Ten common business problems for startupsDecember 28, 2016
With 24 years of experience in management and consulting, Paul Fioravanti brings a wealth of startup experience and expertise in diverse industries ranging from energy to telecommunications, construction, and transportation. Fioravanti is a managing director at Qorval and has authored numerous articles on the subject of business management. Consider these 10 common business problems for startups, compiled from Fioravanti’s insights gleaned over more than two decades:
1: The advice you get is not objective. Taking well-meaning advice from friends and relatives can get startups in trouble because it’s subjective. Instead, ask for help from those who have done it before. The best results come from getting objective advice from business leaders and mentors who have walked the entrepreneurial road before.
2: Fire, ready, aim. Business is a thinking man’s game, so take aim and get ready before you fire. Seldom does luck alone yield great results. Successful entrepreneurs create a plan for their startup with clear goals and a strategy to reach them.
3: A big capital-spending budget. It’s rare that a startup is a success as a result of big capital spending. Shiny modern buildings and a fleet of cars don’t make a profit and eat into margins. Remember: no gross margin, no net income.
4: Control overhead. Your startup can’t generate profit when it is bloated with staff who fall in the category of sales, general and administration. That’s the bottom half of the income statement that eats into your startup’s profits. Your customers won’t reward you for the size of your company.
5: Hiring the B-team. If you hire people, hire the best talent you can afford. Whether it’s a CPA or the cleaning company that spiffs up your office at night, consider always hiring the A-team. These are investments in the longevity and viability of your startup.
6: Nothing to sell. Too many startups fail because they place too much emphasis on imagery and concept and not enough on experience and reality. You must have a product or service to sell and a market that’s receptive to buying it.
7: No innovation or improvement. Growth is more than just generating more sales. For a startup to continue to grow, it’s imperative that entrepreneurs continuously seek ways to improve their business and provide new services to customers.
8: Unhappy employees. Your employees need opportunities to grow. Dissatisfied employees who feel stuck in their positions should be an immediate red flag if you want to keep them around past the startup phase.
9: Growth can kill. Over-expansion of a startup can spell disaster if the owner can’t manage it well. Uncontrolled growth is one of the reasons startups fail. It can overwhelm resources, hurt quality, cause financial mismanagement and lead to hiring of less-qualified people.
10: Sticking to it. Many startup entrepreneurs put in the time to launch their business, but they step back when the profits start rising. This can cause business growth to slow, so don’t let up.