August 22, 2011

5 Things that Kill Startups

To start a company of your own, is a dream of most of the young professionals these days. And many among them go ahead and start the business of their dreams. But, due to several controllable and uncontrollable factors many of these startups fall apart as time passes. There is nothing an entrepreneur can do about an uncontrollable factor, but the controllable ones, if taken care of and manage properly, can actually increase the probability of success. Let us go through some of these controllable factors.

Dysfunctional Founding Team

For every startup, the heart is its founding team. It, without exception, depends on the founding team how well the startup performs. The team has to work together like a whole entity in order to guide the startup through the initial hard phase. In this stage if the founders are not very cohesive then it will spill disaster. This will be the root cause for all the other problems that bubble up in the startup and will destroy your company inside out. So, it is imperative to make sure that you all, as founders, will be able to work together without any major friction.

Launching Too Late

Much thought is to be put into fixing the right time to launch your company. Launching a bit early is ok but should not be too late. If you go into the market too early you might probably end up having a half baked product that has many flaws, but you still have the advantage of being the forerunner in the market, and can fix your product on the go. On the other hand if you spend a lot of time in beta analyzing and fixing the product, by the time you make it flawless the tide would have already passed. Wait too long and by the time you are ready to launch the product, somebody else might have already brought forth a similar product.

Being Profit Centric

One of the main mistakes made by startups is being profit centric. Of course profit is needed and without profit it is impossible to sustain the startup. But that does not mean your focus should be on profit. To run a healthy and self-sustaining company all you need to do is focus on your customers or end users and make sure they stay happy. If the customers are happy, profit is meant to come. While, if the company stay profit centric, knowing or unknowingly you will end up disrupting your customer satisfaction and causing unprecedented damage to your company. This is a case of misplaced loyalty and this will kill your company faster than you can imagine.

Raising Too Little or Too Much Funding

In every startup, there comes a point when funding has to be raised. This is a crucial point where the startup has to think deeply about who they will be bringing on board along with the funding. Much thought and research also has to be put into deciding how much to raise. Raising too little will be a big problem as it might not be enough to meet all the adequate needs and put the startup in a position where they will have to convince the investors all over again to invest more money. While raising too little money can be a pain, raising too much can be a even bigger issue. Raising too much money means that you are giving the investors much more stake in the company than what is necessary. This, in most cases, will not have a positive impact on the company and can impair the management from taking decisions concerning the company.

Mismanaging Finance

Financial management is not a simple layman job; it is not rocket science either. You need to have the basic understanding of finance before you go ahead with the company. But once you feel as if it is too much for you and you cannot do the calculations alone anymore, you need to get your finance manger. A person who is well versed in the subject and has some practical, real world application knowledge of it, simply put, an experienced person who can manage it well. You cannot trust the finance of your company with an amateur manager as any mismanagement of finance can almost immediately put an end to the company’s growth and kill it.

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