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18 Start-up Mistakes Everyone Should Know About

Avoid these 18 common start-up mistakes on your way to business success.

Nicole Crampton

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Give your start-up the best chance it has by following these guidelines. Make sure you’ve avoided all these 18 common mistakes before launching your start-up or you could set your business up for failure before you’ve even gotten off the ground.

Single Founder

Get through all the work yourself is tough and you need someone to brainstorm with. Partners can talk you out of stupid decisions and keep your spirits up. Start-ups have very low, lows. Multiple founders will bind you all together and keep your enthusiasm, determination and motivation levels high

Bad Location

Specific cities have prosperous start-ups because they have:

  • Higher standards
  • The type of people you want working for you, want to live there.
  • Supporting industries
  • Concentrated industry experts

These all contribute to the success of start-ups and when they’re missing the failing of start-ups.

Marginal Niche

Don’t choose a small, obscure niche market to avoid having competition. Every good idea you come up with will most likely already have competition or could potentially have competition. You can only avoid competition by having bad ideas. Smaller ideas may seem safer but they won’t get you the success you’re looking for.

Derivative Idea

Majority of successful start-ups haven’t imitated someone else’s idea. Their ideas came from specific, unsolved problems they either identified or had personal experience with.

Pivoting May Be a Necessity

You’re going to receive unexpected feedback. Don’t give up and don’t ignore it. Use the feedback to inspire you to change your business model which could help you avoid failure. Many successful businesses had to change course along the way.

6. Hiring Bad Programmers

Bad programmers will slow down your progress. Check that your programmer can do what he says he can do.  Hiring or partnering with a good programmer could help you hire experienced programmers.

Choosing the Wrong Marketing Platform

A platform that looks respectable and fine from the outside could destroy your start-up. Give your programmer the choice. A useful trick: See which one they’re using at a top computer science department for their research projects.

8. Slow to Launch

This only works if it’s a strategic and stealthy launch. Don’t spend ages in development. Rather get your most valuable product developed and release it. Then you can see how your potential customers will react. Don’t overdevelop, hundreds of features won’t keep your start-up afloat.

Launching too Early

You can ruin your reputation by launching too early. If people try out your product and it’s not good they won’t try it again. Your newly launched product doesn’t have to be perfect it just has to do something.

10. No Specific User in Mind

Test what you have with your target market. Don’t rely on your intuition. Talk your target market into using your products, if you can’t you’re on the wrong track.

Raising too Little Money

Getting investors to invest in your business is a good strategic bet. You need to take enough to advance you to the next step, like a working prototype or significant growth. Set your expenditure low and your first goal, simple, this will give you maximum flexibility.

Spending too Much

Spend your start-up funds wisely. Invest in exceptional people and quality products. This will work in your favour long-term. Be strategic and balanced with your spending.

Raising too Much Money

Large investments have drawbacks:

  • Time to negotiate, companies are cautious when investing
  • It requires you to employ more people and rent office space – once here you can’t easily change course
  • Managing your employees and the office politics which follows
  • Your employees aren’t founders, they won’t be as committed.

Don’t bargain hunt between investors. An offer from a reputable firm, at a realistic valuation with no abnormally tedious terms, is a good bet.

Poor Investor Management

Listen to your investors useful insights. Don’t allow them to run your company. An example of investors making trouble with successful companies can be Apple, whose board nearly fired Steve Jobs in the early days. Even Google had issues with investors when they started out.

15. Sacrificing Users for (Supposed) Profit

Develop your product and your business model with a customer’s come-first approach. Focus on a sustainable business and not only on making money. Create this by having happy, devoted and long-term customers.

Don’t Want to Get Your Hands Dirty

Spend half your time developing your product and the other half talking to executives and arranging deals. Companies won’t buy a product if there is no tangible proof that it will be successful. Grow a user base to make your product more attractive to acquirers.

17. Fights between Founders

Majority of the disputes are personality clashes. Don’t start a company with someone you dislike or because you didn’t want to leave someone out. The people involved are the most important ingredients, don’t compromise here.

A Half-Hearted Effort

The biggest mistake you can make is not trying hard enough. The common type of failure is not the one that makes a spectacular flameout, but the one we never even heard of that never really went anywhere and was gradually abandoned.

Mistakes will be an unavoidable part of the start-up process. That doesn’t mean you should repeat everyone else’s mistakes.

18-Mistakes-That-Kill-StartupsThis infographic was visualised by Mark Vital for fundersandfounders.com.

Related: (Infographic) Say YES to More Success

Nicole Crampton is an online writer for Entrepreneur Magazine. She has studied a BA Journalism at Monash South Africa. Nicole has also completed several courses in writing and online marketing.

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Start-up Advice

Start-Up Law:  I’m A Start-up Founder. Can I Pay Employees With Shares?

Bulking up employee salaries with equity is a common method to attract, retain and incentivise top talent.

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Every early stage start-up company battles with restricted cash flow and not being able to pay market related salaries to their employees. Bulking up employee salaries with equity is a common method to attract, retain and incentivise top talent.

Can I pay salaries with shares?

South African labour laws require that employees be paid certain minimum wages, and “remuneration”, as defined within the Basic Conditions of Employment Amendment Act, either means in ‘money or in kind’.  ’In kind’ does not include shares or participation in share incentive schemes, as determined by the Minister of Labour. As such, there is no room for start-ups to completely substitute paying salaries with shares or share options. However, there is no restriction in topping up below market related salaries with equity via an employee share ownership plan (‘ESOP‘).

Related: 7 Ingredients Of Small Business Success Online

Employee Share Ownership Plans

There are a variety of ways in which employees can be incentivised, and it will always be important for the start-up founders to consider what goal they wish to achieve by incentivising their employees.

ESOPs can be structured in several ways, for example: employees may be offered direct shareholding in the company, options for the acquisition of shares in the future; or alternatively, a phantom / notional share scheme can be set up.

ESOPs permit employees to share in the company’s success without requiring a start-up business to spend precious cash. In fact, ESOPs can contribute capital to a company where employees need to pay an exercise price for their share options or shares.

The primary disadvantage of ESOPs is the possible dilution of the Founder’s equity. For employees, the main disadvantage of an ESOP compared to cash bonuses or bigger salaries, is the lack of liquidity. If the company does not grow bigger and its shares does not become more valuable, the shares may ultimately prove to be worthless.

Related: 7 Strategies For Development As An Entrepreneur

Key Features

Some key features to consider when setting up an ESOP are:

  • ELIGIBILITY – who will be allowed to participate? Full time employees? Part-time employees? Advisors?
  • POOL SIZE – what percentage of shares will be allocated to incentivise employees?
  • RESTRICTIONS – will employees be able to sell their shares immediately?
  • VESTING – will there be a minimum period that service employees will have to serve with the start-up to receive the economic benefit of his or her shares?

Employee share ownership plans are great corporate structuring mechanisms for attracting and retaining employees, as well as fostering an understanding of the company ethos and encouraging loyalty and productivity. It is essential when implementing an ESOP that all the tax implications are considered and that the correct structure and legal documentation are in place.

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Start-up Advice

Beauty Of Failure: The Art Of Embracing Rejection

In this piece I will try demystify failure, and look into why it should be embraced and not feared.

Jordan Stephanou

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“Chaotic”, “uncertain”, and “rollercoaster” are three words that would effectively describe almost any entrepreneurial journey. If death and taxes are certainties in life, then failure and taxes are the only two guarantees in business.

If failure is (to some degree at least) inevitable, why should we fear it? In this piece I will try demystify failure, and look into why it should be embraced and not feared.

1. It’s Part of the Job

We can start by separating failure into two different categories – micro and macro-failure. If a macro-failure can be considered as the overall failure and shutdown of the business, micro-failures can be seen as the day to day events that go wrong – that potential client that hangs up on your cold call; the sales pitch that gets the soft-no response of “we’ll call you”; the product launch that no one pitched up to. As Mark Manson puts it, business (as in life) is just a process of becoming less wrong over time.

Everything is a hypothesis that needs to be tested, and the process of business is applying the learnings from each hypothesis – each micro-failure – to be less wrong next time to move the business forward.

As Seth Godin says, “The cost of being wrong is less than the cost of doing nothing”. Embrace being wrong. Rejection and failure are part of the job.

Related: The Art Of Embracing Rejection

2. Opportunity to Refine

There is one undoubted truth about every failure – and that is, each failure gives an experience to dissect and learn from. The Roman Emperor Marcus Aurelius had a similar view; that to one person a situation is good, and to another, that same situation is bad – Only perception decides.

As an entrepreneur, it is important to adopt this stoic thinking of managing your perceptions. Look at situations rationally, and perceive rejections as opportunities to refine the product that the market really needs – not the product you are forcing on your market.

3. With each Failure, Fear it Less

fear-of-failureOne of the great things about rejection or failure, is that the more often you are exposed to it, the less you fear it. In fact, micro-failures can become such a common part of an entrepreneur’s day, that you stop even noticing them as failures at all.

You may look back on a day with multiple rejections from prospective clients as a normal day on the path to building a business. The goal is to get to that point as quickly as possible.

4. One Less Avenue

In the beginning, any failure will elicit a strong emotional response, however, when it becomes embraced as part of the journey, as crazy as this sounds, you may even get excited for the next rejection or micro-failure.

Why? Because each micro-failure takes away one possible path you could go down in your business. Entrepreneurs tend to be highly ambitious, highly idealistic people. This may result in wanting to do too many things, take the business in too many directions simultaneously, and run before walking.

The beauty of failure is it re-clarifies the path, stops the entrepreneurial mind from getting carried away, and brings everything back into perspective. What’s better than pursuing 1000 potential clients? Pursuing 999 higher potential clients.

Eliminate avenues that aren’t right for your business as quickly as possible so that you can spend time on providing best possible product or service for the ones that are right.

Related: 10 People Who Became Wildly Successful After Facing Rejection

5. Practical Tip to Embrace Rejection

So with all this theoretical talk out of the way, how do we get over that fear of failure to see the beauty of it? Start by watching Jia Jang’s TED talk of 100 Days of Rejection: https://www.ted.com/talks/jia_jiang_what_i_learned_from_100_days_of_rejection. The talk genuinely impacted my life. I have since implemented an annual (and much less impressive) 10 days of proactive rejection in my life. The goal is for 10 days, to do anything in any aspect of life that you would do if you weren’t ruled by fear. Ask yourself today, “what would I do if I wasn’t scared?”

The goal is to actively seek rejection to remove the power of fear from damaging your business’s potential.

Finally, I believe we should get our heads around the idea of celebrating our failures. Go for a drink as a team and give a toast to that failure even more than if it was a success. After all, if life is more about the journey than the destination, surely we should celebrate and cherish every event of the journey along the way?

Every event that happens will be critically important in forming the empire of a business that you are building. Take a step back, see the big picture, and smile whenever it doesn’t go as planned. See the beauty of failure.

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6 Resources For Start-ups Looking For Funding

Here are 6 online resources that can help you pay the bills and grow your business at the same time.

Josh Althuser

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Anyone who has ever considered starting their own business, or is currently in the process of doing so, knows that every little bit helps when it comes to making ends meet. Part of the charm of start-up culture is the low-budget creative atmosphere that seems to continually fuel innovation. But, eventually you’re going to have to keep the lights on and water running, and you can’t do that with creativity alone.

Whether you are a business that is just starting out, or already well on your way, there are plenty of online platforms that offer start-ups advice and funding opportunities. Here are 6 online resources that can help you pay the bills and grow your business at the same time.

1. Kickstarter

kickstarter-logoAt one point it seemed that anyone with a clever idea could make a video showing why the world should invest in the next big thing. While a lot of crazy projects have gotten funded over the years, utilising a crowdfunding platforms like Kickstarter continues to be a viable way to get your project off the ground. Of course, if you want to reach your funding goals, it’s best that you have already done your market research, have a solid plan, and treat crowdfunding like a global VC.

Visit Kickstarter here.

Related: 4 Tips To Secure Funding For Your Start-up

2. Toptal

toptal-logoThose who are new to the start-up world might not know exactly where to start when it comes to looking for funding. While the freelance economy has grown immensely in the last 5 years, it’s important to know where to look.

Platforms like Toptal offer a wide range of freelance professionals that specialise start-up funding. Start-ups seeking a consultant on Toptal can also rest easy knowing that they carefully screen each candidate, ensuring they have the necessary professional background and experience to guarantee a successful project. 

Visit Toptal here.

3. Appbackr

appbackrIf you couldn’t already tell by the name, appbacker is definitely worth checking out if you are a start-up working in app technology for both Android and Iphone. The platform helps people discover different apps through the crowdsourcing model. Investors can scroll through apps from around the world, and if they like what they see, they can choose to invest. Funding incentive is based on an investor’s ability to purchase an app at the wholesale price, eventually making a profit once the app starts flying off the shelves in the official app store.

Visit Appbackr here.

Related: 7 Strategies For Development As An Entrepreneur

4. Gust

Gust logoInvestors are more likely to invest locally, which is why Gust is an attractive option for start-ups around the world, as they represent over eighty countries worldwide. Founded by a team of investors and lawyers, Gust knows their way around the start-up world.

With portals for both start-ups and investors, the platform seamlessly connects those seeking funds and those looking to invest. Start-ups can create a profile on Gust, and also have access to tools and tips to help them regulate finances and legal matters. 

Visit Gust here.

5. AngelList

angellist-logoNot just for investment, although that is a major part of the platform, AngelList is also a great place to find start-up jobs as well as recruitment. Those start-ups that are looking to expand can greatly benefit from this feature, while also getting their name out there to potential investors.

Their syndicate platform, led by technology experts make room for those who are looking to invest the chance to apply to a lead or directly invest in a fund.

Visit AngelList here.

Related: 6 Steps To Building A Million-Dollar Ecommerce Site In 60 Days

6. Seedrs

seedrs-logoFrom top corporations to big name accelerators, Seedrs aims to simplify the funding process for investors. Providing a vast network of investors from 48 different countries, who tap into an additionally impressive network of start-ups, there is plenty of room for collaboration on this platform. Seeders also encourages investors and start-ups to continue their relationship after the transaction is made. Their online and offline networks aim keep both start-ups and investors in the loop.

Depending at what stage of development your company has currently reached, exploring various funding options available to you is a worthwhile endeavour. Rather than blindly pitching investors, investigating each potential platform, whether it’s crowdfunding or a hiring a freelance funding expert, will save you time and resources so you can focus on the right type of investment based on your needs.

Visit Seedrs here.

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