5 Common Startup Pitfalls & How to Avoid Them

I didn’t build Facebook. I didn’t sell my software startup to Salesforce. But I have worked with quite a few startups who have struggled to reach sustainability. I’ve seen a few of the same challenges over and over again, so I compiled them into this list.

For each pitfall you’ll see a detailed description and an explanation of how you can avoid it. These aren’t the only challenges startups face, and the methods for pitfall avoidance aren’t exhaustive. If you have any additional ideas, please drop a comment at the bottom!

 

#1 Building a product where there is no market

Problem:

Recently we’ve seen a huge rise in the number of startups who offer a product that no one needs.

Why is this happening?

Well, being in a startup is cool. I mean, it’s really really cool. Okay, I think it depends on a lot of factors, but the startup life has gotten a ton of good press lately.

Plus, the technical knowledge required to build SaaS products is being taught in more places and at a lower cost than ever before. If you want to learn to code, you can.

So now, if you have a good idea, it doesn’t have to sit in a notebook until you have a million dollars and can afford to take a year off. You can more easily “bootstrap” your way into startup mode.

Unfortunately this lower barrier to entry means that people aren’t always researching the market for their product. They’re finding that they have a need and assume enough others have that same need to build a profitable company off of it.

How to avoid it:

We don’t want to throw the baby out with the bathwater – I certainly don’t want to discourage you from following your dreams or building something people really need.
I just want to make sure that your million dollar idea has a ten million dollar market behind it and you’ve got a shot at getting 10% of that business.

You’ll need to do research prior to going all-in with your idea. Talk to the people who you think need what you want to build.

Don’t start by pitching them your idea – ask them what their biggest frustrations and challenges are. If the problem you solve doesn’t make the list in 5 or 10 interviews, consider what that means.

If you do end up pitching your product idea, be sure not to lean on them too hard; people will often tell you what you want to hear when they know what that is.

Here’s a great piece from Inc. on inexpensive ways to perform market research.

 

#2 Not focusing on generating revenue soon enough

Problem:

Build it and they will come. Right?

Most of us aren’t building massive open community platforms like Twitter where the revenue has to come after the broad adoption. We’ve got a few dollars in the bank to finance our idea and we can’t afford to make too many missteps.

And yet time after time I see entrepreneurs who focus so much on reaching product perfection that they forget to sell it and run out of money.

This manifests itself in many ways. If you’re building a SaaS product, the most obvious sign is that you’re developing new features before developing a customer base.


How to avoid it:

1) Have a sales plan. Know who you’re going to sell to, how you’re going to reach them, and how much time you need to devote to that so you don’t wake up and find that your runway is all gone. Don’t let this sit on the to-do list until it’s too late.

2) When you set product development milestones (e.g. adding new features), also set sales milestones that have to be hit before you develop any further.

For example, if you set a goal of releasing version 2.0 of your product in the next 90 days, set a goal of generating a certain number of sales opportunities in the same time.

If your product is too early-stage to sell, make the goal a set number of customer development interviews. It’s practically the same activity without asking for money at the end, plus it sets you up for sales down the road when the product is ready.

 

#3 Getting distracted by all the latest sales trends

Problem:

Thanks to the proliferation of blogs (like this one!) and LinkedIn, more sales knowledge is being shared than ever before. That’s a great thing, but it can also be a major distraction.

Everybody wants to avoid hard work. It’s natural – don’t feel bad. A lot of startups get distracted on their path to revenue by the latest “growth hacks” because it seems like it could be easier than cold calling, sending targeted emails, and spending hours following up.

But little tips and tricks never add up to a cohesive strategy or process, and they can keep you from doing the necessary activities in hopes of finding the magical solution.

How to avoid it:

1) Write out your process and stick to it. Even a flawed plan is better than shooting from the hip constantly.

2) Put the most important activities first. If you know that cold calls are going to win you the most business, don’t even log into LinkedIn or type in your favorite news site until you’ve talked to 5 people.

3) Use productivity apps to block news sites, Facebook, and LinkedIn during the times where you have to do the uncomfortable work like prospecting.

4) Test any new idea for at least a month before moving on to the next “trick” – anything less and you can’t really tell if it’s working.

 

#4 Trying to build a sales team or outsource sales too soon

Problem:

If you’re a technical founder and lack sales experience, you’re probably looking for the quickest route to handing off your sales responsibilities. When you do this without a successful, well-defined sales process, you’re asking your sales rep to be a McGyver.

They most likely aren’t ready for this level of responsibility and they are at a greater risk of failure. And if you’re using an outsourced lead gen or sales company, you’re probably going to pay out the eyeballs for this level of service if it’s even available.

How to avoid it:

The easiest way to avoid this is make sure one of the founding team members has excellent sales skills and is made responsible for sales activity.

The next best thing to do is set a revenue goal that you’ll have to hit before hiring a sales rep.

At the very least you should have an ideal client profile that tells your rep who to sell to and why the prospective buyer should care about your offering.

 

#5 Not getting enough feedback on your idea

Problem:

If you ask your mom what she thinks about your latest app, she’ll probably say, “Oh that’s nice, Honey!” If you ask your best friends, they’ll probably say they love it to.
If you’re trying to keep your idea a complete secret from everyone so nobody steals it, you aren’t getting any feedback.

And what happens when you don’t get real feedback from real customers (or at least potential customers)? You wind up building features and services that are not priorities for your customer.

I met with a SaaS company recently that was trying to build a consumer-facing product. They spent tons of time and effort designing and rolling out really cool niche features, but they came up with these features based on what they wanted to see in the software.

Turns out they had way more pressing feature updates that were needed and they lost a ton of lead time that could have been spent making customers overjoyed with their product. It’s a long road to recovery from there and you can often lose customers over it.

How to avoid it:

When you have an idea, whether it’s a new product or an update to your existing offering, run it by your target market.

If you have customers, send them out a survey asking what they want or at least asking if they want what you’re planning to design. If you don’t have any customers yet, you should spend some time pitching your idea to anyone who may be a potential buyer.

Even better than pitching them, ask questions about what their daily problems are and ask them what they wish they could do about those problems.

If your solution is a fit, or close to a fit, you’ll know you’re on the right track and you won’t be using biased feedback like what you hear from your friends and family.


 

Best of luck to you startup folks out there! The world needs you!
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