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The Two Biggest Mistakes in a Business Startup

There is now sufficient research, reports and understanding of the startup ecosystem, and it’s safe to conclude a startup business is very different from a successful, established business.

Avoid these business startup mistakes - TheBusinessTherapist.comBut since a lot of the world has not caught on to the radical differences, startups that try and act like established businesses tend to make two big mistakes:

Mistake 1: Premature product building – The long established process of taking an idea, making a business plan, find a location, start designing and building the product and then selling it often results in a big mistake:

The startup builds a great product that nobody wants.

If a startup business spends all their money, time and resources finding this out – they’re out of business.

This ‘pipeline’ approach to new products and services has been the established method for decades. Startups will often get advice or have learned the strategies from established businesses. A startup can even feel comfortably confident and in control as they execute a great plan to build a great product that nobody wants!

The way to avoid premature product building is to ‘nail the problembefore you start building your solution.

Your potential customers don’t buy your great idea, they buy a solution that solves a painful enough problem that parting with their hard earned money is worth it for them.

In startup lingo it’s called getting to ‘problem – solution fit’.

Once you get to the wonderful milestone of ‘problem – solution fit’, build a minimum viable product, develop the sale funnel and clarify the best customer segments to satisfy, among other things. This stage is the pursuit of “ product – market fit”. This is where another big mistake can happen:

Mistake #2: Premature Scaling

Premature scaling has been described as ‘pouring water into a leaky bucket’. While you may be getting some revenues and early traction, the business is not yet efficient enough to scale properly.

Again, the tendency is to start acting like an established business and hire a bunch of vice presidents of everything. Unless the vice presidents are going to man the call centre and help your first thousand customers work through their challenges with your new product, all they will do is increase your ‘burn rate’ – the amount of cash you are burning through each month trying to pour water into a leaky bucket.

In an established business, the efficient execution of the business model can pay for the higher overheads to manage the operations, but in a growing startup, you are still innovating and improving everything.

In summary, it is clear that timing is important. The ability to resist the temptation to get too far ahead of yourself is also important.

We are working on a program that helps startups assess what stage they are in and what they should be working on. It will reduce the probability of premature product building and premature scaling. If you are interested in trying it out, let us know.

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