Although every new startup is unique, there is common ground for all new businesses that is rife with potential landmines. In this article we’ve compiled a list of things to watch out for as you embark on your entrepreneurial career.
It might seem obvious, but there are many entrepreneurs out there that don’t do their due diligence (or hire someone to do it) in regards to their legal obligations. This includes everything from business licensing and abiding by the tax code to contracts with clients or vendors, intellectual property protection, liability, employment law, and premises permits and licensing. Given the huge implications a lawsuit or fines can have, it is fundamentally important that your legal house is in order.
You have a great product or service, but have you done your market research? Is there a healthy market for your product? Is there an established consumer category or is it completely new? While new ideas can revolutionize an industry and achieve huge success (think Uber), it can be harder to build out a whole new category than to jump into an existing one with a competitive edge. Why? Because not only do you have to make consumers aware of your product or service, you have to convince them they need it.
Another big factor when considering your brand’s market potential is targeting the right consumer with the right product, but most importantly, at the right time. Your next generation product may be better than anything on the market, but in verticals like high-priced electronics, your cutting-edge tech simply may not sell if consumers have just invested hundreds or thousands of dollars a year ago in the current technology.
The key points here are: first, make sure you have adequate cash or investment, and second is to ensure you are tracking and managing your operating growth costs and cash flow. Many new business underestimate their operating costs and overestimate their profits, which can lead to failure pretty quick. Make sure your projections are realistic and your start up is well-funded before you get started, and once you do, stay on top of your finances. Even if you use an accountant or hire an employee to manage the financial side of your business, you still need to understand your fiscal standing at all times to ensure your business stays in the black.
Forgetting About Marketing
A good idea isn’t enough to build a successful business. You need marketing for that. But in addition to needing effective marketing, you also need a well-defined value proposition. The best marketing in the world won’t be able to sell your brand if it has no differentiation from its competitors. But if you put a strong value proposition foundation in place and allocate the right talent and financial resources to build a successful marketing platform, your business will soon be on the fast track to growth.
Scaling Too Fast
A word on growth. While growth is what you want, it can also be a problem if it happens too rapidly. The biggest challenges a business faces when it grows too quickly are operational and/or organizational scale and talent acquisition. To try and keep up with demand, a business may be tempted to scale up faster than it can realistically accommodate, which can spell disaster for the product, customer service and internal operations. Partnering with the wrong vendors, product or customer service issues and poor hiring choices are just a few of the potential pitfalls when you’re moving too fast. Of course you want your business to grow, but at a sustainable level that will lay the groundwork for long term success.
Keep in mind that while there are a number of things that can wrong for a new business, many of the possible startup pitfalls can avoided with the right approach.
And with conscientious management, even the unavoidable snags can be overcome.