Planning to Launch a Startup? Then Avoid These Common Pitfalls
Ritam Gandhi, director and founder, Studio Graphene talks about the difficulties of launching a Startup.
For any startup, it is difficult not to be inspired by the sheer range of entrepreneurial talent on offer across the UK.
Over recent years, more and more people have become inspired to create their own business – there were 589,000 new companies created in the UK last year. Moreover, between 2012 and 2017 there have been 3.5 million startups launched to market. The UK’s entrepreneurial spirit is clearly flying high, and there are no signs of this slowing down anytime soon.
While not meaning to downplay the significance of these statistics, it is important to also consider how these compare to the number of businesses failing. In 2016, for instance, the number of businesses closing was 328,000 – an increase of 50,000 from the previous year. Moreover, it has been revealed that just under half of UK startups have gone out of businesses within just three years of launching.
The question naturally arises: why are so many entrepreneurs failing to get their startup off the ground?
There is no simple answer to this; the challenges faced by each company can be influenced by a myriad of factors extending from its physical location to the sector it’s based in. However, having founded Studio Graphene – a company that regularly works with startups in their formative stages – four years ago, it is has become apparent to me that there are some pieces of advice that are applicable to most early stage businesses.
So with this in mind, what should entrepreneurs heed to help their startups become enduring businesses?
Don’t keep everything in-house
For many people, one of the main attractions of launching a business is the independence it offers. Indeed, for those who have made the leap from full-time employee for someone else to becoming an entrepreneur and their own boss, this can be a truly liberating experience. And yet the sense of control it brings can often lead to startups opting to manage all aspects of the business’ operations in-house. This ranges from the building of an app to the marketing, sales and PR functions of the business.
Understandably, for founders who have invested much of their personal time and finances into creating a company, there can be a natural reluctance to then hand over certain business functions to third parties. However, there are clear benefits in doing so – not only can external agencies reduce the time and resources required to complete a particular task, they also deliver particular specialisms that can be extremely difficult for a small startup to develop in-house.
Moreover, one of the biggest benefits in sourcing an external partner is the startup’s ability to control and determine how and when a particular business function can be efficiently performed. Rather than investing in in-house capabilities, leveraging the skills of an external provider reduces costs and gives the entrepreneur ultimate control. This demand-driven model means that startups can easily stop a service if it is not delivering the desired results or ramp up specific activities in order to meet a particular milestone.
When growing a business, it is vital that entrepreneurs look to build a multi-disciplinary team. But again, this team does not need to exist within the business itself; finding the right service provider who understands a startup’s objectives and matches its culture can enable the company access complementary skill-sets without recruiting dozens of people themselves. What’s more, working with external partners can also offer a unique vantage point and provide solutions that an entrepreneur may not have previously considered.
Opt for regular and attainable milestones
Too often, entrepreneurs set completely unrealistic targets that are simply not achievable within the desired timeframe or budget. The idea of becoming the next unicorn may sound enticing, but more often than not, unnecessarily accelerating the growth of a startup will increase the amount of resources being used before a healthy turnover has been established. This is simply not sustainable – taking such an approach increases the chances of the startup burning out long before it can make an impact on a market.
Small milestones also make companies much more flexible in their ability to adapt to a sudden change of circumstance, or to test a particular set of assumptions about the market. Most business decisions are based on a hypothesis, and entrepreneurs can never be 100% sure that their assumptions and hypothesis are completely true. Regular and attainable milestones allow them to validate these assumptions, and reduces the total sunk costs that could be incurred if a prediction is wrong – something that must be kept to a minimum for startups.
While it is important to have long-term objectives in place, businesses need to break these down into regular and attainable milestones. Rather than a giant stride, taking small steps at a time ensures a solid foundation is in place for on-going expansion, in turn reducing the risk of the business over-committing itself.
Stay on top of the latest trends
This may sound obvious, but launching and managing a business is by its very nature a time-consuming and demanding task. The normal 9 to 5 working hours rarely apply, and entrepreneurs can typically find themselves spending every spare minute working on their startup. In turn, this reduces the chances of them being able to monitor the latest market shifts and tech trends, which could have a significant impact on how their business functions. I like to think of it as an ‘entrepreneurial bubble’.
Consumer and business demands are constantly changing, and startups need to be flexible in how they approach their long-term growth. Market research, for instance, must be routinely conducted to understand the needs and desires of particular target audiences, coupled with an awareness of new technological trends and regular competitor analysis. Such awareness develops a startup’s ability to adapt to different circumstances and take advantage of new opportunities as they arise. The last thing you want to discover after months or even years of focusing on internal development is that your product or service is no longer relevant.
The UK has become an exciting hub of innovation populated by a collection of startups set to disrupt their respective industries. While it is difficult to predict how Brexit will impact the entrepreneurial potential popping up across the country, it is more important than ever that we ensure more young companies are able to overcome the initial challenges faced in their formative years. Doing so will lead to a diverse community of young scaling businesses that have established their position in the market and are on path to reaching their full growth potential.
- 14th August 2020