Turning an idea into a working product is not as easy as it may sound. There are a number of challenges that an entrepreneur has to tackle before launching the product.
Right from researching the idea, getting its validation through MVP to building the product development team, and launching it right, there are different tasks involved and each requires equal efforts.
And yet, according to the U.S. Bureau of Labor Statistics, approximately 20% of businesses fail during their first two years.
Moreover, approximately half of them don't survive past the fifth year.
Now, the question is, how do you run a successful start-up?
Taking the necessary steps to avoid the mistakes made by beginner entrepreneurs is part of the process.
In this post, we'll walk you through the six common mistakes new entrepreneurs should avoid when starting a business.
1. Not knowing the industry you're in
First and foremost, you should know the type of industry where your business belongs. Doing market research isn't enough. The thing is, you need to know the industry and learn from people who have been there.
Assuming that you know everything solely based on what you've read is a huge mistake.
Suppose you like a startup app idea, great. But you might have to soak yourself first in the field by working for someone else so that you'll learn what it will take to get on top.
From there, know what works (and what doesn't!) When you're ready, that may be the time to open up your business.
2. Overlooking market research
Whatever business you'd like to pursue, one of the most important things you need to do is do proper market research.
Not doing market research will only lead you to nowhere. You think you may know a lot already about your business, but the chances of you making mistakes are still there.
So, if you're just a budding entrepreneur, you might need to go back to the basics. Use all your productive time and learn everything as much as you can about the market before you get product development or launch your product.
Doing market research is essential. Knowing the market, establishing the problem that your target consumers have, and knowing who needs your digital product or service as a solution is crucial to your success.
You can even join hands with a startup solutions provider or an IT outsourcing company to avoid making this mistake. They can act as a technology partner that can help with your complete development work, right from the ideation and market research to the complete development process.
Also Read: Top 10 IT Outsourcing Companies For 2021
They ensure that market research is the first step that they undertake and analyze the complete market before getting started with the software development.
3. Neglecting the financial aspect
Starting a business comes with plenty of downfalls- financial issues being on top of the list. A large section of startups also fails because they either run out of money during the software development or are unable to raise funds from providers.
You don't want this to happen to you. That's why you need to have a comprehensive financial plan.
You can start by analyzing how much money is at risk. Making and saving money should be your priority over everything else, especially during the early stages of your business.
You should also decide on the right business structure. A sole proprietorship, partnership, or an LLC are your options. LLC is an excellent choice to protect your personal assets in the event of bankruptcy. Since each state has various regulations governing the formation of an LLC laws and LLC cost differ by state, it is advisable to register an LLC in the state where your company is located. For instance, the state regulations will be applicable when you incorporate an LLC in Texas or Georgia if you intend to do business there.
Don't fall into the trap of spending too little or spending too much. It would be best if you spent your start-up cash wisely. So, make sure that you spend it hiring experts and producing high-quality products. Managing your finances will work for you well in the long run.
Moreover, if you are struggling with finances, outsourcing your startup product can be a great way to save costs. Outsourcing can save money in different ways like getting your product launched faster, minimizing the efforts put in by the in-house team, and even slashing the overall development cost.
Hiring a fractional CMO for startups until your business is actually ready to hire a full-time CMO for extra growth is another efficient strategy to gain experience while saving money.
4. Partnering with investors that don't fit your business
Another important thing that new entrepreneurs should be aware of when starting a business is that investors are more than just financial backers.
Your first set of investors can make or break your company. Usually, these are people who put their confidence in the potential of a business. They can help you speed up your growth, or they can also put you in a hole if you fail to deliver. Your technical co-founder can be your investor or can be your CTO or your startup technology partner.
Now, many IT outsourcing companies are even acting as the perfect partners for startups with innovative ideas. Not only are they providing product development to the entrepreneurs but also investing in the idea to turn it into a fully-fledged product.
Partnering with the right investor is important. Researching the investor profile, past investments, and financials is crucial. Top-notch investors only invest in a niche that they know. They don't put their cash everywhere.
For example, if you're in the bioscience industry. You can do some basic research for companies that invest in your category. One reputable investor is Biospring Partners, co-founded by Michelle Dipp, a growth-stage firm that invests in Life Sciences Technology.
5. Hiring unfit people
A "bad hire" is one of the most common mistakes made by new entrepreneurs. If you have tight funds, don't try to skimp the costs on new hires. That's because there's a big chance that you'll be paying more in the long run.
Low-cost employees are likely to be inexperienced, lack the necessary skills for the job, or unreliable.
Although you don't need to pay more than your employees are worth, there's no harm in shelling extra cash on paying someone who knows what they're doing.
Make sure that you're paying competitive rates as well. Remember that your employees are the backbone of your business. So, hire the right people.
Another great way to hire the right people is by hiring remote developers for building your product. They not only help you fill in the technology gap but also come with great expertise and tech skills that might be missing in your region.
Moreover, remote developers can help you save costs as you can hire them for as little as $25-30 per hour whereas, a developer with same skills and experience might charge over $100 per hour within your local region, especially in the UK, the US, and other Western countries.
6. No customer-first mentality
When creating products and building a business model, you need to have a customer-first mentality.
Many new entrepreneurs are so concerned about making a lot of cash (especially during the beginning) that they tend to forget that this isn't the key to building a successful business. The key is to have loyal and happy customers that will support you in the long run.
You may have one of the best products in the world, but if no one is buying it, then what's the point? So, when building a product and determining your business model, you need to have a customer-first mentality.
Over to You
So there you have it. We mentioned the critical mistakes that budding entrepreneurs should avoid to be successful in their respective industries.
Mistakes are an inevitable part of the process. However, this doesn't necessarily mean that you'll be repeating it, just like everyone else!
Make sure you are not making any of the mistakes listed above. You can avoid a lot of the issues that lead to such mistakes by joining hands with a software outsourcing company. Such companies can not just partner with you to build your complete startup product but also ensure that your startup scales and grows with time.
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