10 common mistakes that KILL a start-up

10 common mistakes that KILL a start-up

In my interaction with over 10000 current and future entrepreneurs, there are 100s of mistakes I have come across that people make.

What may be perfect for a particular venture may turn out to be absolute disaster for another! But there are some key mistakes that any young entrepreneur can avoid while starting a business.

1. Not starting

The key to any successful business is to take the first step. Dreaming about success does not lead to it — doing does.

I have seen lot of ‘wannabe entrepreneurs’ reading up headlines and saying ‘I wish I had started this company’ — that is the exact difference between an entrepreneur and any other person with the idea.

Entrepreneurs are action oriented — they do not wait for perfect market research, funding from VCs or support from Government to take off their ideas. They take a calculated risk, jump and keep building the parachute along the way!

To every management strategy, there is an equal and opposite strategy – focus vs diversification, localisation vs globalisation and so many other conflicting theories!

In reality, strategies do not work – the entrepreneur makes them work.

So listening to everyone does not help, as there will be conflicting advises coming from different angles.

Best case is to build your trust in a mentor and find a Krishna for the Arjun inside you.

Recently, I came across an entrepreneur team that signed a term sheet for selling equity stake in their venture to a VC.

They were too happy to raise million dollars at a good valuation.

But after going through the details, I told them they were giving 3 times liquidation preference to their investors, which means that the investor takes home 3 times their money, before entrepreneurs get anything at the time of exit.

Now that is the devil in the detail that you should be aware of.

Remember, a deal is not done till you got the money in the bank.

Entrepreneurs should love their ideas, and be passionate about it — almost to the extent of madness.

But that is where it should not end.

The love should translate into perfect execution — from idea to product, and from product to market.

Take the case of Nano car — it is a great idea, an average product and poor marketing.

While it still has a chance to deliver on its original promise of a mass vehicle for transport, it will require perfect execution and correcting the mistakes of the past.

Majority of Indian businesses are run as a proprietor — single person owns the company and runs it with all risks and rewards to one individual.

Proprietorship is a highly respectable form of entrepreneurship, but there is always an opportunity to grow beyond the initial founder.

Kishore Biyani of Big Bazaar, one of the most renowned retailers of India, would have remained a shopkeeper had it not been for his ability to think big and grow teams to replace him.

Due to the hype associated with investors, many entrepreneurs think that raising investments is the only way to do business.

But in reality, the only way to make money is from customers. So you must do something awesomely well for your customers, and they would love to give you money for it.

That’s how you will reap profits.

I have seen several entrepreneurs wasting precious time running after investors in so called ‘investor meetings’.

Instead, I would suggest validate your idea, get customers and then go to a VC — that will also give you great negotiating power.

Most famous way to kill a business is to spend more than you have, either on a fancy business class airlines or renting office at Nariman Point in Mumbai.

If your product, distribution channel and value proposition is not established, even putting ads on TV will not help your venture. So use whatever money you have effectively.

But do not save pennies by cutting things like employee welfare!

Business planning is more important than the business plan.

And planning is a continuous process — it does not end by creating a fancy presentation or excel sheet.

Lean start-ups launch quickly, validate assumptions, modify products and scale up their efforts in directions that work.

As a wise man said, ‘If you get 60 minutes to cut a tree, spend 59 minutes sharpening the axe.’

In the hurry to grow and sustain their ventures, young entrepreneurs do compromise on ethics.

It can be as small as delaying vendor payments to as large as paying bribes to get contracts.

However, ethics are important in business.

While doing business in India, remember that your relationship with customers and clients matter a lot and hence, it is important to keep the long term goals in view before compromising for short-term gains.

In the recent past, the technology sector has seen an upsurge in interest among aspiring entrepreneurs, whether it is for building a website business or for mobile applications.

But most of these entrepreneurs are unable to sell their products.

Create and sell — these are the two basic functions that a business thrives upon.

So keep your ego aside and go out to sell your product to customers — even Steve Jobs did it.


About the Author

Amit Grover, founder of AHAtaxis.com, is an IIT Delhi and IIM Indore alumnus, having more than 12 years of industry experience. He started Nurture Talent Academy, and earlier worked with Infosys, Asian Paints, Onida and Mumbai Angels. He regularly blogs on www.amitgrover.co.in. AHA Taxis, his recent venture, offers one way outstation travel across India.

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