Many young entrepreneurs cannot sustain their business in the first year. Around 50% of start-ups are in their second year at the latest. Learn which mistakes you should avoid in order to reach success with your start-up.
You’re proud of your new company and rightly so. After all, founding a company requires courage, perseverance, and a lot of discipline – on top of the necessary know-how.
Statistically, start-ups are rarely older than 20 to 36 months. In the first two years, about half of the start-ups fail. After three years, as a rule, 80 percent of the founders have given up, believe it or not, and after five years, about one out of ten start-ups is still on the market.
The company Zagster, founded in Massachusetts, is still successful on the marketsince 2007.
But why is it that so many start-ups fail?
There are many reasons for this. We present the seven most common mistakes made by start-ups in their first year so that you can successfully avoid the traps.
7 mistakes that can break your neck in the first year.
#1 Your industry knowledge is not sufficient.
Of course, having a good idea is a great start for the foundation of a successful company. But on its own, it’s not enough. The very first prerequisite for founding a company is to know your industry inside-out.
According to the DIHK Start-up Report of 2017, around one fifth of founders have insufficient specialist or industry knowledge. However, gathering as much industry information as possible and thus knowing as much as possible about one's own field of business can be decisive for the success or failure of a start-up. This is because start-ups often fail simply because they lack important industry knowledge in advance that would have significantly influenced their planning.
Tip: Before you take the plunge into entrepreneurship, get to know your industry: How large is the market? How has it developed in recent years? What is the competitive situation like? What are the industry trends, and what is the economic situation like?
#2 You have not given enough thought to your product idea.
You have an idea for a product and want to sell it as soon as possible. Congratulations! But have you really thought through everything with your idea? Do you know the customer benefit of your idea, and have you conducted a target-group survey?
There are different techniques to avoid this mistake. One of them is the Elevator Pitch. The idea is to present the uniqueness of your (product) idea during an elevator ride and convince the audience.
Tip: Before you take the next step, make sure that you know your product, the benefits, the target group, and the industry inside-out.
#3 You pay too much attention to your competition.
It's true that anyone who sets up a start-up should know their competitors. However, this does not mean that you have to follow every step of your competition and adapt your own strategy accordingly. Henry Ford once said, "If I had asked people what they wanted, they would have said faster horses.”
So it is more important to convincingly work out your own USP (Unique Selling Point), be innovative, and stand out from your competition.
Tip: Put your energy and time into developing your own product or idea rather than emulating your competitor.
#4 You haven’t planned your numbers correctly.
Starting a business costs money. At the beginning, there are various start-up costs and expenses for investments. For example, costs are incurred for office equipment, administration, and marketing. Your product also costs money at first, for example for the design or material, before it eventually generates profit.
In addition, you might only break even to start, which can cause problems for entrepreneurs without secondary income.
Tip: At the beginning of every start-up, there should be realistic financing plan for at least the first few months. All factors really have to be taken into account here: From rent, salaries (yes, even your own!), and marketing to expenses for product development and travel expenses for meetings.
#5 You’re overly perfectionistic.
Perfectionism is good – as long as it doesn't stand in your way. Because founders live from the sales of their products. But where there is no product, no money can flow.
It is therefore not always optimal to wait with the launch until even the smallest bug has been eliminated. It makes more sense to test yourself on the market with the MVP, the minimum viable product. The MVP is a version of the product that offers just enough features to satisfy the first customers. Based on user feedback, it can then be continuously developed and improved.
At the same time, it is not advisable to go public with an unfinished product too early. The basic version of your product should be up and running, it should be coherent, visually appealing at least to some extent, and, above all, functional.
Tip: Make sure you choose the right time to launch your product on the market. If you wait too long and are too idealistic, your competition will pass you by. If, on the other hand, you launch an unfinished product, it can cost you your reputation right from the start.
#6 You neglect marketing.
"If you build it, they will come." This is a widespread belief among Start-Up founders, which we would like to contradict wholeheartedly.
Convinced by your product? That's good! But don't think that it will sell solely through free PR and Word-of-Mouth. Even the best product needs a suitable marketing strategy. Storytelling and content marketing are more important today than ever.
Video in particular is becoming increasingly important in marketing. No wonder, as a well-placed video can increase your conversion rate by an amazing 80%.
Tip: Don't neglect marketing. Sure, the product comes first, but without the right marketing efforts it will be hard to get attention in the market.
#7 You overwork yourself.
Setting up a start-up is pure stress: long working days and hardly any downtime are part of the deal. For a while, this can go well, but in the long run, permanent stress can have serious consequences and eventually lead to burnout.
The founder in particular must keep a clear head. He or she has to make important decisions, serve as a contact person for employees, and is the company's constant.
Tip: Time-outs are important, especially in the start-up phase. After all, it doesn't help anyone if you are completely absent for several weeks or months due to a burnout.
Are you already in the starting blocks of your foundation?
Are you already in the starting blocks of your foundation? Starting a business is exhausting and costs a lot of energy, time and money. But it is also extremely exciting. No matter whether you have already founded your company or are just about to start – we wish you every success!