Learn what small business experts say are the 20 biggest mistakes startups make.
According to data from the U.S. Bureau of Labor Statistics, 20% of new businesses fail within the first two years of operation, and about half of businesses do not survive beyond the fifth year. So how can you successfully launch and run a startup?
We reached out to hundreds of small business owners, growth strategists, financial advisors, legal experts, and business consultants to compile the 20 biggest mistakes startups make so you can avoid them when starting your business.
«The biggest mistake you can make is being afraid of failure. Failure is the key to your success, and jumping to fear is very positive for your future business. “How you get back up after failure and learn from your mistakes is the key to great success.” – Audrey Darrow, president of Righteously Raw
“Too many businesses start without a basic plan, and if you don't plan, you're essentially setting yourself up for failure. A new company must draw up a business plan, even if it is a single page. It should include how much it costs to operate, how much you expect to sell, who would buy your product and why.” – Deacon Hayes, financial expert and founder of WellKeptWallet.com
«Being organized is the key. Running a small business is like being the ringmaster of a circus. It's normal to have dozens of things happening at once. So I have a daily to-do list, things I have to do. And I list them by priority. It seems simple, but it works, and it makes me much more productive. – Tara Langdale-Schmidt, founder of VuVatech
«A common startup mistake is not taking the time to understand the market or customers you are building for. For technical founders, writing code may seem easier than talking to customers, but there's no way to know if you're on the right track unless you're constantly getting feedback from current or potential customers. It's important to recognize that creating a great product often doesn't translate into a successful business. Many companies find that they focus on a market that is simply too small to build a big business.«. – George Deglin, co-founder and CEO of OneSignal
“The biggest mistakes startups make are not registering their business, choosing the right business entity, or protecting their intellectual property. “These three areas are crucial to getting a business off to a good start, where if not done correctly, it will cost valuable time and money to correct.” – Heather Green Miller, Attorney and Owner of HGM Law Office
«A big mistake that entrepreneurs make is thinking that they are alone and try to operate independently without surrounding themselves with wise advice. Don't try to run a new business alone. Find and hire experienced and trusted advisors to discuss your business ideas, strategy, challenges and progress. Wisdom and power exist in the multiplicity of advice. Incentivize four to six people to join your company as consultants to receive continuous feedback so fewer errors occur.” – James Zimbardi, CEO of Rent Items
«An important tip that entrepreneurs should know before starting a business is that their investors are more than just financial backers. The first group of investors in a company will make or break it. These people place their trust in the company's potential without being presented with a proof of concept. “Once companies have gone through their initial funding, they will then engage with investors who are looking at the growth and sustainability of the business.” – Krish Subramanian, Co-Founder and CEO of Chargebee
«One of the biggest mistakes a businessman/entrepreneur can make when starting a business is not applying contracts. No matter how good relationships are, they can fall apart when systems and agreements are not put in place. – Michelle Colon-Johnson, founder of 2 Dream Productions
“By far the biggest mistake a startup can make is hiring employees too early, such as hiring full-time when a part-time worker might make more sense, or hiring an employee when a subcontractor could have done the same work.” /function. It is very easy to run a small business with part-time workers, subcontractors and the services of other professionals. ». – Joseph C. Kunz Jr., CEO and President, Dickson Keanaghan
«Most entrepreneurs think they can go further with less. In an effort to minimize capital dilution, they forget to account for any unknowns, challenges or delays along the way. Startup leaders tend to plan for the best-case scenario, but that almost never happens. This mindset can be attributed to the leaders' positivity and drinking their own Kool-Aid. Positivity has its place, however, when it comes to capital; “It often results in having to go back to the pot for a less than ideal raise.” – Wayne Schepens, Founder and CEO of LaunchTech Communications
«Managing money incorrectly and being irresponsible with cash flow is a death sentence for startups with limited access to capital. I've made the mistake of hiring too many people instead of the right ones, and spending money to fill the top of the funnel without having a well-defined process to manage the bottom of the funnel. Putting good money to bad use and trying to be everything to everyone instead of focusing on a niche is a sure way to waste valuable time and money, which are the lifeblood of any startup. – Thomas Aronica, Founder and CEO of Biller Genie
«Paying yourself too little or too much (is a mistake). It is often easier to determine the salary of a new employee than that of an owner or partner. Consider paying yourself a percentage of income. Whatever you choose, make the determination of your salary – and that of your partners – a practice and a basis for a healthy management expectation. – Diana Santaguida, co-founder and creative director of SEOcial
«Don't set the price too high, but don't set the price too low just to gain market share. If you're good, put a price on it! Many entrepreneurs start with the best of intentions and give things away for free, or do things for free for charity, community, or visibility. Be very careful with this, because you don't want to be known as a source of freebies. Ring the cash register first.” – James Chittenden, small business consultant, OneClickAdvisor
«One of the biggest mistakes startups make is launching before they are ready. The saying 'done is better than perfect' is the correct advice, however, the 'done' has to ensure that you can handle new clients. Once you've gone public and started getting clients, make sure your systems and processes are in place, such as payment terms and process, contracts, communications, while still being able to maintain your marketing strategy. . Background processes must be airtight before starting to attract clients; “If they aren’t, these are the cracks that will show and look unprofessional.” – Gems Collins, online course creator, business coach and CEO of Gems Collins LLC
“When you start to see success, it can be easy to assume that growth will continue, and the best way to make the most of it is to simply copy and paste your working formula. However, if you…expand your business too quickly, it could have dire consequences. You may discover that your period of growth has only been temporary, and you may end up stuck with a bunch of new staff but no work and no funds to cover them. “That's why it's important to take a slow and steady approach to expansion, and never act on good results.” – Mark Webster, co-founder of Authority Hacker
«Many startup founders start without an accounting process. Good accounting habits help you make smarter business decisions, spot opportunities early, and avoid problems before they become unmanageable. Understanding finances helps keep a pulse on the company's financial health. Good accounting practices also ensure that you are aware of issues such as tax and insurance payments, which can get otherwise great businesses into trouble.” – Paola García, vice president and small business advisor, Pursuit
«If you have successfully validated your startup's problem, market, and idea, then you need to have a plan for how you are going to get your first user, the first 10 users, the first 100 users, and so on. That's where you need a detailed marketing strategy that covers initial user acquisition, converting those users into paying customers, and getting those customers so happy with your product that they help you get more users (through reviews, word of mouth, referrals, etc.)» – Sam Sheppard, co-founder of Cabana
“Different skill sets and backgrounds are needed for the different positions you will want to fill. When you start, make sure you have hard-working, generalist people who can do everything you need. As you begin to grow, consider hiring specialized people for positions that require a specialist. “Don't hire a generalist when you need someone specialized, and don't hire a specialist when you can hire a generalist to do it.” – Devin Miller, Attorney, Founder, CEO and Managing Partner of Miller IP Law
«Don't push yourself too hard in the search for income. It's much better to tell a potential client that you can take on their project next month, for example, than to take on too much. This will not only prevent you from missing goals due to an increase in workload, but it will also make it seem like you are in high demand. And that's always good”. – Zhen Tang, business consultant and COO, AILaw
«The biggest mistake startups make is underestimating the demands of the business. Documentaries and blogs about startups make people think optimistically; This is because the information available does not highlight the difficulties of starting a business, but instead glorifies the end, which is a prosperous business. Therefore, people think that a startup is easy and fun, when in reality it is quite the opposite. Startups take up most of your time and money. They can even ruin relationships.. – Esther Meyer, Marketing Director at GroomsShop
A successful startup is not built by one person: surround yourself with subject matter experts and mentors from whom you can lean on and learn. Although there are several startup mistakes you'll want to avoid as you build your business, occasional mistakes are inevitable, and manage your expectations accordingly.
Don't be afraid of failure; Instead, learn from your mistakes and pivot your business model as necessary. Test new ideas and receive feedback so you can adjust your product to better meet customer needs.
