Managing a budding start-up is an arduous undertaking. It is highly demanding and often fails to yield visible returns in the short-term. It can get overwhelming at times and cast doubts upon its future. Despite having a well-rounded business model and a precise plan, the disheartening reality is that nearly 90% of start-ups fail. However, the pride of being your own boss and the wish to bring about a positive change in the world continues to draw millions of ambitious, young professionals every year towards starting their own company.
It is estimated that around 100 million new start-ups are formed in a year. Out of this, according to a Forbes report, only a meagre 0.05% make it to the basic funding stage. Furthermore, approximately just 4000-5000 start-ups reach the Venture Capital funding stage. Although these numbers seem disillusioning, raw data does not show the whole picture. This failure can be attributed to a lot of reasons. In the hopes of making their mark on the industry, young start-ups often make several common mistakes.
Often, entrepreneurs make the mistake of focusing too much on their product while failing to understand the market for it. This results in the creation of a product that the market doesn’t really need. This indirectly leads to the next mistake- spending all your resources injudiciously. It is important to understand that resources are limited. New entrepreneurs are excited about their venture and spend imprudently, hoping that it’ll pay off in the long run. The caveat to bear in mind here is that if you peak early and run out of cash, there will be no long run. Another common problem faced by start-ups around the world is getting a functional team and retaining them. On an average, start-ups last around 6-12 months. With such a high turnover, it is difficult to maintain the intensity of work and prevent clashes of interest. This can prove to be detrimental to the functioning of the organization. There are also cases where the company is fixated on its idea and fails to adapt to the market’s needs, thus failing to gain a foothold.
However, there is a silver lining. All these provide valuable lessons to future entrepreneurs. While we analyze the common mistakes made by failed start-ups, it is essential that we look at the other end of the spectrum too. All successful start-ups have some common attributes. They all had motivated leaders who weren't afraid to take risks and pursue their dreams. They were willing to sacrifice their personal time for the development of their business. They were also willing to pivot and adapt to the customer's needs. Every successful start-up owes its success to its customers and recognizes their contribution by putting customer satisfaction at the top of their priority list. Markets do not drive customers; customers drive the markets. It is imperative to keep this in mind while launching your product and making the necessary upgrades in the future.
‘Start-up Diaries’ is a series of articles, kicking off with this, related to various aspects of managing and working in a start-up. Ranging from getting the initial funding, releasing your first IPO to various challenges, both internal and external, the series will cover a variety of critical topics. Stay tuned to read on and learn more about the working of a start-up.