According to Investopedia, “a startup is a young company founded by one or more entrepreneurs to develop a unique product or service and bring it to market. By its nature, the typical startup tends to be a shoestring operation, with initial funding from the founders or their friends and families.” There’s a standout phrase used in this definition. That’s “shoestring operation”.
Many if not all startups work within a tight budget. And many if not all cannot afford to fail. To ensure that your startup won’t go down the drain, here are some recommendations.
Do not prematurely set up an office
Renting an office is costly. And the cost will vary depending on your location. In the United States, the average square foot cost of office rental is between $8 and $23. If you live in a big city like New York or San Francisco, expect to pay a hefty amount, which will eat up a lot of your startup budget.
Alternatively, you can maximize coworking spaces. They are more cost-efficient compared to renting an office, especially if you do not plan to do the whole 9 to 5 in a specific location or you have yet to assemble a full team.
Do not pitch unprepared
The bulk of your job as a startup entrepreneur is to entice investors. Unless you or your clan are well connected and a simple phone call from your dad will give you the money you need to fund your business, you will have to pitch as if your life depended on it. And you must never pitch unprepared.
Remember that the person you are pitching to is a busy businessperson. They saved a slot in their schedule to hear you out. The last thing in their mind is to sit through a poorly-prepared presentation.
Come up with a winning deck. Practice your speech. Make sure that once you stand in that room, Powerpoint clicker in hand, you’re in absolute command.
Do not sign contracts without consulting experts
Save a portion of your startup budget for experts hired on a retainers agreement. Ideally, these experts should include legal counsel, an accountant, and a marketing professional.
A legal counsel, for instance, is indispensable especially when you’re on the hunt for investors. They have trained eyes to peruse pages upon pages of contracts. They will spot the details that will get you shortchanged.
Do not get ahead of yourself
Sure, you believe in your product. And you have what it takes to convince other people to believe in it too. Those do not mean you should get ahead of yourself. Take the story of Theranos as a cautionary tale. Its founder, Elizabeth Holmes, quickly turned from startup darling to disgraced entrepreneur now dubbed a fraud.
Your goal should not be an overnight success. A slow but steady climb often proves more rewarding. And it’s less dangerous too. Keep in mind that in business, there are no shortcuts. If there are offered shortcuts, take them with a grain of salt.
Forbes published an infographic outlining the most common reasons startups fail. The usual suspects include lack of market, insufficient funding, pricing/cost issues, and a team unfit for the job. The list also included reasons that are closely linked to the recommendations stated above, such as bad location, lack of a business model, legal challenges, and burnout.
All startups must heed these warnings. After all, these warnings exist based on observed and studied occurrences in the startup industry as a whole. No matter how special you think your ideas are, if you commit the same mistakes as those before you, the consequences will be the same. Failure that is. Something that could be mitigated if you listened.