Starting a start-up, is fine. One needs to open a company, have it registered and start the engine. If all the parameters are safe and well maintained, it will be a smooth ride, else the engine will sputter and soon die down. So, lets understand the various grounds of failure of a start-up, so that the ride is always smooth.
1. Clarity of Thought
An entrepreneur must be very sure in his/her thought process about business process including future risks. Just having a mere idea, to start a business is not enough. The idea itself, has to be understood and researched in relation to its viability. A good Market Research and a proper Feasibility Study should be undertaken before starting the business.
2. Funds for the Start-Up
When an entrepreneur starts his/her business with his/her limited savings, it might be good for the initial period. If sales and marketing and the eventual cash inflow will be taking time, then it is imperative that he/she is able to generate enough funds from other sources, to run the business, else it will fail and so will the invested funds.
An entrepreneur, when on the look-out for investments may sell his/her stake to get funds for the business. He/she should be very clear about the company valuation, financial requirements, funds being received. This will also have a future impact on further sale of stake. Errors in such calculations often turn out to be disastrous.
3. Mentoring
Locating a good mentor for a start-up is as important as providing water to a plant. The mentor, so selected does not do his/her duty, or is ignorant or even has conflicts with his/her other mentees, then the future of the start-up is surely flammable.
Often, start-ups avoid appointing mentors so as to reduce costs and avoid being advised to. They do not realize, the importance of a mentor, until they suffer losses.
4. Talent Acquisition
The entrepreneur must hire the right person for the right job, having relevant experience and with proper legal safeguards. Any error of judgement will create a shock for the enterprise. Instead of being top heavy, a start-up should be lean, have multi taskers who in turn are well paid.
The general trend is to hire the best students, fresh out of the top Engg. Schools/ B Schools at mind boggling salaries and ignoring the grass-root level staff/worker with a pittance of a salary.
5. Customer Acquisition
When a product/service is ready, who is the end user? When, the Market Research and a proper Feasibility Study was conducted at the initial phase, this very important point must have been taken into account. To acquire a wide customer base, the start-up must invest in “social media” promotions SEO must be optimised.
If, customer acquisition is not accurate then the start-up is bound to fail, irrespective of how the product/service is.
6. Change in Technology
Often, when a business is started, it has to adapt to the change in technology, else they will cease to be counted for. Faxes has been replaced by scanners and emails, Accounting Cash Books have been replaced by Tally and other softwares etc.
Not adapting to such changes also leads to failure.
7. The Office
Splurging on your Office as a show piece might be considered acceptable if you are using your own resources. If the start-up, ‘shows off” by excessive expenditure on the Office decor with the investors funds, then it may not be palatable. Instead the start-op Office should be functional in nature, with basic furniture, and a good chunk working from home or in co-working spaces. Ideally, start-ups should try and find spaces in incubation spaces, where the office expenses are minimal and that too shared.
8. Team Bonding
It is very important that the founders of the start-up stay as a close family. There should be mutual respect, faith and trust amongst them. There should not be any animosity between them, that might cause friction and cause emotional hurt. Many times promising start-ups fail due to this particular reason.
9. Stop Corruption
Many Start-Ups, are suffering losses due to corruption within themselves. Once, they receive funding from various sources, they start splurging on themselves. They increase their packages, which increases the “Burn Rate” of the Funds. At times the start-up founders buy ultra-expensive capital assets in their name, from company funds, thus reducing “spends” on necessary expenditures eg salaries etc.
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