Starting up your business is not a one-day hustle. It is not as glamorous as it often seems to be – 9 out of 10 startups fail. Though there might be a host of reasons for such failure, still most of them can be attributed to lack of awareness and a culmination of small faulty planning elements, both before and after starting up.
Today we will talk about five mistakes almost every startup does on daily basis. These mistakes might not impact the business immediately but are bound to cause some serious dents.
Not Conducting Pre-Incorporation Research
The first and foremost thing to be done is some homework. You have a business idea. Now before going any further with it, you need to judge its feasibility and market demand. After you do that, you would need to understand the legal framework of the sector you wish to enter.
In brief, following are some of the points to be taken note of:
- Entry barriers in the target market.
- Applicable licenses and registrations required.
- Trademark search of the proposed brand name.
- Name availability of the proposed brand name, in case you wish to register a company.
- Exit strategy.
Based on the above, you need to decide the type of business form you wish to take up – proprietorship, partnership, LLP, company.
The 12-month Cushion Money
In case you are in an existing, secured job and planning to quit for starting your business, this is a must-do.
Your business idea will not start paying off from Day 1. In fact, there is a 99% probability that the first two years of your business will not yield any revenue at all. Expenses on the other hand will mount.
Related Article: 3 Of The Most Common Mistakes First Time Entrepreneurs Make
Hence, it becomes very important to plan your personal and family finance.
Rent, mortgages, and health insurance — these are all things that don’t pay for themselves. Budget for these, budget for unnecessary or unforeseen expenses.
Over Or Under Spending
Plan your business expenses.
You will need to learn where and when to spend. This stays a valid point even if you avail seed funding or angel funding. In fact, becomes even more important then. It’s important not to waste the funds but it’s equally important to spend where necessary. This is where planning comes into play.
For example: do you really need that glass door office? Or do you need to hire that super expert resource who would build your product. When there is ample money in the bank, we tend to become less cautious and start spending on trifles.
Funding For Survival And Not Scaling Up
Funding today has become a means for survival. It has become the objective with which businesses are starting up. Too much of a rush towards this is a major roadblock for your business.
The focus should be building up a sustainable long-term business model and not availing VC funding.
Professional funding is usually safe to avail when you need to scale up your business and grow the already stable stream of revenue. So think before approaching for funding. Even if you need funding, there are a lot of ways to achieve that without diluting your interest too. Some questions to ask yourself:
- Can you bootstrap your company?
- Can the requirement be solved by availing a small business loan?
- Can friends and family help or should you look for venture capital or an angel investor?
- Do you really need a professional investor right now?
Also being rejected by a VC does not mark an end to your aspirations. It also does not mean your business is not worth it.
No Or Faulty Marketing
It is a common myth that only established businesses need to advertise/market. It is, in fact, the opposite. Startups and early stage businesses need to market themselves even more.
It is another myth that only formulated products can be marketed. The right strategy is to start marketing from the very initial stages. When you are trying to build an idea from the seed, you should start building an accompanying marketing strategy from the seed too.
Marketing does not mean you have to spend loads on GoogleAds, hoardings, posters, etc. Thanks to social media, digital marketing has grown in leaps and bounds.
Start a blog, offer to write articles or talk for free on your expert subject, get people trying and reviewing your product or service, create a YouTube channel, a Facebook page and you are ready to shoot.
[This post by Dipanjali Chakraborty first appeared on Taxmantra and has been reproduced with permission.]