How Not to Screw Up a Startup

By    November 19, 2013

startup mistakes to avoid

Pretty much any current or would-be entrepreneur would salivate at the thought of dreaming up the next Facebook or Twitter. For starters, such good fortune would bring incredible wealth.

But let’s be honest here: The vast majority of startups aren’t the next Facebook or Twitter. Many startups simply struggle to stay alive—and, frankly, many of them flop. The startup graveyard is pretty crowded.

“While extremely gratifying, founding a startup is a highly stressful and daunting task,” said Raaja Nemani, co-founder and CEO of artist-designed footwear company BucketFeet Inc., based in Chicago. “You have to love and feel passionate about your creation so you can withstand the turbulent ride. Money will follow after that.”

Fortunately, SpareFoot, the startup where I work, has been able to withstand any turbulence that’s come its way. In fact, we just passed the 100-employee mark. To be sure, unsuccessful startups normally don’t keep that many people on the payroll.

As a rising star among startups, SpareFoot benefits from a solid idea—operating an online marketplace for self-storage—as well as bright co-founders, savvy investors, financial discipline, a phenomenal team … You get the idea.

OK, now that I’m done patting SpareFoot on the back, let’s turn to the matter at hand: How do you not screw up a startup? It’s a compelling question with many valid answers. To come up with some answers, we solicited advice from startup veterans and advisers. Here are nine of their gems of wisdom.

yoga pose

1. Be Lean and Limber.
“Chances are that you won’t be making money at first, and there is still a long road toward breaking even. Don’t spend money that you don’t have yet,” BucketFeet’s Nemani said.

To secure money, get creative with fundraising, Nemani said. Think beyond venture capital by applying for small business loans or entering business-plan competitions, he said. Nemani helped judge this year’s Miller Lite Tap the Future business-plan competition, whose grand prize was a $250,000 business development grant.

perfectionism

2. Avoid Being a Perfectionist.
“I’ve wasted a lot of time—and money—dabbling with and perfecting website designs and other marketing
 endeavors when I should have just pushed out a ‘minimal viable product’ to 
test the market and then tweaked it as I went,” said Griff Hanning, owner of Homefix, a home remodeling and repair company in Colorado Springs, CO, and CausePub, a “crowd publishing” company.

Hanning and several other entrepreneurial types stressed the importance of focusing on the “minimal viable product” philosophy—a fancy term for product testing.

help wanted

3. Hire Carefully.
When it comes to bring employees aboard, hire people who’ve successfully done for another business what you want them to do for you, said Rachel Braun Scherl of South Orange, NJ, co-founder and principal of business strategy firm Spark Solutions for Growth.

Another tip from Scherl: “Hire people who are emotionally low-maintenance. You will not have the time to babysit.”

Hanning learned a tough lesson about prudent hiring.

He recounted the story of hiring a man as general manager of his home repair and remodeling business. On the first day on the job, the general manager informed Hanning that he needed to rescue his wife, whose car had broken down. “Sure, no problem,” Hanning replied. “Family first.”

The general manager also must have put another job first. Hanning said the guy never returned to the office and never returned his phone messages.

“And 
this was a guy I was going to let run my company!” Hanning said. “I should have not been
 so lazy. I should have spent more time with him and asked harder questions.”

networking event

4. Make the Networking Rounds.
Jason Weberman, a relationship expert and former business coach in New York City, acknowledged that networking—in person or even over the phone—can be intimidating, particularly if it’s foreign to you.

“However, it is essential for you to meet the right people who you can 
learn from, network with and partner with,” Weberman said. “Trying to do it all by
 yourself will be lonely and tedious.”

That’s why experts say it’s critical to attend business happy hours, chamber of commerce luncheons and other networking events.

reducing risk

5. Minimize Assumptions.
Assumptions can cover an array of concerns, such as setting customers’ expectations and establishing long-term goals, according to Ian Aronovich, co-founder and CEO of GovernmentAuctions.org, a New York City-based website that helps people find government auctions and foreclosure sales.

“Every assumption is a risk, and risks need to be managed,” Aronovich said. “Almost
 any business-related activity your company conducts will start from 
assumptions. So before you start allocating funds to different services or
 different tasks, you have to minimize these assumptions, turn them from
 uncertainty to concrete facts, and reduce these risks as early as you can in
 order to get the most out of your capital.”

business-mentor

6. Surround Yourself With Mentors.
“If these mentors are good, they should 
be offering criticism and feedback along the way. Be able to take it,” said Karen Jashinsky, founder and chief fitness officer at O2 Max Fitness Inc., a Santa Monica, CA-based company that sets up personalized fitness and nutrition programs for busy people.

“You 
don’t want someone telling you that your every move or thought is accurate. You want people to challenge your thinking, which will only help you improve 
and grow.”

business experts

7. Assemble a Team of Outside Experts.
Denise Beeson, a small business consultant in Santa Rosa, CA, said the team you put together should include a CPA, a bookkeeper, a banker, an attorney, an insurance broker and a small business consultant.

“Success is cheaper, manageable and predictable with expert help,” said Lauri Flaquer, a small business coach in St. Paul, MN.

Hanning found that out the hard way. He said he regrets enlisting a tax preparer instead of a CPA when he opened his home repair and remodeling business, as “she really messed me up.” A CPA is better equipped to steer you in the right direction when it comes to taxes and cash flow, according to Hanning.

legal matters

8. Get Your Legal House in Order.
Nellie Akalp, co-founder and CEO of CorpNet.com, an online service for filing legal documents based in Westlake Village, CA, said she sees far too many of her startup clients fail to incorporate their businesses (through a vehicle like an LLC) because they think it’s “too early,” or they fail to choose the right legal structure. She said a slip-up in this department “can have a significant impact” on a startup’s taxes and on the business as a whole.

Incorporating a business through an online service like CorpNet.com is cheaper than tapping a law firm to do it.

However, a startup should hire an attorney to handle everyday legal matters, according to Mark Britton, founder and CEO of Seattle-based legal marketplace Avvo.com.

“While most young entrepreneurs would rather have a root canal than consult a lawyer,” Britton said, “nothing will put you on the path to startup disaster quite like an unexpected lawsuit, nasty contract dispute or friendly competitor stealing your idea.”

obsessed

9. Stop Obsessing Over Accolades.
“Don’t be fooled if you get media mentions or write-ups but are not 
profitable or don’t have a strong pipeline. Media and press might lead to
 sales, but not always,” said Caroline Ceniza-Levine, co-founder and CEO of career coaching and training firm SixFigureStart LLC, based in New York City.

“Don’t just chase after media because it feels good. Check 
to see that mentions you have gotten led to traffic, engagement and, ideally, 
sales.”

John is editor of The SpareFoot Blog. He first moved to Austin in 1999, when downtown Austin wasn't nearly as lively as it is today. John's loves include pizza, University of Kansas basketball and puns.

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