The most common yet avoidable mistakes that cause startups to fail

As CEO of Universal Business School Sydney (UBSS) and author of The Unlikely Entrepreneur, Alan Manly OAM has seen many startups come and go. He shares the top seven avoidable mistakes he’s seen over the years that cause even the most promising startups to fail.

The secret to success may well be that there is no one secret at all. Likewise, there is no one way to avoid failure. However, there are some well-worn paths that startup entrepreneurs seem to revisit time and again.

What causes a promising startup to fail?

Here are some common mistakes that entrepreneurs make that can lead to their businesses failing.

Following a dream

There are people who follow a dream systematically, who turn a dream into a goal with realistic steps. And then there are the dreamers.

The dreamer’s desire to follow that dream means they immediately protect themselves from criticism. When speaking to others about their prospective venture, the entrepreneur that would rather blindly move forward instead of seeking constructive criticism is often setting themselves up for failure.

The cold, hard reality of business awaits them.

Friends in business

If you’re having trouble finding a person close to you to join your startup, then maybe you should get out more. If the idea is of any value, others will want to join in your potential success.

Writing in Forbes, Soulaima Gourani said that it’s often difficult to find people close to you that will actually help your business. “Friendship and business don’t mix and there’s no point trying to force it. If you find yourself in a situation where you absolutely have to, then you may be faced with some critical decisions to make,” Gourani said.

Look outside your circle for others that can see your vision.

Dreaming too big

All corporations start small. Some startups will unwisely model their organisation on massive structures that are just big bureaucracies that can absorb errors in judgement and have the depth of finance to rework any errors.

Apple founder Steve Jobs is quoted as saying “Details matter; it’s worth waiting to get it right.”

Bigger is not always better.

Sharing the pie before it is baked

Risk equals reward. The rush of excitement shared by all around in the initial startup stages can lead to a sad rush of generosity. This is a trap for young players.

Just like a marathon, the prize is at the end, not the start. Draft up a set of KPIs and reward folks when we all get there. Again, like a marathon, the rules are clear.

It is at the end – or in business, when a declared KPI is achieved – that the rewards are handed out.

Failing to evaluate your customers

Startup entrepreneurs often seek the freedom to run their own race, escape inept management and be free. So, they rush into a startup only to learn that each and every customer is now their new boss.

This new business relationship needs to be understood. Customers who pay on time are valuable. Customers who don’t pay on time are worth less, and customers who don’t pay or use up more resources than is profitable are someone else’s customers that you need to get rid of.

Startups are often too insecure to make such harsh decisions.

It’s all about money

The biggest mistake a startup can make is to run out of money. If a startup has more income (money coming in) than expenses (money going out), it is deemed a successful startup.

You’ve got to walk before you can run. Growing that business will be a challenge for another day.

The work-life balance conundrum

Some would suggest that a separation of work and non-work is vital. I have a different view.

A happy entrepreneur regards work and life as one. If you don’t like your work, take charge and change. If you don’t like your life arrangements, take charge and change. No one is happy if they haven’t taken charge of their lives.

In deciding to be a startup entrepreneur, you may well have chosen a minority pathway that not everyone will understand.

I wish all potential entrepreneurs success in avoiding some of the mistakes that others have experienced.

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