way to motivate and enroll the help of more individuals when your startup is lean on cash. This can be applied to co-founders, key team members, friends and family investors in the seed stage, and even advisors and professionals such as lawyers. However, too much equity in the hands of too many (especially inexperienced) early shareholders can be problematic.
2) Overhead is Too High
One of Sam Walton’s core principles when building the Walmart empire was to always control costs better than the competition. That’s where he found his advantage, and sustainability. Not everyone wants to run a discount business, but there is no lack of scale or revenue at Walmart.
3) Weak Marketing Plans
Scaling and generating real revenues is going to require a realistic and aggressive plan. You can’t only rely on paid advertising. Especially if they have only identified one or two channels to use. There may be times when funds are tight, and you need to be able to generate sales regardless of fundraising success, and profits, and profit margins will be a lot better if there are other sales channels working.
4) No Technical Founders
If you aren’t technical, and you have no technical founders, that means there will likely be significant cost in paying for technical development and maintenance. That is a hard cost that the venture may not survive without. Contrast that setup with having at least two or three co-founders that cover all of the main functions and skill sets.
5) Poor Use of Funds
Start-ups that have burned through previous rounds of funding without generating results can be a scary proposition. Note that this doesn’t necessarily have to mean break even, or in some cases, revenues. Some of the biggest stories of recent years appear to have changed these rules. However, you’ve got to have something to show for it.
6) Early Investors Not Participating in Additional Funding Rounds
If previous investors are not getting in on a round that can definitely be a bad sign. If there is a good reason for that, make sure to address it proactively, rather than allowing it to work against you. A good way to avoid this issue is to prepare detailed quarterly updates for your investors where you bring them up to speed on the core issues of the business. This creates trust and builds the relationship further with them.