As you begin your start-up company in 2018, it is highly important that you prepare well and not make commonly-made mistakes. Preparation is everything, and failure to plan will result in setbacks that could have been prevented had you spent a little time reviewing these common errors. Reading through these tips, provided by Alejandro Cremades, will provide you with a foundation for everything you want to avoid in order achieve success in 2018.
1. Too Many Members on the Founding Team
Cremades noted that one of the biggest reasons behind failure in start-ups is that they start out with too much equity in the hands of too many early shareholders. Although giving equity is great in motivating and enrolling the help of individuals when your start-up is lean on cash, too many can create many unnecessary and avoidable problems.
2. Overhead is Too High
If overhead is already too high, or the profit margins are going to be too small, the management team should rightly be concerned. One of Sam Walton’s core principles when building the Walmart empire was to always control costs better than the competition. That’s where he found his advantage, and sustainability. Not everyone wants to run a discount business, but there is no lack of scale or revenue at Walmart.
3. Weak Marketing Plans
Scaling and generating real revenues is going to require a realistic and aggressive plan. If this isn’t your area of expertise, look for guidance. Furthermore, start-ups can’t only rely on paid advertising, especially if they have only identified one or two channels to use.
4. No Technical Founders
If you aren’t technical, and you have no founders with this trait, that means there will likely be significant investment in paying for development and maintenance. That is a hard cost without which the venture may not survive. Contrast that setup with having at least two or three co-founders that cover all of the main functions and skill sets.
5. Poor Use of Funds
Start-ups that have burned through previous rounds of funding without generating results can be a scary proposition. Note that this doesn’t necessarily have to mean break even, or in some cases, revenues. Some of the biggest stories of recent years appear to have changed these rules. However, you’ve got to have something to show for it.
6. Early Investors Not Participating in Additional Funding Rounds
If previous investors are not getting in on a round, that can definitely be a bad sign. If there is a good reason, make sure to address it proactively, rather than allowing it to work against you. Unicorn companies (start-ups with a valuation of over $1B) will experience a tough time in 2018 if existing investors do not reinvest in following rounds of financing.
A good way to avoid this issue is to prepare detailed quarterly updates for your investors where you bring them up to speed on the core issues of the business. This creates trust and builds the relationship further with them.
If you happen to be facing any of these issues, my advice is to tackle the challenge head on and determine what changes must be made to improve the probability of success.
This was taken from an article on Forbes and edited.