You only have to look at Bloomberg’s US Startups Barometer to realise how successful Silicon Valley enterprises have been over the past 10 years.
Since 2009, the overall health of the business environment for private technology companies based in the USA has gone up more than 1000%.
Even so, the reason why this weekly indicator exists is because “few business communities swing from boom to bust as reliably as startups.” For every success story, there are dozens of failures.
If you’ve recently launched a startup or are thinking of setting up your own enterprise, here’s 5 mistakes to avoid from those who have experienced the pitfalls of business first hand.
1.Choosing the wrong business entity type
The structure you choose for your business will affect you in a variety of different ways – financially, legally and personally. If you opt for the wrong one, you could put your assets at risk and have to fill out a mountain of tax forms.
“Carefully review your options before deciding on your business structure,” says serial entrepreneur Nellie Akalp. “I recommend enlisting the guidance of an attorney, accountant, tax advisor, and/or other qualified professionals to ensure you understand the pros and cons of each business entity type.”
2.Misinterpreting the market
“The biggest mistake a business owner can make when launching a startup is misinterpreting the market,” says Nabeel Mushtaq, COO and co-founder, AskforTask. “Whether it is underestimating [or] overestimating costs, appealing to the wrong target demographic, or poorly gauging the demand, misinterpreting your market can end your business before it even starts.”
The lesson here is to conduct comprehensive market research ahead of time and to develop a financially watertight business plan.
3.Not doing it for the right reasons
Some might be motivated by a better work/life balance and the opportunity to be their own boss, while others will be interested in more money and power. But no matter your motivation for starting up a business, make sure you do it for the right reasons, ideally in industry you’re passionate about.
“The problem you want to solve, the people you solve it for (your potential customers) and the people you co-found with should really mean something to you,” says digital entrepreneur and public speaker Andreas Diehl. “You should be prepared to work on that for the next 10 years. Otherwise, you waste your time and you will most likely burn out.”
4.Rushing recruitment and hiring the wrong staff
According to US Startup Outlook, access to talent (63%) was the critical issue affecting startups in 2019. Although a lot will depend on the nature of your business, you can’t underestimate the importance of people power.
“To work in a startup, you need to be a self-starter with vision and ideally team members need to be aligned with the greater mission,” says Maryam Henein, editor-in-chief of HoneyColony. “Many times my gut indicated that a person didn’t have the stamina it takes for whatever reason.”
5.Failing to delegate or micromanaging your workforce
“As a startup, there is sometimes a lack of self-awareness,” says Matt Pyke, founder and CEO, Fly High Media. “Founders in the early stage are not great at delegating work to their team members.”
Sure, you’ll be focused on cutting costs wherever possible, but delegating tasks that aren’t your strong point will pay dividends in the long run.