Not every startup will be a success. In fact, after a quick Google search of startup failure rates you’ll likely be of the opinion that most of them will fail. Firstly, don’t let these claims discourage you. While there are some reasonable data sources out there to report business success rates, most of them don’t give the whole picture.
Secondly, some of the world’s most successful entrepreneurs failed many times before they hit the big time – and some of them continued to do so afterwards too. Take Richard Branson for example. After dropping out of school at the age of 16 to start a student magazine that tanked, he went on to create a multi-billion dollar empire with Virgin Records and Virgin Airlines. Yet despite the wild success of the Virgin brand, it had many failures. From fashion to vodka to cars, Sir Richard Branson tried – and failed – at many of his Virgin ventures. Remember Virgin Cola, anyone?
Should you face failure in one or more of your startups, you can rest assured you’re in good company. The biggest differentiator between those that go on to be successful and those that don’t is whether you learn from your mistakes. Branson might have had some epic failures, but he learned from them. And he didn’t give up.
Not every startup will be a hit, but that doesn’t mean you have to quit. It does mean, however, that you need to identify and learn from your mistakes.
Learning from Failure
In order to learn from your mistakes, the first step is to recognize them. Of course it’s possible that an unforeseeable and unavoidable set of circumstances evolved to the cause demise of your business, but this just isn’t the case most of the time. The truth is, there is likely something you overlooked, an assumption that was made or a wrong decision – or series of them – that caused the downfall. The key to success is to be able to identify what factors or actions contributed to the failure and how to avoid them in the future. You should consider factors internal to your business as well as external. The source of your mistakes may in fact have stemmed from marketplace pressures rather than an error in business operations or there may have been a combination of internal and external contributing factors.
When evaluating where things went wrong, it’s often helpful to layout the sequence of events to help pinpoint where the business started to break down. It also helps to analyze your strategy. Did it align with your objectives? Evaluate the company’s strengths and its weaknesses, too. How did they contribute to the situation? Thoroughly consider all of the variables that influenced the outcome. Question everything; even your business objectives.
Once you feel like you’ve fully dissected and examined your situation, it’s time reassess your approach for the future. Be prepared for your next venture by reevaluating your planning and execution strategies. Determine not only what you would do next time should a similar situation arise, but how you can avoid it happening again entirely. The more prepared you are for potential eventualities, the more you can anticipate potential problems, the greater potential you have for success.
Common Startup Mistakes to Watch Out For
While there are plenty of random things that can affect the success or failure of a startup, there are some mistakes common to many of the businesses that don’t make it. A lot of these might seem like basic business sense, but you might be surprised how many entrepreneurs overlook fundamental problems, particularly if it conflicts with their vision. Letting go of an idea or changing direction after you’ve spent a lot of time, energy and money can be a very hard thing to do, but if the decisions you are making aren’t the right ones, your success depends on it.
- Do your research. Market demand is key to your business success, and if the demand isn’t there, you simply won’t succeed. You have to know your audience inside and out, and you have to make sure there are enough potential customers out there to support your product or service. This is especially true if it’s a first-to-market product or service as the challenge to educate and win over consumers can be even greater. Don’t neglect price point research either; even if there are customers out there for your product or service, you need to know what they’re prepared to pay for it.
- Stay on top of your finances. Make sure you have the right investors and enough capital to fund your business through the startup and initial operation phases. Keep track of cash flow and intervene before there are financial problems. Too many entrepreneurs bury their heads in the sand rather than taking an active role in financial management of their startup. Conversely, don’t spend unnecessarily if you have a large amount of investor cash. Many companies get carried away and overspend their way into oblivion.
- Pick your co-founders wisely. While it would probably be more fun to start a business with your best friend, it’s not going to work out if neither of you have the technical, marketing or business skills to actually pull it off. The same goes for building your team; pick the right people for the job, not the people you like the best.
- Always look ahead. Never stop reevaluating – and when necessary reworking – your plan and execution strategy. The plan you started with may not be the right plan now, so you need to consistently assess your business position and adjust your course if change is required.