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Evolution Accelerator, an entrepreneurship program based in Sacramento, helps entrepreneurs avoid the common mistakes that cause most startups to fail. The Evolution team has seen hundreds of new startups at every stage of development, all the way from idea to investment. Here is a list of common mistakes made by startup founders and suggestions for avoiding those mistakes.
1) Lack of Product-Market Fit
Studies from CB Insights show 42% of startups fail due to the lack of market need. In other words, you can build what you think is a great product or service, but if the market doesn’t find your offer useful, your business will never succeed.
Product-Market Fit is achieved when you are able to successfully balance your company’s value proposition with the needs of customers. But how do you know if you have achieved product-market fit?
Ask yourself the following questions:
- Would 40% of your customers be upset if they weren’t able to purchase your product or service anymore?
- Do customers purchase your product faster than you can manufacture it?
- Is word of mouth spreading? Are you receiving a lot of press coverage?
If the answer to any of these questions is, “No,” you have work to do.
Using the Value Proposition Canvas from Strategyzer, entrepreneurs can find the customer pain points and gain points that will help develop a strong value proposition. It is imperative to test your hypothesis with real customer feedback. Validating what you believe to be true is genuinely the critical step to success in achieving product-market fit.
2) Lack of Sufficient Funding
In business terms, your monthly expenses divided by the amount in your bank is called your “runway.” The runway indicates how many months you have left to operate your business at the current cash flow level. Where entrepreneurs go wrong is not realizing that they need to take an early proactive approach to securing funding. Early action is necessary, as the process is long and often doesn’t pan out.
If you only have three months left of funds in your account, you’re already too late. On the other hand, if you have the opportunity to take on an investment, but don’t need the cash flow, it could harm your business in the long run.
Remember that taking on investors is like entering into a marriage. It is a long-term relationship and not easily dissolved.
3) Lack of a Supportive, Effective Team
Having a good team supporting your startup during the initial phases is crucial to most entrepreneurs’ success. While you may be a great CEO, it is likely that you are not great at every role needed to run a business.
Look for individuals who have prior startup success when adding to your team of advisors, mentors, and/or employees. Determine your weaknesses and find team members to fulfill those roles.
According to Forbes, you should have a hacker, a hustler, and a hipster on your team to help deliver success. The hacker handles your business technology, the hipster delivers the brand messaging, and the hustler packages it altogether in a way that will appeal to customers.
How to Ensure Your Business is Succeessful
Of course, many other factors can come into play that can make or break a business. Failure is sometimes caused by circumstances completely outside of your control, such as a stock market dive, or a natural catastrophe. Nevertheless, there are very basic steps you can take that will vastly increase the odds that your business will make it:
- Make sure there is a healthy market for your product
- Make sure you have sufficient funding to go the distance
- Make sure you’ve put together the most effective team you possibly can.
Need a few more tips on how to run a small business? Visit Evolution Accelerator or leave Marsha Rogers a comment down below!
This article originally published on GREY Journal.