Of the most familiar statistics in the entrepreneurial world the big ones are about failure. According to the data:

Behind these failures lie one major agent: mistakes. Sometimes its a few massive mistakes, and at others an aggregate of various small ones, that ultimately cause the collapse of a business. You see, even Titanic had been built as an Olympic-class ocean liner that went down, after meeting what could’ve been avoided.

However, unlike the Titanic, the dead of the entrepreneurial world are buried without any fanfare.

So, if you’re in the process to build a business, here are the five big mistakes you must be watchful about:

1To sell ice lollies during the Christmas season

What is wrong with selling ice lollies? You may wonder. 

The thing is there is nothing wrong with selling ice lollies. But there’s definitely something wrong with selling ice lollies during the Christmas season. This something wrong is: no market for your product.

In a research conducted by CB Insights that asked 101 startup founders to pinpoint the reasons they believed their company failed, the top reason of failure stated by 42% of the founders has been the absence of a market need for their product.

Now before you choose to throw late Job’s:

A lot of times, people don’t know what they want until you show it to them
let me clarify my point further.

Lack of need for a product can arise when it’s a right product for the wrong market, or the wrong product for the right market. It can also happen when you deliver the right product in the right market at the wrong time; and also when a compelling value proposition can not be established. The product-market mismatch can be avoided by knowing the pulse of your target market.

It’d be interesting to mention here the example of Poocho.co.

Built as Pakistan’s first start-up centric communication platform to gain and share knowledge, Poocho.co had been inspired from Quora. The platform founder Kamil Rextin meant to develop it as a structured and open platform to share ideas and ask questions about startups, and as a replacement of the private Facebook group about start-ups from Pakistan. However, the idea couldn’t succeed. In Rextin’s own words:

Facebook plays nicely into one’s daily routine and no one wants to go to another place to login and do the stuff they could on a Facebook group. Also, we could not get some folks who would have brought in a lot of other people interested or invested enough to ask or answer questions.

2To burn more than you earn

Believe it or not, but fewer businesses die because of cash crunch than do because of a poor product-market fit. So here, you can have a breather!

According to the insights availed through data, 29 percent of business burn out due to an exhausted cash flow. A mismanagement of finances is the second biggest mistake an entrepreneur is likely to make.

One of the most important responsibilities of a CEO is the fiscal responsibility to properly manage cash flow and the multiplication of it for the company. To ensure that you do not commit this mistake, remember that a company that is not growing, is shrinking! Make sure that you understand where to invest for growth and where to keep costs lean.

3To brew discord

With 23 percent of founders blaming their team choices as the mistakes that drowned their start-ups, a wrong team/management is the third biggest reason why start-ups fail. 1/3rd of companies fail because the management was unable to handle issues like hiring, finances, and marketing.

Businesses prosper with adjustment and observation, listening and learning. In case of a team at the helm of affairs marred by constant internal conflicts, there is close to no hope of survival. Among other drawbacks of a poor team, the most hazardous is that it loses the capacity to strategize as well as that of proper execution.

4To give poor thought to the sustainability of the business model

An unsustainable business model is a question-less suicide formula. Not only that there is no scalable way to acquire customers, the cost of acquiring a customer (CAC) is irrationally high as compared to the lifetime value of that customer (LTV).

This is where Twitter comes in handy as an example. Despite a near perfect product-market fit, the social media platform, to-date, has been struggling with the need of a viable business model.

5To get caught in legal issues

While the CB Insights data testifies only 8 percent founders finding legal mistakes a cause of their startup failure, the ratio could be alarmingly high in the local context. Beginning from branding issues to a company’s expansion into new markets, the nature of legal processes is neither smooth, nor there are proper guidelines available. Incorporating a private limited company alone is a months long task. Meri Taleem, is an example of one such affectee of this legal whirlpool.
An extremely interesting successful example of how to avoid a legal feud in a highly competitive, copyright driven industry is that of the music streaming startup Patari.

As can be seen, all of these mistakes are connected, in one way or the other, to lack of leadership. In a nutshell, to develop a sound team and develop a sustainable business model and a thriving brand, a founder is fighting no less than a leadership battle. While lack of finances could be argued as a factor outside the leader’s capacity, the factor in itself is not independent and arises due to other controllable mistakes.
If you’re interested in the subject, make sure to visit Autopsy.io. This site is built as a database of failed startups and documents the reasons of their failure. You can learn about the failed start-ups in a chronological order, with their product idea and the reason for failure.

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