Building a business is hard; building a successful one is even harder. First-time entrepreneurs usually learn, the hard way, about common pitfalls that can sink a company. Ignorance of proper hiring, marketing, and product development practices almost invariably leads to a business's demise.
Here are five common mistakes first-time entrepreneurs often make.
Picking the Wrong Co-founder
Infighting between co-founders is a common source of startup failure. Choosing the right co-founder is among the first and most essential decisions a founder has to make. Many unsuccessful founders choose co-founders who they cannot amicably work with or who do not properly complement their skills.
Failing to Plan
A founder's lack of foresight can have a negative domino effect on the entirety of the business. A founder may lack the necessary skill-set to actually run (not just start) the business and fail to plan accordingly for all of the legal, business, and operational challenges that inevitably beset a growing business.
Hiring badly can annihilate a company's culture, invite a toxic work environment, and can lead to operational inefficiencies due to unproductive employee output. Likewise, many growing startups hire big-name managers that turn out to not be good fits for the positions they fill, resulting in numerous problems.
Running Out of Money
Often, first-time founders ignore their company's cash flow, run out of money, fail to find sufficient external funding sources, and plummet. First-time founders should channel their limited (and often overestimated) financial resources into core near-term and long-term revenue generating functions such as customer acquisition and employee productivity.
Being Unrealistic About Finances and Profit Potential
Due to the many hours of toil that first-time founders dedicate to their products, they often get emotionally attached to their creations, to the point of being delusional about the real profit potential of their products. Excessive emotional attachment convinces founders to build products that they think customers want, not what customers actually want; poor sales reflect this disconnect. Poor sales lead to reduced finances (and financing options) which subsequently leads to a startup's demise.
Founders should maintain a realistic perspective about their company's financial situation, both before and after their products are released. Financial experts help companies monitor and control cash burn, scaling, cash flow, and more; hence, by using rational financial management strategies, they help companies avoid financial calamity.
By avoiding these common mistakes, aspiring founders can greatly improve their company's chances of surviving and thriving in the competitive, brutal, but nonetheless lucrative tech marketplace.
If you have built or are considering building a tech company, you should strongly consider seeking the services of accountants that can help your business succeed.