New to Entrepreneurship? 4 Mistakes You Can Easily Avoid
The hip startup slang of the day involves words like iterations, being lean, failing fast, and essentially being ok with messing up a whole lot in the pursuit of eventual success. That means we try a lot of things, most of which don’t pan out. But it’s the things that do pan out that keep us motivated.
While this is all true... That doesn’t mean we as technology entrepreneurs should ignore the mistakes of our past, instead we should learn from them. As an agency that works with a variety of start-ups, we compiled a list of four common mistakes that we have helped entrepreneurs avoid.
1) Building solutions in search of a problem
Everyone has ideas, but the only ideas that turn into successful business involve solutions to problems that people will pay to solve. But what if the problem you’re solving isn’t as big of a deal to customers as you originally thought…
Founders often run into this issue when they try to solve problems in unfamiliar markets. Their lack of experience in the space usually forces these entrepreneurs to make dangerous assumptions. Unfounded assumptions about customer problems and priorities are the equivalent to kryptonite for an entrepreneur.
There are typically two types of failure that can befall founders who build solutions in search of a problems.
- Problem exists but not a big enough problem to pay for a solution
- Problem does not exist
Situation one is the most common issue that gets a startup funded and then sunk. Because this is the situation where you first talk to a bunch of potential customers and ask their opinion on an idea for a product or service. Upon asking and explaining your rationale, you will get a range of positive feedback on the idea.
Unfortunately, this is some of the most dangerous feedback you can receive. Because while you think you validated the idea, you really only validated that your interviewee is agreeable. Action is the only feedback that can be relied upon, and that typically comes in the form of purchases, engagement, and referrals.
According to CB Insights, solutions that are interesting rather than those that serve a true market need was cited as the number one reason for failure in 42% of unsuccessful technology startups.
DO NOT invest thousands (or millions) of dollars into ventures that assume they are solving a problem a customer will pay to fix. You need to test with paying customers as soon as possible, cycle through your feedback loop, focus on features users rave about, and find out whether your solution so good that users will recommend it to their friends.
2) Chasing the competition
Competition always exists, even when you don’t think it does… but that doesn’t mean you need to dwell on them. As a startup founder you are uniquely equipped to solve the problems that your customers have.
What you need to be chasing is your customers, and your unmatchable ability to give them value. Study them more than a competitor’s most recent social media update or feature upgrade.
New features and adjustments to a product need to be driven by market data, usability testing, and your intuition about what your customers care about. Chasing a competitor thoughtlessly will definitely make your product less valuable by being a copy, or worse, something that your customers do not even want or care about.
3) Charging too little
Pricing is a huge component of every startups business model, being that it is the price you charge for the value your work provides. Oftentimes we see technology startup entrepreneurs charge far to little to scale, and barely enough to keep their businesses afloat.
There are usually a few reasons for this: in many cases founders who charge too little are new to the startup game and undervalue their work. Also, many founders who do not know the industry they are serving and underestimate the value they are providing to users.
At Helm, we have found that most often people don’t charge what they deserve because they haven’t taken the time or don’t know how to measure, quantify, and identify clearly the key value that they offer. They also don’t intimately understand the differentiation between them and their competition.
What you offer IS different from your competitors, but do you know how, exactly? Do you know what you bring to the table that your top 10 competitors don’t, and can’t?
Knowing the answers to these questions can get to the price your product deserves along with the justification you need to back it up when selling customers, investors, and employees.
4) Forgetting your app has to have a business behind it
With the rise of unicorn app-based businesses like Instagram which sold for $1 billion dollars after just 15 months of existence, and Snap Inc’s recent $25 billion IPO, many founders engage app developers and agencies hoping to stumble upon similar levels of success.
Assuming your company has an idea that solves a major problem for customers and you have team of extremely talented developers behind it. You unfortunately aren’t out of the startup woods and into billion dollar valuation heaven just yet.
After Dijiwan, a web content mapping startup, folded their leaders summarized the demise like this:
A good product idea and a strong technical team are not a guarantee of a sustainable business. One should not ignore the business process and issues of a company because it is not their job. It can eventually deprive them from any future in that company.
Moral of the story: A great product alone is not enough to make a startup successful. Products need to iterate as new customer needs discovered and the company scales. Unforeseen challenges will arise and the business will have to adjust with them. Founders who invest in building a technology startup need to understand that just because the core value of the business is being delivered through an app, does not mean that the full commitment of the founders isn’t necessary.
Helm Experience & Design is a digital product and UX studio proudly located in Buffalo, NY.
You can check out our work here and if you’d like to talk more about design, technology, or business just send us an email at team@helmux.com.
