There are 5 very common, and avoidable, mistakes many startups & new businesses make. I have seen these poor choices lead to frustration, dissention, poor performance & worse; bankruptcy.

They are (in order): 1) lack of strategic planning; 2) lack of adequate management talent; 3) underestimating costs; 4) overestimating revenues & 5) underfunding the venture.

    Lack of a strategic plan

Eisenhower said, “Plans are worthless but planning is essential”. There is no question that the planning process, facilitated correctly, is tremendously valuable. The questions that have to be asked; the decisions that have to be made; the goals that have to be set all contribute to a better business with a much higher probability of success & sustainability.

I recently had a client that had been putting this off for 9 years. Within 12 months of developing & implementing their strategic plan their revenues & margins increased significantly & sustainably.

   Lack of management talent

No matter how visionary & talented an entrepreneur is, they need other key players to shoulder some the burden of operations, marketing, finance, etc. in order to succeed. The more successful startups employ manager/leaders [beyond the CEO] who can make decisions, use assets & achieve targets all aligned with the strategic plan. The results are simply better.

I saw a local capitalist struggle for years just to stay afloat until she brought in a couple of good folks to help run the shop. They now produce more with less stress.

   Under estimating costs

Everything will cost more than planned. This seems to be true in every forecast I review. Too often firms do an expected cost forecast based on “gut´ rather than research. The end result is a nasty surprise of real costs being surprisingly/significantly more than projected leading to financial problems from the beginning. Sometimes this creates an irreversible downward spiral.

   Over estimating revenues

Revenues (sales) take longer to develop & grow than planned. For every 100 firms that expects large, immediate sales, there are 99.87 who are surprised at 2 developments. 1) Sales take longer to materialize than anticipated. 2) Sales are frequently at prices below expectations.

Develop a marketing plan as an outgrowth of your strategic plan & you just might be able to avoid this.

   Underfunding

Based on 3 & 4 above, startups need more money (cash) than the forecast calls for. Too frequently the financial projections are based on assumptions not borne out by reality. The cash inflow in simply isn’t enough to carry the outflow. Problems arise immediately. Cash is King is the old expression that is still true. Without enough cash the business dies.

Good strategic planning can help you avoid these common traps & give you a better shot at success.

 

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