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10 deadly startup mistakes to avoid

Deadly startup mistake no. 1: Not prepping your life.
By Paula Andruss |


Countless startups fail every year. But there are not countless reasons that they fail. “I’m talking to entrepreneurs three or four times a week, and they’re all coming to me with the exact same issues,” said Tarek Kamil, a serial entrepreneur with five launches under his belt (most recently, as founder and CEO of the communications platform Cerkl). “People are falling into the same traps over and over. If they could just avoid those common mistakes, the chances of their company being successful would significantly increase.”



He is not the only one who thinks so. Mentors, venture capitalists, and serial entrepreneurs all say they routinely see entrepreneurs fall prey to a common set of mistakes. So what are they? You should know. 



1. Not prepping your life

No one would show up to run the Boston Marathon without training first. The same should be true of startups. You need to warm up with some prelaunch training, from getting proper rest and nutrition, to shoring up relationships. “You have to be rigorous about making sure you are ready and that every area of your life is in check,” said Kamil. A startup will take a toll on your life, guaranteed.



2. Confusing a product with a business

Here is how to make the distinction: Do you have potential revenue streams beyond the customer’s initial purchase of a product? That is a key factor for prospective investors, who want to see what the next thing is and want to make sure that there is some longevity beyond what you are offering today.




3. Not paying for expertise

We say this with full respect: You are not good at everything. You cannot be. And yet, every part of a business should be done expertly—particularly the tricky stuff like taxes and legal issues.


So where it really matters, do not download some free online guide or think you can handle it yourself. Find an expert whose job is to know exactly what you need to do.



4. Ignoring data

“Magical thinking can kill any business,” said Lisa Stone, the San Francisco–based cofounder of the online community BlogHer. You cannot just believe you will succeed—you need to actually crunch some numbers and figure out if you will succeed. There has to be data that validates that your big idea is real, or at least provides a leading indicator that it could be. Once you collect that data, use it to create key performance indicators or milestones to show your idea or business is progressing. 




5. Scaling too quickly

Here is a scary number: Seventy-four percent of high-growth internet startups fail because they scaled too fast, too soon. (That’s according to a report by Startup Genome.) “It happens a lot,” said Erik Rannala, co-founder and managing partner of Los Angeles–based Mucker Capital. “People raise money, think they’re flush with cash and then spend it on the wrong things. But by the time they realize that spending is not getting them anywhere, it is often too late.”


What are they spending on? Oh, anything—from marketing to hiring too many employees too quickly. But the basic problem is the same: They are draining the budget on things that are not essential to expansion or determining whether their business is even viable. “When you start to spend money, you need to either have more or have a way to generate more,” Rannala said. “Because if you run out of money before you actually hit any real business milestones, you are going to have a very hard time raising more.”




6. Clinging to the wrong idea

“You have to realize that sometimes you’re pushing up the wrong hill or you’re pushing into a brick wall you’re never going to break through,” Rannala said. This mistake is especially prevalent among first time entrepreneurs and people entering an unfamiliar market—folks who just fall in love with their original idea and cannot recognize how much it is failing.



Do not go on gut. Go on evidence. Evaluate how your product fits in the market. Maybe you run experiments on what tactics or product tweaks draw in customers the best. Or maybe you closely track how much it costs you to acquire each customer—and if small tweaks make that cost go up or down.



7. Failing to delegate

It is perhaps the most classic problem in management: Rather than give up control and trust others to take the reins, you try to do everything yourself—and fail. The instinct is understandable, of course.


So, what to do? Delegate, obviously. Start by drawing up processes, almost like a guidebook for how to do things the way they should be done. That way you will feel calmer, and your employees will have the direction they need.



8. Thinking money solves everything

Struggling entrepreneurs often think that if they can just raise another round of financing, their problems will be solved. But money does not work like that. It cannot solve a fundamental issue with a business model, said Carter Cast, professor of entrepreneurship at Kellogg School of Management and venture partner at Chicago-based Pritzker Group Venture Capital.



“If your business model isn’t sound, throwing money at it is not going to work,” Cast said. “You have to fix the problem first, and then raise the money. Doing it the other way around will only get you in more trouble.”



9. Underestimating how long sales take

Let us get this out of the way: Sales take time. Many startups even think they can close a big enterprise account in three to six months—but in reality, a deal like that can take more than a year. And if your business plan does not account for that, you are going to be in trouble. 



10. Fearing failure

“Fail fast” may be a popular catchphrase, but Kamil is not a fan of it. No matter how much entrepreneurs may glorify failure, there is still that scary word: fail. And nobody wants to be the opposite of success. “It’s really the wrong term, because ‘failing’ means there’s no benefit, and most times that’s just not true,” he said.



Change the mindset. You did not fail—you ran an experiment that will improve your next business. 


So, were these still 10 types of startup failures? Sure, technically. But that just means they are also 10 ways to learn. 



Copyright © 2016 Entrepreneur Media, Inc. All rights reserved.

This article originally appeared on Minor edits have been done by the editors.


Photos from Thinktock

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