The advent of the startup ecosystem has seen two sides of the globe — one of success and one of failure — all across the world, including India. Find out the three most common startup blunders that you should recognize if you don’t want your business to fail.
Tonnes have been written and discussed on the different faults that lead to startup failures, such as a lousy idea, going it alone, no or insufficient planning, lack of focus, inadequate leadership, reckless spending, launching at the wrong moment, and so on.
However, the breadth of this conversation touches on several faults in the Indian startup ecosystem that are not acknowledged or written about as often as they should be.
With the introduction of technology and programs such as ‘Make in India,’ the number of Indian startups has skyrocketed.
Furthermore, Startup India has created an ecosystem to promote entrepreneurship and job development in the country. Despite these variables, a survey from IBM Institute for Business Value and Oxford Economics estimates that 90 percent of Indian companies fail within five years of their debut.
The reasons for their failure might include, among other things, the type of industry or business, the geographical or market target for business, the founders’ talents, qualities, and track record.
These errors are rarely discussed, yet they are critical. These are some of the less-discussed places where startup blunders occur.
The uniqueness of ideas
A business concept may create or ruin a company. Intelligent founders and clever investors swiftly screen and avoid bad concepts. We’ve met some startup enthusiasts who don’t want to put in the work and instead want to steal or clone other successful company ideas or business methods. To be successful, a concept must be unique, honest, and believable. Before beginning work on the business plan, the concept must be thoroughly considered, pondered, and investigated, with a greater emphasis on the pros in detail particular to the business plan rather than assuming it would be the same as the original.
The enthusiasm of a founder
It is widely acknowledged that founders with in-depth knowledge of the business, its underlying technology, a desire for success, and an overall comprehension of multiple business pillars perform well and attract investors. This, though, is about their attitude.
Many entrepreneurs believe that dropouts may succeed in business since people like Bill Gates and Steve Jobs did. These dreamers contribute significantly to the failure rate.
Needless to say, such entrepreneurs lack talents, leadership traits, subject expertise, or experience, and these factors alone ensure failure. This is not to be negative, but to warn individuals who aspire to be entrepreneurs about the obstacles that will stand in their way.
The value of support functions
The concept is the hero, but founders who believe that once they have a strong viable idea, they can achieve everything under the sun on their own are making a costly mistake of misjudgement. As a result, a good concept might fail if it is not implemented carefully.
Finance, accounting, human resources, information technology, and other tasks are frequently overlooked by early-stage business entrepreneurs, who either try to handle everything themselves or outsource them to poor service providers.
These back-office or support operations are typically seen as non-value-added or unproductive. Alternative choices for part-time or freelance services of any function are now accessible throughout the early phases.
However, startups have a propensity to resist using reputable services for tasks such as finance and HR for as long as feasible in the hopes of saving money in the early stages. Startup funding will not be useful unless money is managed attentively and judiciously, which necessitates enough skills and expertise in managing cash flow and investment.
Founders frequently have their company plans and valuations done by consultants that propose unrealistic excel spreadsheet ideas. These plans are frequently theoretical workings and forecasts based on unreasonable assumptions extrapolated using templates and replicating the plans of other firms.
People with business and financial experience must engage closely with the creators to grasp the pulse of the concept and develop a feasible plan. Finally, a business strategy must be realistic and appealing to investors. In reality, the internal IT role is critical in establishing internal technology requirements, tools, and systems to provide a seamless working environment.
This has become more more important during the COVID-19 epidemic, where enabling a robust work-from-home environment is critical.
It goes without saying that recruiting and onboarding individuals that are knowledgeable and driven, but more importantly, a culture match for the firm, is critical.
Ignore them at your risk.
Even if the founders opt to onboard resources or outsource services, the founder must have a fundamental grasp of these activities, or if there are many founders or co-founders, they should accept leadership duties of the function with which they are most familiar. If they wish to direct their firm to success, they need understand the fundamentals of taxation and other compliances, financial tools such as cash flow management, valuation at a minimum, resource planning, onboarding procedures, and technological tools.
There are two primary causes for sidetracking these activities: one is the founders’ overconfidence in handling all of these operations on their own, and the other is the desire to save money or cut costs, which is OK until the consequence is more expensive than what was saved.