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Pitfalls Start-Ups Need To Avoid


pitfallThe U.S economy is driven by start-ups. They play a vital role in the net job creation. However, INC. magazine reports 33 percent of all the new businesses face failure within the first 6 months of operation. 50 percent go on to fail after 2 years, while 75 percent see the wrath after three years.

So what are the pitfalls that startups need to avoid in the first 6 months? Let’s take a look at some of the biggest mistakes that startups need to carter to, and the dangers of not avoiding these holes;

1.  Poor management

Even though Bachelors or Master degree in Business Administration teaches about the theories related to corporate business level operations, it doesn’t really teach individuals practical business skills on how to run a business.

Poor management can lead to several problems for startups. They may work on a strategy that is weak, failing to bring ideas to validation before working on product development. A poor management team can also face execution problems, which would lead issues in the product manufacture or the time of manufacture. If the management at the top is poor, the effect will go on to lower levels and new employees coming in.

Poor management can also lead to problems and violations in business contracts, but this can be avoided by opting for contract management software like Contract Logix.

Great resources for learning practical skills include Small Business Administration and sometimes the local Chamber of Commerce. There should be continuous study of market research, while customer data should be analyzed and examined frequently. Successful management does well when it comes to strategic thinking, and have the skills to convert a vision into reality.

2. Low start-up capital

Lack of capital for operating the business in the long-run is a common reason why many startups fail. The owners fail to calculate how much capital was required, and as a result, they close down even before the business had a fair shot at gaining some attention.

Lack of sufficient capital means the business will realize poor cash flow sooner or later, making way for pending bankruptcy, and even the headline ‘Start-up business goes bankrupt within the first few months.

It would be wise for startup business owners to have at least 24 months of expenses covered for operations whether through borrowing or saving as most startup businesses take a year or two to get going. This would mean the business has enough funds to cover operational costs until it starts realizing sales to reach the breakeven point and cover the expenses from the revenue made.

3. Lack of planning

Success for a startup business requires a well-thought out, logical plan. Lack of planning is one of the major causes of startup failure within the first 6 months. Failure to set realistic goals and planning with over expectations is what makes a business suffer the ultimate demise–bankruptcy.

A proper plan includes the identifications of problems that may arise and how they would be solved, the needs of the workface, the vision and goal of the business required for success, competition analysis, marketing and promotional strategy, cash flow analysis, forecast of revenue and expenses, income statement and everything else that needs to be kept in mind.

A business plan would also be helpful to secure additional capital after few months of operation if the need may arise.

All these potential problems don’t mean startups can’t succeed in the first 6 months. Frequent planning and openness to new things by everyone attached to the business will help avoid most mistakes and increase the chances of business success.

  • http://www.callbox.com.sg/ Jayden Chu

    Failure should always be anticipated, that’s why contingency plans are there. You should always expect what will happen in the long run if things don’t go the way you want it to be. Start up can be difficult especially for the less experienced yet with proper planning and all the suggested things written in this post I believe failure may be prevented and damage could be minimized. :)

  • henry

    Nicely done. I am a start up and right now i am trying to manage my business. It is hard to manage it especially if you do not have enough experience and knowledge about business.Virtual Office Kuala
    Lumpur

  • Bhose

    I see Poor Management has a GREAT pitfall to avoid. It once happened to me and I’ve learnt my lessons.

    Bhose from http://www.insurancegisthq.com/

  • http://www.callboxinc.co.uk/ Oliver Scott

    What was written above is very crucial problem. Before getting your self into business you should be ready for the consequences that may happen. Start up is very hard when you don’t have everything. Solid plans, accurate capital are the two main solution to go through.

  • Guest

    It’s quite hard for neophytes in building solely an entrepreneurship. There confusions, destructions, and risk that comes along the way. But keep your ears close, go forward for the passion and profession. I think capital is the biggest problem if you don’t. Remember that before you go through, you should have solid plan planted in the mind, and experiences that drives you through. Better analyzation of everything will help you control your decision making.

  • http://www.it-sales-leads.com/ Barbara Mckinney

    It’s quite hard for neophytes in building solely an entrepreneurship. There confusions, destruction’s and risk that comes along the way. But keep your ears close, go forward for the passion and profession. I think capital is the biggest problem if you don’t. Remember that before you go through, you should have solid plan planted in the mind, and experiences that drives you through. Better analyzation of everything will help you control your decision making.