Most startups will fail – and it’s rarely because they lacked passion. Their founders are like baby birds who jump out of the nest too quickly, and fall into one or more of these common planning traps:

1. They aren’t selective about who they work with

These founders confuse convenience with quality.  They spend very little time vetting service providers or employees qualifications, relying on word of mouth & gut feelings. These are the people who invite someone to help redesign their website because they work in the same building or because their cousin recommended them. If someone is undisciplined when it comes to vetting personnel, you can bet they’ll be the same way when it comes to problem solving and planning.

2. They over-promote themselves

Do the founders run a blog, post 10 times a day – each! – on four social media networks, produce a video series, do interviews, and stage promotional events — when they’re still trying to figure out their business model? Making a connection is important, but founders shouldn’t use their personalities or publicity to compensate for a weak  strategy. PR buzz can pique investors’ interest – but they’re still going to demand substance over style.

3. They don’t respect their investors

The moment you bring in an investor, your company is no longer yours. It’s a partnership, where your ideas and passion are balanced – and checked – by the investors’ rights, experience, and financial expertise. Startup founders who marginalize their investors are destined to find themselves entangled in years of litigation – or to lose their companies entirely.

4. They haven’t done thorough market research

Can the founders rattle off customer demographic data, but struggle when you ask them about their competitors? And can they give you credible sources to back up their assumptions about the market? It’s not enough to be an expert on your craft. You also have to be an expert on your industry – including your potential customers, your competition, and market trends.

5. They have the wrong leadership

Startups require a completely different skillset than they teach in MBA programs and Fortune 500 companies. Those are organized military campaigns compared to the guerilla warfare that is startup culture. Startup leaders have to be able to plan – but pivot! – and adapt plans to rapidly changing circumstances without sacrificing financial progress. A startup needs a team, including people with experience navigating startups successfully. Only a team can minimize risk and maximize skills. Startups can not survive on the intelligence or charisma of a few personalities.

6. They don’t have a revenue model

Startups are different from typical companies because they’re still trying to figure out a scalable revenue model. And that’s okay. No one expects a startup to have their model set in stone the first month – but the ones that survive have at least a few potential models they want to test.

7. They don’t have a long term ROI plan

Investors aren’t interested in financing your hobby – they want to make money, and lots of it. A revenue model won’t do you any good if it barely brings in a profit. Successful startups outline plans to give investors at least 10 fold return on their original investment. That number is the same, whether you’re investing your own money or using someone else’s, because it gives you a wide buffer to adapt to the market.

8. They only have one revenue projection

I can always tell when someone is a startup newbie, because they only use one set of data to make financial projections. That’s how established businesses – with plenty of data to draw on – make projections. Experienced startup planners always use at least three sets of data for every projection: one for extremely fast/exponential growth, one for slow-but-steady growth, and one for catastrophically slow growth.  Doing anything less is a sure sign they don’t understand the factors that influence startup planning. If they don’t know that basic difference between startups and traditional businesses, you can be sure they’re ignorant of other important information.

Most of these mistakes can be easily avoided if founders take time to ask questions and accept guidance — and if the people who surround them are willing to call them on their blind spots. You can read more about what makes startups different from other businesses in our article “Baby Elephants & Baby Birds: What Does It Mean to Be A Startup?”

 

A physicist by trade, author by choice, a born teacher, a retired veteran, and an adamant problem solver, Frank has helped the White House, federal agencies, military offices, historical museums, manufacturers, and over 250 technology startups get stuff done, communicate effectively, and find practical solutions that work for them. In his spare time, he makes sawdust and watches Godzilla movies.