Fatal Errors Start-Ups Make (& How to Avoid Them) - NP GROUP

The majority of start-up companies fail. But what mistakes do their founders make as they develop their product and services?

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Fatal Errors Start-Ups Make (& How to Avoid Them)

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Fatal Errors Start-Ups Make (& How to Avoid Them)
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In the 20 years I've owned the agency, I've worked with many start-up companies. In my experience, some have done quite well – we've seen exits well into the 8-figures. Meanwhile, others have floundered. While the reasons some succeed and some fail can vary, there are a few commonalities I've seen, which I haven't ever quite summarized before. Now is the time, and I wanted to share some thoughts on a few prevalent errors I see start-ups commit, ultimately leading to problems later on. Again, like most of our posts, I present our points in no particular order of priority or importance, and I'll try to give enough insight to help you avoid the same problems.

Let's get to it!

No Focus on Marketing

I'm consistently amazed at how many start-ups focus on everything but marketing. I wouldn't want to be involved in any project as an investor that doesn't include a cofounder who knows how to market a product. In almost every case, the difference between success and failure is a comprehensive and holistic approach to marketing the product to the intended audience. That strategy should be developed as the product itself is developed as well. The start-ups I've seen done well all had someone at a high level managing the marketing campaign and doing so in a mathematically sound way. IE, spend X, recover Y for an ROI of Z%. If you are running a start-up and don't have this planned and accounted for, then take a breath and figure it out. Unlike Hollywood, not all companies are Field of Dreams – simply building it does not mean customers will come. It takes work, strategy, and above all else, execution to make that happen.

Rigid in Terms of Pivoting

The most successful start-ups I've seen made massive pivots in their direction after being in the market for a bit. If they didn't embrace those pivots, they wouldn't have made it. To be an effective executive, you need to know that pivot points will present themselves, and taking them on isn't always a mistake; in fact, it's often beneficial. Accept that it will happen, and be prepared to identify them early and act on them quickly. Even more helpful is to attempt to predict what possible pivot points may occur beforehand, though that isn't essential to success. In some cases, the market will define what those moments will be.

It's Minimum Viable Product, Not Maximum

Don't be too distracted by every bell & whistle you can think of as part of your initial product. Keep it simple. Make sure you can market and explain the concept in as few words as possible. During initial discovery, it's absolutely appropriate to think in terms of a roadmap of future functionality. But your MVP is meant to be minimally viable, which means it's a foundational project, not a comprehensive one. You want to keep a larger vision in mind while going to market with something that can prove the concept. The sad fact is, most start-ups DO fail. You need to mitigate your risk profile by establishing the model works and enhancing it as you gain traction.

No Market Research

You'd be surprised how many introductory calls we have with potential clients who didn't even research the market to see if there is competition they have to worry about. I often wonder how this could be! It's essential to research the market and see what's out there. You'll do one of two things: think about a better product or choose not to pursue your plan because the market is too saturated. Either way, it's better to find the latter out earlier, rather than later!

Think Niche

I don't want to be a downer, but the big ideas are rare to come by. I think the best ideas today are highly niched and very simple. I wouldn't want to invest or start anything that can't be explained in a sentence and is overly complex. The latest start-up to garner a lot of attention is Clubhouse. While I question its longevity, the overall concept is quite simple: live content with audience participation. I like the idea. I doubt the longevity because other platforms could easily do the same thing with an already sizable audience. In the years I've been in this business, the most straightforward ideas often led to the best outcomes. What are my own personal favorite products that serve as examples of simple but scalable and highly profitable? Calendly and Sanebox. I use them both, the price points are low, and they do one thing really well.

Failure to Expand Beyond Themselves

All too often, founders have an idea of how an app should work based on their own experience, but frequently that isn't enough to appeal to a broader audience. Even in a niched concept, there are times that product managers need to dig outside themselves and see more edge cases and additional possibilities. This is not meant to contradict my last point, but rather to remind founders that no matter how specific your idea, different types of people will use the product and as such you need to know you are not the world. Often I see founders who are quick to naysay ideas from outsiders because they don't know how that would work the way they are envisioning, but they'd be wise to take a crack at these ideas and calculate whether they would bear fruit or not. I'm never a fan of making something more complex than it needs to be, but we all live in a world where our viewpoints are dictated by our own experiences, and realizing that opens us up to feedback (and in some cases, criticism) which can prove valuable.

Chasing Incremental Savings

I realize that start-ups never have deep pocketbooks, but at the same time, there is no such thing as chasing operational efficiencies when you are in the early stages of a new company. Bootstrapping is fine, but attempting to cut back expenses at the wrong time for the wrong reasons rarely works out well. Founders should be focused on expanding at all times – the law of attraction tells us that where we focus is what we attract. This means focusing on marketing, sales, and enhancements to a product is where attention should be aimed, rather than saving incrementally on areas that introduce risk or distraction from the entire company's core goal. It is completely inconsistent with the idea of a start-up to pretend that business efficiencies that may be taught at Harvard Business School would be applicable. If anything, it's a distraction. Focus on what's important - chase growth and expansion.

Embracing Corporate Practices

Finally, though none of these points are in any particular order, I want to reiterate that everyone comes into a start-up with their experiences driving expectations and their own approach to the new endeavor. Historically, those that have come from small business or an entrepreneurial background seem to excel better than those who have spent the majority of their careers in a corporate setting. The fact is that an enterprise setting is entirely different than that of a nimble start-up. Enterprises drown themselves in meetings, policies, procedures, and workflows. Start-ups should focus on fast, incremental changes, embracing mistakes and continuous improvement. These two ideas and approaches are mutually exclusive. If your background is entirely corporate, you need to offset that with team members used to the scrappy, unorganized environment of a proper start-up to balance out the approach.

And on that note, I want to say, corporate participants bring much value to the team. But if the team is five individuals who worked in the enterprise setting and think they can now create and run a start-up, well, that never works out well. It must be balanced.

Thinking Digital is Easy

This one is always somewhat amusing... But when we hear a prospect who has an idea, and they were previously very successful in their other business endeavors but now want to try something online because "it's easier"... Well, I haven't had a single one of these folks stay in business for more than a year. And I've seen a few.

You may be really good at what you do. I've seen surgeons, investment bankers, celebrities and sports stars... you name it - each of them failed because they thought success in their respective fields would translate. Newsflash: It doesn't. You need help. You have to form a team, trust the team, and build up your own knowledge about how digital works. It takes time and effort.

In the inverse, the most successful people I've seen came into the arrangement humble and eager to learn. I've seen this with marketers who were traditional and converted to digital and I've seen it with start-up founders as well. humility and leaning on expertise go a long way.

Wrapping Up

In short, start-ups are hard work. But they are rewarding and fun. In fact, extremely rewarding in some cases if you can prove the endeavor has value and find someone to either invest or acquire it. However, the vast majority of start-ups do fail, and having seen it happen repeatedly, these points discussed above certainly are some of the familiar stories we've seen. Avoiding these mistakes is sure to put you in the right direction as you navigate the waters of developing, operating, and scaling your new business. And remember – even when the seas are rough – it's ultimately worth the effort!

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