They say that 90% of startups fail, but that’s more likely an exaggeration. The Bureau of Labor Statistics (BLS) states that approximately 20% of new companies fail the first two years of being open, and 45% of them fail during the first five years. However, this doesn’t mean that you should be comfortable with where you’re at and turn a blind eye on the common practices you should be avoiding in a startup.
In this article, I’ll be sharing some of the common pitfalls new startups face that can ruin the livelihoods of a business.
Not Taking Patents Seriously
Patents are legal rights to exclude your competitors from stealing, copying, or using your invention for their own gain. The invention can come in the form of a product, composition, process, machinery, or an improvement of any of the stated categories. A patent application can be quite confusing for a new business owner, therefore it is recommended that you consult a qualified IP consultant. Surprisingly, it’s not as expensive as most people would think!
Too many inexperienced owners miss out on important documentation, don’t understand the standard patenting practices, and fail to create a patenting strategy to protect their products.
Chasing Every Marketing Opportunity
A good quality product is just as good as your marketing strategy. As a startup, you have very limited resources, especially financially. Don’t stretch yourself too thin, as marketing can get expensive quickly.
Know where your main audience is, and only focus there for the time being. For example, If you have a product for teens, you’d be better off marketing it on Snapchat and Instagram.
The point is to not chase every opportunity, but divert your attention to where you think works best after your market research.
Scaling Too Quick
According to Startup Genome, 74% of internet startups fail because they scale too quickly. When you raise money, the temptation to spend overcomes rational thinking. What happens is that business owners use more money and resources to grab market share. An example would be on unnecessary marketing to hiring too many staff.
The money raised may give you a false sense of security on the readiness of the market to accept your product, and as your spending running costs increase from reckless spending, you find yourself struggling to collect from customers.
The best thing to do is to take your time. You should allow your company to pivot often. This means being able to make fundamental changes in your business when you see that your products or service don’t meet the needs of the market. If you scale too quickly, it’s difficult to pivot.
Not Studying Competitors
As obsessed as you are about your own company, you have to be just as obsessed about your competitors. Studying them should be part of your research before you invest your time in developing your product or service.
If the market is too saturated with competitors, obviously it’s harder for you to get a head start. But if there are no competitors at all, you should be concerned whether or not there’s a market for a product or service like yours, to begin with. There should be enough competition so that you don’t have to educate potential first clients or customers about your product from scratch.