Starting a business is one of the most exciting things that you can do. There is no greater feeling than creating something that no one else has ever seen before. The problem is, most startups fail within the first six months.
There are a number of reasons for this, but it is important to know the common mistakes made by new entrepreneurs. By learning from these mistakes, you can make sure that your startup doesn’t follow in their footsteps.
Hiring Expensive Employees
Of course, having the best and most qualified team is the dream of every entrepreneur. However, hiring the best employees is expensive. Before you even consider hiring someone, you need to make sure that they are worth the cost. The best way to do this is to get an employee’s work history. By doing this, you can see how long they have been in the field and what their salary was at their previous job. This will help you determine if they are worth the money or not. It is also best for the first six months to hire the “generalist” type of employee first. This will be very helpful in cutting the hiring cost, and “generalist” employees tend to be easier to teach new things. If you want to hire the best employees, it is best to start small and build your team from there.
Spending Too Many Funds
Most startups don’t make much money for the first six months. This is why it’s important to spend your funds wisely. When you first start, it is best to spend the majority of your money on paying your employees and to invest in your business’s future. You should also remember to not purchase inventory or software excessively during the first six months of running a startup. By doing this, you can save a lot of money and be ready for when it gets more profitable.
Being Too Ambitious
It is understandable to have ambitions when you first start a business, but it is important to realize that your business may not be able to fulfil all of your dreams. This is why it is important to understand the different areas of your business and make sure that you are fulfilling all the necessary needs. It is also best to be realistic about your goals. During the first six months, it is best to focus solely on products and sales, rather than renovating your buildings, purchasing new equipment, and other unnecessary projects.
Seeking Investment Before You’re Ready
Looking for investment is necessary, but it is best to wait until you are ready. This is because the funding process can be very time-consuming and stressful. You will need to present your business to multiple investors, as well as convince them that you have a good idea. It is best to have a clear understanding of your goals and prepare for the pitch investment before you even begin looking for an investment.
Not Being Able to Allocate the Equity
This is a big mistake that many entrepreneurs make. It is best to have an equity plan for your business before you even begin. This will help you figure out how much of the company will be given to each employee, and will help you set your salaries accordingly. If you’re being too generous in terms of equity, you will end up having a hard time when it comes to salaries. However, if you’re too stingy with the equity, you will have a hard time retaining employees. The key is to make sure that you have a good equity plan for the first six months of running a startup.
Not Having a Good Plan for the Future of Business
You can never be too prepared for the future of your business. By preparing yourself for the future, you can save a lot of money and increase your chances of success. In order to have a good plan for the future, it is best to have a clear understanding of what you want to accomplish with your business. This will help you decide how much funding to raise and how much funding you will need in order to reach your goals.
Overall, these are some common mistakes that new entrepreneurs make during the first six months of running a startup. By learning from these mistakes, you can avoid making them yourself and ensure that your startup doesn’t follow in their footsteps.
About the Author
I am the Founder of Cudy Technologies (www.cudy.co), a full-stack EdTech startup helping teachers and students learn better. I am also a mentor and angel investor in other Startups of my other interests (Proptech, Fintech, HRtech, Ride-hailing, C2C marketplaces, and SaaS). You can also find me on Cudy for early-stage Startup Founder mentorship and advice.
You can connect with me on Linkedin (https://www.linkedin.com/in/alexanderlhk) and let me know that you are a reader of my Medium posts in your invitation message.