Running a startup is no easy task, and the risk/reward balance is never guaranteed. But once you’ve got going, having your own company and being your own boss is adrenaline-inducing, and you become addicted to the thought of success and high valuations. But early stages are the most important, and what you do during the first few months can determine your fate during the next several years. It’s important to run your business on a lean budget and always be forward thinking and customer-focused. The following mistakes are those that are easy to make, and many startups fall victim to:
There are many reasons why startup founders begin by pricing their products and services too low to be reasonably sustainable for the business. Sometimes, the fear of failure causes people to underprice because they assume more people would purchase it if it were cheaper (undermining the value people will actually see in the product, and the concept that people are willing to pay more for that type of value). In this case, knowing who your customers are is critical — someone who values premium might see you proposition as cheap, for example. Furthermore, underpricing will wreak havoc on your bottom line: your margins need to be in order, and you’ll have trouble staying afloat if you aren’t careful with product pricing.
You choose the wrong hosting solution
Startup founders might overlook choosing the right hosting provider because it seems like something that can’t go wrong. But this simply isn’t the case. There are many different types of hosting solutions, and each caters to different types of needs. An ecommerce startup with a large catalog of products wouldn’t want a shared hosting plan because they’d require dedicated resources and can’t afford site outages.
At the same time, a simple website detailing your copywriting services wouldn’t require a dedicated server hosting plan. Both of these scenarios would be problematic: the ecommerce owner could lost thousands of dollars during a site outage caused by another website on the server, and the copywriter will be losing money on unnecessary resources. Additionally, certain platforms like WordPress have different costs depending on the hosting provider. Write down a list of your needs, and choose your hosting plan based on your business goals.
You overspend on expenses
Startup founders are dedicated to making their business succeed, and sometimes it’s this drive that forces them to believe they need the best of everything to increase their chances. They spend hefty amounts of money on marketing services, software, and premium equipment. However, when you’re just starting out and need every dollar you can get your hands on, it’s important to bootstrap your business.
This means, it’s probably not a great idea to pay for developer services, like building an app or a website. Not only is this risky if you don’t understand whether it will stick in your market, but could cost large sums of money. There are plenty of simple platforms for building your website with little expertise, and app building tools to test your product viability before investing thousands.
Spending a monthly retainer for public relations firm would also be a bad investment during the bootstrap stage. You can write articles for publications like Medium, or sign up for Help a Reporter Out to get interviews from big-name publishers looking for quotes. Be sure to develop a business budget based on your minimum reliable income, and stick to your numbers.
You assume you know the audience
It’s not uncommon for startup founders to have the wrong assumptions about who their target audience is. Other times, they neglect market segmentation, and only attract a portion of their entire market. For example, if you owned a premium office supply ecommerce business, you’re not just targeting office managers, but students as well. Without proper market research, you don’t fully understand where the most selling potential exists. You should create detailed buyer personas for each ideal customer, and keep it in mind as you market the business.
You hire employees too quickly
When you’re eager to grow your startup, it’s easy to think that hiring fast will contribute to fast growth. But fast hiring can actually hurt your startup. First, you run the risk of hiring the wrong people when you just want someone to work for you. You need dedicated, talented individuals more than ever during your early stages, and patience is key here.
Furthermore, employees cost money, it might be in your best interest to take longer doing things on your own the right way than concerning yourself with getting work done quicker with help. If have the expendable funds, and have tried to do something yourself and failed, that’s a sign you need to hire. Otherwise, be slow with your hiring process.