The Top 10 Entrepreneurial Mistakes that Startup Studios Help Address
Calling all startup enthusiasts…
Let’s face it — the world of startups and entrepreneurship can be competitive, risky, and honestly, brutal. According to the Bureau of Labor Statistics, 20% of new businesses fail during the first two years of their conception, 45% during the first five years, and 65% during the first ten years. These stats shed some light on some key challenges of the startup environment — only the strong survive. In a survey of 150 founders conducted by Wilbur Labs, about 70% of entrepreneurs will face potential business failure, and nearly 66% will face this potential failure within 25 months of launching their company.
But why is failure so common for startups?
No one trait or characteristic ensures the success or failure of an entrepreneur. There are countless factors beyond the personality and professional accolades of a startup founder that impact the ability of a company to succeed.
It isn’t enough to just be smart or business savvy, have adequate funding or have the perfect team. Success comes from having all of these elements in place, along with many other pieces to the puzzle that can be challenging for solo entrepreneurs to coordinate on their own.
Ultimately, it comes down to this: a successful startup launch requires the ability to operationalize an idea, which is easier said than done.
Enter startup studios…
Haven’t heard of them? You’ll want to start here for some context on how startup studios are reshaping the startup industry before you jump into the rest of this article.
As a quick synopsis, startup studios are companies that build companies. But not just any companies…
The primary goal of a startup studio is to address and provide a solution to a consumer pain point. The nature of a startup studio inherently helps to mitigate risk and expedite growth — a few characteristics that make them unique from other sources of funding for startups.
According to Coplex, founders of previously successful businesses have a 30% chance of success when it comes to their next venture. These odds are amplified when you factor in that startup studios employ a diverse, multi-functional team of proven founders with expertise in their respective industries or specialties.
So how can startup studios help entrepreneurs navigate and address challenges?
There are a few common mistakes that entrepreneurs make that end up costing them their business. But want to know the best part? They can be avoided.
Let’s take a look at the top 10 mistakes that entrepreneurs make and how startup studios can lend their support to dodge curveballs and overcome obstacles that commonly take out young businesses.
1. Inability to secure adequate funding
We all know that money makes the world go around. Unfortunately, even if you have the next unicorn startup idea, you won’t get too far without the money to develop your product, build and launch your business and get your amazing, revolutionary idea in front of your target audience.
A startup studio’s investment occurs at the earliest stage of business development to provide funding to drive the startup through a successful launch and beyond. When armed with a disruptive business idea, startup studios provide the funding required to build, launch, and even operate a startup until the startup is fully self-sustaining and profitable, in return for partial ownership of the business.
2. Failure to clearly define your unique value proposition
There are countless businesses led by passionate founders who are driven to succeed. If that’s you, great! But what makes you different? Your unique value proposition defines why a customer should choose your product or service over your competitors.
Don’t have a unique value proposition and can’t identify what makes your product uniquely valuable? You simply won’t last. Because if YOU can’t identify what makes your business uniquely valuable, you can bet that the customer won’t be able to either.
Startup studios know that a unique value proposition is your north star and must exist at the core of your business operations, which is why they help you define it from the beginning. From the development of your unique value proposition, all actions and communications from the business align to this.
3. Sudden market downturn
Leading a startup is risky in general — it is simply the nature of startups. However, success can become increasingly difficult to attain when there is a sudden and unexpected shift in the market.
For example, the recent global pandemic has claimed many young businesses, forcing entrepreneurs to close their doors and cease operations, simply due to unforeseen circumstances and unfortunate timing. This is one of those unfortunate circumstances that is beyond anyone’s control, but there are ways to mitigate the risk of going under when the economic climate becomes a little tumultuous.
To help you navigate the risky startup industry, startup studios keep a constant pulse on the state of relevant industries and markets to anticipate when there is a potential threat. And when things take a turn for the worst, a startup studio’s diverse portfolio of companies enables them to provide financial support through trying times.
4. Failure to solve a problem
A founder may think they have the perfect business idea, but at the end of the day, if your prospective business does not provide a solution to a problem, there is essentially no market need. You must pay attention to your target audience and aim to address their pain points. If nobody needs your “solution,” and you spin your wheels and burn through your budget to try to market your business idea, your company will flop in a matter of months.
Let’s break it down to make it as simple as possible. No market need = startup failure. And this is a costly mistake.
Lucky for aspiring founders, startup studios exist to identify pain points and develop viable businesses around a sought-after solution. This is backed by data and research to verify the need before you ever spend a dime on marketing.
5. Misguided loyalty to the original team
If you have a billion-dollar idea, you need the proper team to back it and take your business to the next level, and quality employees take time to find or develop. The first few years in business are critical, and you may not make it through the amount of time it takes to equip your startup with the right people. Whatever the specific startup demands, the startup studio will source a qualified, professional team to set the wheels in motion and drive the business to success.
6. Failure to let go of personal attachments to their vision
As an entrepreneur, you cannot be so in love with your idea that you are unwilling to compromise in areas that will ultimately help your business become more successful. You must be willing to separate yourself from the business enough to be receptive to opportunities to improve upon the original vision.
Startup studios offer collaborative environments of like-minded innovators who can help you identify opportunities to enhance and expand upon your idea when you are too narrowly focused.
7. Inability to anticipate and overcome legal obstacles
Legal obstacles can be a major barrier to new businesses. Arming yourself with all the legal information you need to start and operate a business can be daunting, and the likelihood that you will overlook something that can cost you thousands of dollars is pretty high — simply because you aren’t an expert at business law, and there are tons of nuances.
Startup studios understand that this is a big problem in the startup space, and to provide a smart solution to this problem (as they do) startup studio teams are equipped with legal experts to make sure all the t’s are crossed and i’s are dotted.
8. Failure to make timely pivots
Agility and resilience are the hallmarks of any successful startup, especially in the world we live in today. This requires keeping a pulse on industry trends and current events, and then making informed, strategic pivots. When you have your head down, focusing all of your time and energy on all the million other things that go along with building a startup, it can be easy to forget to look up and notice what is going on around you. Neglecting this can mean missed opportunities to capitalize or being perceived as tone-deaf in your brand communications.
Startup studios are diligently monitoring current events and shifts within industries and consumer behavior to identify opportunities to make strategic pivots in ways that will protect and benefit the company.
9. Loss of focus or focusing on the wrong thing
To be successful in any business venture, founders must remain focused on the business vision and executing strategy to find the most direct path to success.
A common mistake many entrepreneurs make is trying to be everything to everyone rather than focusing on your niche and executing it well. When the business vision becomes muddied and unfocused, the probability of evolving into a viable, self-sustaining business is slim to none.
You may also find yourself focusing too much on some aspect of the business while completely neglecting others. For example, you may be pouring all of your money and resources into marketing when you should be focusing on investing in market research or product development. This is an easy mistake to make, and it can cost you everything. A startup studio’s diverse team of builders and hyper-focused playbook approach charts the path to success, ensuring that the business does not run too far off course.
10. Neglecting scalability
While the events leading up to the launch can make or break a new business, it is important to start with the end in mind. This means thinking about the direction in which you want your business to grow, and how to put all the right pieces in place to make this possible.
The ability to scale is incredibly important for startups, and this can sometimes require big investments in technology and development upfront to make scalable growth possible. Not only do startup studios account for scalability in their business strategy and planning, but they also make the necessary upfront investments to poise the startup to grow and scale sustainably in the long term.
Startup studios help address these top 10 most common mistakes entrepreneurs make and many more. The entire purpose and specialty of a startup studio is to build healthy, thriving, independent businesses, with the necessary support and resources — and they do that better than anyone else. The startup studio model is designed to promote the growth of their companies alongside the entrepreneurs that build them.
To learn more about the startup studio business model, and what some top startup studios are doing in the space, follow Startup Studio Insider and stay tuned for more insider looks into the startup industry!