Starting your own company can be exciting. You have an idea and you think you can create a full-fledged business model around it. Every year hundreds of thousands of entrepreneurs launch their companies in the hope of making it big.
The industry statistic on new startup is quite alarming on the contrary. Over 90% of startups fail within their first 5 years. The question is, why do so many companies fail and most importantly, what separates the 10% from the rest of the pack.
I have worked alongside several startups and entrepreneurs and I think I have had my fair share of experience with the world of startups. The goal of this article is to ensure that entrepreneurs looking to start their own business venture don’t make the same mistakes as other failed startups did during their first five years of business.
Your Value Proposition Is Weak
All successful startups have one thing in common. Their value proposition is strong and helps sell their product to their target audience.
The first question that you should ask yourself as an entrepreneur is “Why would someone buy your product?”. Well that’s an easy one right?
Now, you should immediately follow up with this question, “Are there others doing a better job in what I have to offer in my market segment?”
If your answer to the second question is YES, it means that your idea or product is not unique and you have to face the obstacle of direct competition.
When you have a direct competition you need to constantly study your competitors and come up with new features that makes your product unique and gives the sales team a more convincing value proposition to work with.
You Are Not Scaling Your Sales Team
In order to generate revenue for your startup you need a sales team or a sales funnel. Figuring out a viable way to monetize your product is a crucial step for your company. It will make your business sustainable in the long run.
Creating a sales team is the first stepping stone in ensuring a steady cashflow for your startup. Start small by hiring a few inside sales rep. If you are not familiar with sales yourself, hire a sales manager to manager the department.
The three most important skills that every sales rep should have include:
- Can-do attitude
- Pushing to hit their targets every month
Most successful sales reps are driven. I suggest creating a sales culture where your sales representatives are incentivized for all of the
Your marketing department is weak
There is no sure shot way to success. However, one certain way to fail with your startup is to not invest heavily on marketing.
Always ensure that you are allocating a significant portion of your revenue towards marketing and acquiring new customers.
In your early days figure out a sustainable funnel that generates a customer after spending $”x” amount. That’s your CAC (customer acquisition funnel).
Once you figure out this number, simply scale your campaigns keeping pace with the growth of your startup.
Not developing the product (focusing too much on sales & marketing)
Focussing too much on sales and marketing and not allocating the proper budget for product development is actually worse than not focussing on sales and marketing.
If you are not investing in your product, then your competition will catch up. However, you might think that your product is unique or you have one of a kind solution for your target market.
Well, once you start generating revenue words spends around the industry pretty fast. Your competitors will likely copy all of your features or launch something similar at a better price.
In that case, you need to go back to the drawing board because it will have a direct impact on your sales.
Always stay one step ahead by listing to your customers and have a sustainable product roadmap.
You are not creating real leaders (you micro-manage every element)
A popular reason why many startups fail within their first 5 years is because the founders are too attached to the old way of running things.
You need to create leaders inside the company and stop worrying about how they run their departments. Every leader has their own style and in order to survive you need to give your management team the support and flexibility to get the job done.
IF you are micro-managing every department or challenging every decision that they make then you are simply creating obstacles from making your management team great leaders within the company.
You are doing it only for the money
The number one reason why most startups fail is become the founders do not have a constructive vision that is exciting for the company as a whole.
You may start your business with a plan but if your are just doing it for the money, you are never gonna be as successful as you wish you were.
As matter of fact a company with the core culture of making lots of money and without any inspiring vision is a recipe for brain drain (especially talented people). This is because talented people can work for the same amount of money they are making but for a bigger cause.
Keep in mind, that this philosophy applies even for sales. Although, salespeople are primarily motivated by their commission checks, they will perform much better if they have a sense of greater purpose in what they are doing.