Our head of business advisory, Desi Olsen, has advised businesses for almost 30 years and put many start-ups on the road to success. Here he looks at the biggest mistakes early-stage start-ups make – and how you can avoid them.
Mistake 1: Founders thinking it’s a part-time job
Running a successful start-up is not a job for part-timers.
As a founder, your work needs to be your passion and your focus – during work hours at the very least – if you want to make it a success.
A surprising number of founders don’t get this; there’s plenty who think they can do whatever they want, particularly when they’ve got investors on board and some cash in the bank.
These founders usually see their firms fail.
If you aren’t willing to commit yourself full-time, or you’re looking for excuses not to do the work, then maybe a start-up isn’t right for you.
So, get off that beach and put down the piña colada… It’s time to get to work.
Mistake 2: Over-complicating your offer
Instead of trying to do everything at once, focus on solving one problem really well.
It makes him sad, because it’s the easiest way to kill a good idea.
Please don’t make Andras sad.
It’s tempting to add features early on that you think will make your product or service more compelling, but this usually just makes it harder for users to understand what you are selling.
The best start-ups concentrate on a single task or problem they can solve better than anyone else in their space.
The best way to do this is workshop your idea and then create a prototype that really nails down the best version of that idea.
Focus on solving a core problem rather than building infrastructure that does not generate revenue or help the business grow faster.
That’s not to say you shouldn’t be planning and scheming for the future, at the same time
Yes, it is important for an early-stage start-up launching a product to focus on getting out there quickly with an MVP (minimum viable product). But you also need to make sure you have built an infrastructure and have a roadmap that lets you iterate and improve as you go along, based on data and customer feedback.
Mistake 3: Not thinking through structures and finances
One of the biggest mistakes early-stage companies make is not thinking through:
Addressing these issues early on can save you a lot of headaches in the long run.
The first step is to decide how you want to structure your ownership. That means answering questions like:
- Do you want everything owned by one or two people?
- Are there any investors involved?
- How much equity will each owner get?
- Are there any outside partners who want to invest in the company but don’t want an ownership stake (e.g., banks)?
Then it’s time to figure out how much money needs to come from outside sources, such as angels or venture capitalists (VC).
If someone else is providing capital then they will likely be taking some form of equity or convertible debt, so that needs to be worked out too.
Mistake 4: Not protecting your intellectual property (IP)
Ideally, you’d work through your IP before you even incorporate.
As early as possible, I’d suggest you:
- Identify what IP you have and what you need to develop more fully
- Speak with a legal expert who specialises in this area to draft a plan for protecting and developing your IP
You’ll need to consider issues around:
- brand names: it’s important you protect company or product names with a trademark (i.e. a word, phrase, symbol, or design that identifies and distinguishes the source of the marked goods from those of others)
- patents: stop people ripping off your ideas with patents, which give you the right to exclude others from making use of your invention while patent lasts
Mistake 5: Launching too soon
The thing that will differentiate you – as an entrepreneur or innovator – from most others, is doing something.
The power of an idea – however good – is only ever in its execution.
My experience is you’ll never feel truly ready to launch your firm and a lot of people will tell you just to get on with it. There’s a lot of wisdom in that.
But before you launch you still need to make sure you have some important pieces in place. These include:
- a product that people need and can afford – and which you can get to customers in a timely way (nothing kills a new firm quite like failing to deliver on its promises)
- stakeholder validation – you must listen to customers, staff, investors, (etc.), and get answers to questions like “Do people want the thing I’m selling?” and “Does it actually work?” You’d be amazed by the volume of poor decisions made based on either false assumptions or business owners believing their own hype
- clients under your belt – you’ll ideally have at least a couple to act as case studies or testimonials before you really push your platform, product, or service. (Many firms will want proof of your bone fides, and won’t want to feel like guinea pigs, particularly in B2B)
If these things aren’t already checked off your list, then hold your horses! Get them in place before you open for business.
Mistake 6: Hiring people who are the same as you
Hiring in your own image can be the comfortable, easy thing to do, but you should avoid it.
You need people with skills and experience that complement yours. On top of that, your team should have different backgrounds from you, as far as is practicable.
Diversity will promote creativity and productivity, as well as help keep everyone honest and open-minded when making decisions together.
An easy way to spot that you’ve hired in your own image is if you’re all agreeing all the time. You should all treat each other with respect, but you shouldn’t always think the same way. If you are, then you’ve got a problem.
The one thing you do all need to agree on – and have a passion for – is the vision and mission of the firm. That’s crucial.