Startup advice: 5 mistakes to avoid
The first few years in the life of any business can be critical. For many entrepreneurs, a startup will be their first foray into running their own company.
Between raising finance to actually coming up with a product and getting a first customer, the road to success can be full of potential pitfalls. We spoke to Eoghan Jennings, managing director of [Startupbootcamp in Dublin](http://www.startupbootcamp.org/europeans-cities/dublin/) and co-founder of Bandwith Ventures, to find out what are some of the key mistakes that startups should try to avoid.
**1. Don't go it alone**
When you are starting a company, you are going to need to convince a lot of people to trust you. There are a diverse range of stakeholders involved in getting a business off the ground, from bank managers and investors to potential customers. All of those stakeholders are taking on risk in becoming involved with a new company.
“Those who go it alone become very hard to judge,” said Jennings. “In a short 30 minute discussion with your bank manager or first potential employee, they will look to see if you are an insane, crazy person. Insane and crazy is good, otherwise you would probably be in a corporate job somewhere, but you have to be able to differentiate and know if this is someone you want to work with.”
“How do you decide into which camp someone falls in 30 minutes?” said Jennings. “The best way to do that is to look for proxy. You need someone to stand next to you and say they are willing to put their hands up and be associated with the project, as a co-founder rather than as a funder.”
**2. Don’t take on money until you have validated your product**
While your main focus may be on raising investment, according to Jennings the most important thing to is to validate your product in some way. A business plan may be seen as a vital component, but in the end it isn't worth much more than the paper it was written on.
“The validation is the most critical thing,” said Jennings. “There is too much focus put on the business plan, which is a piece of paper with some numbers on it. The biggest mistakes in business were made on paper, taken to be truth and then executed on the basis of the paper. That's not truth, there is no validation in a piece of paper.”
“You need to actually find a customer or a distribution partner,” said Jennings. “It is to do with people signing up to it in some form as some sort of stakeholder. Generally the best validation is from customers or users. Even if you don't have a product, you can describe it.”
**3. Stop building until you know what your customer wants**
While it may seem important to have a finished product as quickly as possible, getting user feedback at every stage of the process is vital to having the right product in the end. One of the biggest risks for a company is releasing a product or service your customers don't like. Talking to them at every step along the way reduces that.
“Rather than spending 18 months in an ivory tower coming up with a grandiose idea that the world is going to thank you for, go out and find out who the prospective customer is,” said Jennings. “It they say they want something different you have just saved yourself a whole lot of money and time.”
**4. You need to be mobile**
If your company has aspirations to export, you have to be flexible about where you
will be based.
“We put that test to people right away,” said Jennings. “If you are not willing to leave Westmeath, you are not going to be able to sell in China. That doesn't mean they are not going to be a great local business. If you want a global customer base, you have to be willing to leave your comfort zone.”
**5. Work out the unit economics**
Many companies are happy to come up with potential revenue figures, but ignore some of the most important metrics, such as how much it will cost to build a product or provide a service. It is important for a company to know how much they will sell for and also how much they will need to spend on marketing.
“Know how much is it going to cost to get a particular customer,” said Jennings. “You need a good understanding of how much you will sell your product or service for, how much it will cost to deliver that and how much will you need to spend to acquire that customer. If you can't tell me that for one product, then don't give me any revenue figures until you figured that out.”
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