The Biggest, Most Costly Mistakes Made by Startups (and how to fix them)

In the past few years, I’ve had the opportunity to work with a variety of amazing people, startups and small businesses. Some I worked for on a short contract basis, others I was more involved in the overall product design and strategy.

This has given me a unique perspective. Just as User Experience Designers notice patterns in user behaviour, I’ve noticed patterns in founder behaviour.

I’ve seen the same mistakes being made over and over again, and the kicker is, most people don’t even realize they’re making them.

But even If they do, they don’t understand how much of a negative impact they’re having on their business.

The thing is… I’ve also made every single one of these mistakes myself. It’s not like I sat back and just observed people crash and burn. Along my journey… I participated in all the things I’ve listed.

Hindsight is 20/20, and sometimes failing is the only way you’re able to see so clearly where you went wrong.

And trust me… I’m really good at failing.

But… I also think it helps to share your experiences with others. This way, we can all learn from each other mistakes as a community.

So I put this article together to help you pinpoint where your business could be going wrong, and also some resources on how to fix it.

Enjoy my list of 10 of the most common mistakes I’ve seen made by startups.

Confession… I actually ended up writing a list of 15 startup mistakes… But since I didn’t want to make this a 10,000 word article, I’ve packaged up all 15 mistakes (and fixes) into a pdf which you can download here.

1 — Not Keeping Detailed Analytics

So many businesses are guilty of this.

It’s not complicated. You absolutely need to be keeping track of how people are using your product. If you’re not, you’re simply operating blindly.

I often stumble upon this problem after asking about past strategies. For example, what they may have tried in the past to reach a certain goal.

Explaining the strategies to me is no problem, but it often ends up the same way…people have no idea if they were successful or not.

Why? Because without keeping track of user behaviour, they have absolutely no idea if what they tried worked or not.

Imagine for a second that you’re attempting to build the world’s fastest car. In order to make the car go faster, you need to try different tactics.

You know that a higher quality rubber on the tires is supposed to give the car more traction, and therefore… make it go faster. Makes sense right?

Now imagine pouring thousands of dollars (and hours) into this racecar, taking it out on the track, and watching it drive around… except not using a spedometer to see if it goes any faster.

What happens then? Everyone just looks at each other and says…

“Well.. I mean… it looks faster… it must have worked! Hooray for us!”

This happens all the time when people are building digital products! It’s just way more funny when you think of it happening to a racecar.

The Fix

Setup some detailed analytics!

Let me make one thing clear, when I say “analytics” I’m not referring to simply hooking up Google Analytics and then doing nothing else (although even this is better than NOTHING).

You need a system in place that can track specifics. If your product has users, you should be tracking things like daily active users, monthly active users, churn rate, button clicks, conversion rates, etc.

It’s possible to customize Google Analytics to work for you in this way, but it needs to be specific to the goals you’re attempting to accomplish.

If this is over complicated to you, check out The Beginners Guide to Startup Analytics.

The important thing is, you’re able to read and understand the way your product is being used.

Fortunately, there are a ton of tools out there that make it much easier to track the metrics you need to be tracking. I would recommend the following resources:

2- Focusing on the Wrong Metrics

This is often fuelled by good intentions. A founder, or team, or leader, chooses a goal they want their team to accomplish.

For example, increase the number of daily page views to their landing page.

They pour time, energy, and money into accomplishing their goal. And, at the end of the day, when they finally do, they’re happy about it.

It makes them feel productive, accomplished, and it’s a “job well done” for the whole team.

The problem? The goal they choose has no actual impact on the success of the business.

In the example above, you might think that increasing page views to your landing page is a great idea… but what do page views actually give you in terms of value?Nothing.

In this example, the more important metric to focus on would be the conversion rate of all those new page views. Or even how many of those conversions actually turned into users that didn’t just log in once to never return.

The Fix

There is no way to list metrics you should be paying attention to and ones you shouldn’t.

This is about your product’s specific goals.

If you don’t have any goals, the first step is to sit down and figure out exactly what you’re trying to achieve.

Are you trying to increase your number of users? Generate more revenue? Decrease cart abandonment?

Once you’ve figured out your goals, write down the metrics that will help you make informed decisions on how to reach that goal.

For example, if you’re trying to increase your monthly revenue, you might try running a A/B test on your payment page.

The results of these A/B test would be actionable metrics that would allow you to make decisions on how to continue to increase revenue.

The most important thing to remember is to not get overly excited about metrics that are meaningless, no matter how good it feels to indulge.

They will lead you down a rabbit hole which you will wake up from one day with no money and nothing of value to show for all your time and effort.

For more info on actionable metrics vs vanity metrics, check out this post by Eric Ries, author of The Lean Startup.

3 — Operating Without KPIs

Much like focusing on the wrong metrics, people sometimes make the even bigger mistake of having absolutely no idea what numbers they should be tracking at all…so they track none.

If you’re unfamiliar, a KPI is an acronym for a Key Performance Indicator. It represents a set of metrics (chosen by you) that reflects whether your business is succeeding or failing.

A few examples of common KIP’s could be:

If you’re spending time and money attempting to improve your business, but you’re not keeping track of what’s working and what isn’t, then you are 100% wasting your time.

The Fix

Determine between 1 and 5 key metrics to track that will indicate you are moving in the right direction. Keep in mind that unless you have an actual goal for your business, it’s almost impossible to dictate which way the “right” direction even is.

Are you trying to reach $1m in yearly revenue? Are you trying to raise a funding round and need 10,000 users to be successful? Are you trying to keep more users activate each month?

The goal you choose will help you determine the proper KPIs to be paying attention to.

Need some help choosing the correct KPIs? Check out this article How To Pick Metrics For Your Startup That Matter.

4 — Not Setting (or Sticking to) Deadlines

Regardless of how disciplined you and your team are, simply saying you will release the next feature “as soon as possible” doesn’t actually work.

And I’m not just saying that based on my experience, it’s an actual thing calledParkinson’s Law.

It’s a law that basically states that any given task will take as much time as you give it.

For example, you have a project that seems to be going on for days and days, yet you manage to finish it up just before the long weekend…

How is that possible?

It’s not. It’s simply you working within time constraints. Without those time constraints, you’ll just keep working and refining and changing things forever.

The Fix

Set a hard completion date on goals you want to achieve. Do not let this date slide. Tell yourself, and your team, that this is not a “shifting” deadline, and you will ship whatever you have completed by that date.

Having a time constraint forces you and your team members to make decisions about what to prioritize and what to forget about.

When the time comes to ship what you’ve built , actually ship it. If it’s a disaster, then it will teach you a valuable lesson about prioritization and trimming the fact on unnecessary requirements.

Too afraid it will ruin your business to ship? Burning company time and resources on a never ending project is much much worse.

Need some help setting and sticking to deadlines? Check out these articles:

5 — Not Having a Team Working Philosophy

Productivity hacks, work hacks, time management principles, project management philosophies, blech…. There are literally thousands of ways to approach building a product.

The problem occurs is when everyone is trying to work using different methods.It’s even worse is when people are trying to work using a method they don’t fully understand.

It leads to disorganized chaos. One person approaches all their ideas from a “Lean” perspective, while a few other people are convinced a project or feature needs to be 100% complete and polished before shipping.

This creates internal turmoil, fighting, and unhappiness. It takes time away from doing the work that matters.

The Fix

The best places I’ve worked for have a similar pattern… The people who are making the decisions are constantly learn and reading about the best way to do things, and they make sure everyone knows what they know.

The most effective method of getting everyone on the same page is by handing them a book, or a bit of reading material, and having them do nothing else until they are finished reading it.

For example, someone handed me a copy of The Lean Startup and told me to read it before I did anything else. Even though I had already read it, I brushed up on it again just to be sure we would all understand each other.

37Signals (the founders of Basecamp) are an excellent example of a company that has a strong team philosophy, which was created by the founders.

Here’s a hilarious example (and ad) for their book Rework which is based on their company’s core values.

If you’re not a reader, here’s a short list to get you started. Keep reading until you find something that really embodies what your business is striving for, and have everyone you work with read it as well.

Note: Confession… I actually ended up writing a list of 15 startup mistakes… But since I didn’t want to make this a 10,000 word article, I’ve packaged up all 15 mistakes (and fixes) into a pdf which you can download here.

6 — Not Firing People Early Enough

Negativity, anger, resentment, frustration, all of these things can spread like wildfire throughout your team and have extremely terrible consequences. And sometimes it can all come from one bad apple.

More than anything else, this kind of mentality takes time away from what everyone should be focusing on…. Doing the work that makes the business succeed.

This problem seems to stem from the fear of firing people. Or the belief that employees can be changed or improved upon.

Work is an equal trade… you trade people money for their services. If their services aren’t worth the money you are paying them, then it’s no longer an equal trade.

It doesn’t matter how many children they have or how much they need the job… if they aren’t living up to their end of the bargain… it’s their own fault.

Or is it? Could it instead by your fault for hiring the wrong person?

The Fix

Companies like Netflix take hiring the right people very seriously.

They understand that your success is entirely determined by the people you hire to help you create it.

How do they do it? They have a very specific set of core values which they hire by.

If for whatever reason you aren’t living up to those values, they fire you.

No hurt feelings. They give you a nice severance package and send you on your way. They don’t care how you feel about it… they care about their own success.

Begin by determining the type of company you want to build… then create a set of core values you believe will lead to that type of company.

I highly suggest checking out Netflix’s presentation on their culture and core values.

I’m not saying be a dick and fire people because your company isn’t successful. Make sure you realize the difference.

7 — Not Communicating With Your Users / Customers

It’s not that difficult to come up with an idea and get at least a few people interested in it.

Generally, if you’re at the point where you’re hiring a team or you’re reading this article wondering if you’re making mistakes, you’re probably past the validation stage of an idea.

Unfortunately, many people approach things backwards. In their mind, they’ve created something they think a lot of people want, and they spend the following months trying to cram it down as many people’s throats as possible.

When they run into trouble they often complain about how “expensive” marketing is, and how they need more money in order to get the product in front of more people.

But that’s not what’s happening. Instead, they’ve built something that is sort of what people want, but they haven’t got it quite right yet.

This is usually called “finding product market fit” and it happens when your product finally aligns with your market’s demands.

But most people don’t get there… why? Because no one is asking, or observing, what people want.

It’s like they put a sign on a door that said “Free Lemonade” but when people came inside… no one was drinking it…

What’s wrong?? How do we fix it? They ask.

Many startups approach this situation by just throwing a bunch of different drinks into the room and seeing if any of them will stick…

Throw some Coke in there! Nope.

Okay throw some iced tea! Shit nope that didn’t work either.

Eventually, everyone starts to leave and before long, it’s just an empty room with a bunch of spilled drinks on the ground.

The Fix

Because none of the “founders” bothered to mingle around the room and speak to anyone, they failed to understand the problem…

Most of the people in the room were diabetics and couldn’t drink the lemonade. They came inside looking for water, and when they found none, they simply left.

Had someone learned this information earlier and grabbed a case of water, they would have quickly been on their way to a building successful… water… business…

Yes… the analogy is weird, but the point is…

If you’re not talking to your users, then you’re simply guessing at what they need and want from your business. This is slow suicide.

Don’t think this is important? Ask the founders of AirBnB who nearly closed up shop before aggressively embarking on a user research journey that completely turned the entire company around.

User research isn’t overly complicated, but there’s a few simple methods you should learn you that will be literally eye opening for you.

I cover all of these in my free email course 5 Weeks to a Better User Experience.

Follow that link. Sign up. Talk to users. Build what they want. Collect money. Buy yacht.

8 — Building Too Much Stuff

Productivity feels great doesn’t it? It’s a high that is like nothing else.

In fact, I’ve been putting off writing this article for a while now, but at the moment I’m writing full steam ahead and it feels GREAT.

But… what if it’s actually not great?

I’ve worked for companies have “planned features” list a mile long. Literally, a never ending list of ideas to be built.

And what did we do? Went through one by one building them.

Why? Because it felt productive as hell, and we didn’t know any better (myself included).

At the end of each day we would wipe the sweat from our brows and head home exhausted but feeling great.

In the end, we build an extremely bloated product, that had a list of thousands of bugs, and a bunch of features that no one even wanted (because we weren’t communicating with our users!).

It failed.

Having a ton of features is a huge drain on your team’s resources, because every new feature requires maintenance, support, explanations, etc.

Not only that, but it gets in the way of your users attempting to access the value they actually need from your product.

The Fix

Building things isn’t a bad thing… you have to be constantly changing, expanding, or fine tuning your product.

But, it’s important that you follow two important rules:

  1. Thou must only build things that people want by conducting user research first.
  2. Thou must swiftly remove things that people don’t use, even if thou spent hours and hours building them.

User research is vital here. Interviews, user testing, etc. will all give you valuable insights in what to build and what not to build.

Again, you can learn about all these methods of research in my free email course.

But sometimes, even with all the user research in the world, you build something that people don’t actually want. These things need to be removed.

Making it as easy as possible for your users to access the value you’re offering and quickly as they can is key to a positive user experience.

9 — Being Too Focused on Visual Design

Hi, I’m Craig… I’m a Product Designer and I think visual design is stupid.

Cue sounds of angry designers throwing rocks at me

Here’s the thing… visual designers are a bunch of extremely talented and creative people. Nothing is as satisfying as an amazingly beautiful app interface, or visual brand…

BUT

The mistake here is pouring time and money into creating these things at the beginning.

Most startups have an extremely short runway in the beginning… this means they are strapped for cash and time (more on this later).

I have watched founders pour thousands of dollars into logo and brand designs. Stay up all night worrying about the colors of buttons or which mockup they should choose.

This stuff doesn’t matter until you have an established business.

Especially if you haven’t yet reached product market fit.

The Fix

The only way to fix this is to change the way you see your product. If you’re building a startup, you’re not creating building a traditional business, you’re running an experiment.

The goal of this experiment is to find out what people need from you… and you don’t find out what people need through nice logos or beautiful interface designs.

For example, my most recent product Kwilia, provides pre written, popular and highly viral content for businesses to share on their social pages (mostly Twitter).

Myself and my co-founder built version 1 of Kwilia extremely quickly, and we wanted to do it without putting in much money or time.

We wanted to expend the least amount of resources to get the answer to our main question…

Is this what people want?

Had I spent the first 3 to 4 weeks focusing on creating the perfect logo, or creating a cool interface with all sorts of complicated interaction design and animated buttons… what would I have accomplished?

Nothing.

No amount of time I would have put into logo or interface design would have gotten me any closer to answering the question… is this what people want?

Keep in mind when building any stage of your business that the goal of everything you do is to find out if people want what you’re creating… Not if people like the way it looks.

10 — Running Out Of Time

Unfortunately, this is the way the majority of startups and small businesses fail… and it’s probably one of the most difficult thing about being a founder that has no financial experience.

The problem here is that many founders simply don’t pay close enough attention to the amount of money they’re spending each month, and it quickly snowballs out of control.

They take a quick glance at how much money they have left in total, but without paying enough attention to their monthly expenses. Eventually bankruptcy sneaks up on them and they suddenly have to close up shop (often without paying employees… boo).

They spend their resources on shit that simply doesn’t matter.

The Fix

You may have heard the term runway before. If you haven’t, runway refers to the amount of time a business has left before it runs out of money.

Runway is calculated taking the total amount of money you have in your bank account, and dividing it by the amount of money you spend each month (called burn rate).

For example…. If I have $100,000 in capital and my company spends $10,000 per month that means I have 10 months of runway left.

Always be aware of your runway. Remind yourself of it every single day, and before every single decision you make.

If a weird way, short runways are good. They force you to trim the fat, do away with excessive and unproductive tasks (like visual design), and instead focus on the only thing that matters…

… extending your runway.

How do you extend your runway? Go back to Number 2 (Focusing on the wrong metrics). The metric you choose should related to a goal that will ultimately lead you to getting a longer runway.

If your plan to extend your runway is to raise a round of funding for your business as quickly as possible, do you think getting 1,000 more Facebook fans will be the quickest path to that?

Probably not. But then again, maybe it will if your business is focused on social media.

It’s entirely dependent on your product.

If you’d like to learn a bit more about burn rate and runways, check out this article by Mark Suster.

In Conclusion

I’ll end this by saying… don’t take this article as me claiming to be perfect. As I said, I’ve made every single one of these mistakes. Mistakes are good. It forces you to learn.

Am I a billionaire who has sold multiple businesses… no, and I don’t claim to be.

Have I had some success? Yes. Have I tried and failed a shit ton of times? DAMN YES.

And let’s be honest… nobody wants to fail, no matter how much they’re going to learn. Sometimes…. Being aware of the mistakes that you might make will help you avoid them.

One last time, I put this whole thing together in a handy PDF file you can refer back to later (and it contains 5 more mistakes I didn’t include to keep the post length down).

You can download the free pdf here.

http://usabilityhour.com/15mistakes

This article originally ran on my blog UsabilityHour where I write about Product Design, UX, and Startup Culture.