There are many people with brilliant ideas and one or the other dreams of becoming self-employed. However, the desire to be your own boss and to make dreams come true also involves risks. If the pitfalls of starting a business are ignored, even the most promising start-up can quickly turn into a financial fiasco. It is therefore important to before the start of the start-up phase about the seven most common mistakes.
1. Forget the business plan
If you want to found a start-up (external link), you first have to check whether it is actually an innovative business idea or a fixed idea. This can be achieved with a business plan. This clearly summarizes the future project idea – its goals, strategies and requirements. This gives the founders a realistic picture of the planned company and the market brought before your eyes. The business plan highlights the strengths and the USP – the unique selling proposition – of business ideas. At the same time, he focuses on possible risks and obstacles and proposes solutions.
If you forget the business plan, you cannot get a comprehensive overview of your idea. This poses a risk:
- to overlook financial requirements (financial plan),
- enter an oversaturated market (marketing strategy),
- to overestimate the individual suitability as a founder.
Another problem: Without a business plan, the likelihood of convincing business angels, venture capitalists or other lenders of your own idea decreases.
2. Avoid critical thinking
When founders plan a start-up as part of a team, the herd instinct is one of them biggest obstacles on the way to success. If there is a close personal bond, there is a counterproductive effect. There is a lack of motivation to deviate from the prevailing opinion for fear of hurting the feelings of the other person or spoiling the basic mood of the company foundation. Ideas are not questioned, which has a lasting impact on decision-making. In the worst case, founders can get the company into trouble and run straight into financial ruin.
This can be avoided by creating an open and critical mood in the team. The founders must dare to critically examine and dissect their own ideas or suggestions from others. If they do not stand up to the inquiries, a revision can be made. This tactic facilitates error analysis and offers potential for development.
3. Relying on experts too soon
As a press release from KFW from October 2020 (external link) shows, start-ups are becoming increasingly interested in financing themselves with venture capital. This is venture capital that investors give to companies despite their insufficient earning power. The requirement is one above-average growth potential. In order to achieve this, many founders bring industry experts on board as early as the start-up phase. However, there are two dangers here: high costs and wasted potential. The majority of these experts are used to:
- improve existing structures
- to optimize processes or
- to expand into a new market.
Your specialty isn’t building a business, so on both sides Loss of productivity and demotivation are to be feared.
4. Set unrealistic goals
When starting a new business, entrepreneurs must set achievable goals. Step by step they can fulfill them and grow organically. If you set yourself too high goals too early, you won’t be able to achieve them. As a result, the motivation in the team and, in the worst case, the belief in the entire company decrease. Especially in things Growth, customer acquisition and awareness It is important to reach your goal slowly and steadily. The moderate speed decelerates business processes, leaving enough time for error detection and correction. (Reading tips: customer acquisition and sales strategy)
5. Leave competencies unbalanced
If it is not exactly a one-man company, a start-up consists of several employees. These should be about have different competencies to complement each other. If the founders only value their own professional background when making their selection, this creates an imbalance. As a result, there are numerous technology professionals in the company, for example, who lack sales talent. The corresponding business idea is doomed to failure due to the unbalanced skills.
If the founders don’t have an eye for diversity of skills, they can Mentor or start-up advisor for advice (service: consultant search). This can sharpen the perception of competence gaps so that they can be closed. This characteristic is not only relevant in the start-up phase of a company, but can influence its entire development.
INFO: Another problem arises when it comes to finding competencies in a start-up. If the founders rely on “cheap” labor for cost reasons, they have to reckon with quality losses compared to trained specialists. These can stand in the way of long-term success, especially in the growth phase of the start-up.
6. Blindly emulating the competition
If the idea of founding your own start-up results from the success story of a “role model company”, that doesn’t have to be a bad thing at first. The competitor’s success can inspire your own ideas and encourage improvements. It becomes problematic when the founders orientate themselves too much on the offer and corporate strategy. If the USP is missing, two companies compete for a customer base, resulting in losses for both. This has a negative effect on the growth of the start-up. For this reason, it is not wrong to keep an eye on the competition – you should not just follow them blindly.
INFO: Especially in the case of already established companies, this tactic threatens another pitfall. The founders set themselves too high goals in order to achieve the same success within a short period of time. If that doesn’t work, frustration and demotivation are not long in coming.
7. Investing too much in visibility
External impact is very important for a start-up. The image and the offer must ultimately be brought to the man (or woman). However, here it is professional corporate marketing in the foreground. A common mistake made by inexperienced founders is to relate the external image to their own person. They try to underpin the success of their business in front of customers or business partners with material wealth. Fine cars, expensive watches or spectacular trips cost more money than the public image achieved is worth. On the contrary: splurge can be quick appear unprofessional and stand in the way of your own success.
By the way: Don’t forget to apply for government funding. The funding check can be used to find out what funding is available.