20 December, 2019 11:02PM
“I bet you are crazy” This is probably one of the thoughts running through your mind right now. It would have made sense if it is about common business pitfalls entrepreneurs should avoid right? Starting a business is the craziest thing ever. It is weak, complex, and volatile. We need to rethink some common business pitfalls we all believed to be true and some measures to work around them. Some of these common business pitfalls may be a blessing probably in disguise. Entrepreneurs tend to avoid these pitfalls but one thing is certain — it is not a roller coaster. One is likely to fall into one startup pitfall or the other, maybe more than once no matter the effort invested to avoid it. Not all business pitfalls is devastating especially if it is about:
Insufficient capital:
According to CBInsights, 70% of tech companies fail within 20 months of operation after they raise enough funds usually from One million USD and above. If you’d notice, how you spend when you have more than enough and how you spend when you are on a tight budget isn’t the same. When there is insufficient startup capital, entrepreneurs strive to do more with less. There is this “money spirit” on every dollar bill. The more money startups get started with, the more likely it’ll “call to be spent” and this doesn’t guarantee growth. While lack of funding is one of the reasons startups fail, starting on a tight budget is likely a good move. There are reasons most startups don’t last more than three years despite having a good idea and products. Your guess is as good as mine . . . Execution and it’s crazy when too much is raised.
Over the years, many startups blew through investors’ money on business “investments”. One such investment is luxury travels for business meetings, lodged into five-star hotels just to mention a few. Startups founders starting on a very tight budget, let’s call it insufficient capital here cannot enjoy such luxuries. Instead, they tend to look for ways to navigate this either through Skype, Zoom, etc. While this may look cheap, one can have this professionally executed without giving the other party “we are short of funds” signals. The same can be said about startups marketing spend for some conferences, event sponsorship, etc.
The most rewarding conferences are free. A mentor once said “When you pay to get a pass just to meet with me, it makes me feel like that pass is all you’ve got. Isn’t there any smart way to connect with me or get me to learn more about you?”. Networking isn’t free, but there are creative ways to work around it, find them — like building a healthy online presence through content marketing or becoming an expert in your niche.
One good skill of successful startup entrepreneurs is that, in the beginning, they operate very lean. Tight funding comes with discipline starting with self-control, determination, and resilience. While these can be a result of a self-imposed personal standard, limited resources are likely to be one of its drivers. Without discipline, startups fail to succeed in business even if situated in the best economy.
Slow growth:
Which would you want to pick? A tortoise or a cheetah speed? There are lots of reasons to pick the tortoise speed. Due to unforeseen circumstances like operational complexities, new increased overhead costs, etc., a tortoise speed is ideal especially if it’s steady, one that can help us not test the depth of a river with our two legs in. Fast growth results, although “a critical metric and often a measure of success” is overrated in the startup ecosystem. Paul Graham’s article on “Growth,” lays out three phases, starting with a period of slow or no growth — Rather than something to avoid, it helps in long-term business success and sustainability.
Never starting an MVP First
Building a minimum viable product is the easiest way to get to know your customers by satisfying the early adopters with just sufficient features. While MVP’s are recommended, starting with an MVP, is quite dicey. Consumers have lots of choices these days. Their complex choices make it quite challenging to resonate with them. If an MVP fails the “test”, they’re likely not to hang around for long. Don’t wait for their feedbacks, most times, they’re deceiving. An example is what happened to the Shoe of Prey. In a nutshell, they simply walk away. You may probably try to figure out why you’re experiencing low retention and you try to pivot — it wouldn’t hurt to bring in some features from your competitors, right? but at this point, your confidence level is “below the sea level”. You probably may get lucky but more likely not.
Building products isn’t the challenge, what to build is. When entrepreneurs start by focusing on the solution, things are bound to go south. Ash Maurya who enjoys helping entrepreneurs find their business model kicked against starting with an MVP. He didn’t build an MVP at first but made an offer instead. The first thing his team did was to sketch several variants of their idea. This helped them identify several customer problems and the solutions and he wrote an article on Don’t Start with an MVP to tell the story.
Hourspent started with an offer to. Only when we got enough freelancers and employers that bought into our offer, we started building out the MVP after a series of interviews? What we eventually built looked very different from what we thought we’d build.
