5 top mistakes that startups make

2015-10-01 14:46 - Duncan Alfreds
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Cape Town – While some startups have embraced a Lean strategy to effectively expand, many make rudimentary errors that could sabotage their efforts, says an industry insider.

A lean strategy is the process where entrepreneurs conduct ongoing testing of the market while working to refine a product or service.

“At Ignitor, we have seen many talented entrepreneurs apply the Lean methodology thereby building successful and revenue generating businesses,” said Paul Smith, co-founder of the tech startup accelerator.

However, despite the promise of the strategy many startups fall short by inadvertently sabotaging their business models.

Here are Ignitor’s five most common startup mistakes in applying the Lean methodology:

1. Treating lean as a once-off event

Development of the strategy should be built into the nature of the business rather than a once-off attempt, said Smith.

“Many of the entrepreneurs we have worked with have initially done some customer interviews, but then stop interacting with their customers as they develop and build the product. The result is when they launch the product tends to get a 'blah' reaction from customers,” he said.

Smith advised that customer engagement should inform design and build direction.

2. Not pre-selling their product

Instead of asking people whether they like a product, service or application, entrepreneurs should check whether people would buy or subscribe, even if they don’t actually earn money at this stage.

“There is little relationship between customers saying they like a product and them becoming a customer. Hence, the need to pre-sell. Pre-selling does not always mean you need to collect cash, but customers should have to give some form of currency, such as, making them take some action without social pressure,” Smith argued.

HTC for example has won many awards for its mobile phones, but struggles to sell them in significant numbers.

3. Wasting time

“Many of the startups we have worked with avoid the difficult work of finding a repeatable and scalable way to find customers, but rather focus on performing ‘fake’ work such as writing business plans, entering competitions, seeking undirected publicity, taking random meetings, speaking at conferences, participating in long discussions and ‘strategy’ talks,” said Smith.

He advised that startups focus on finding and retaining customers.

4. Maximum viable product

Companies should focus on something they can build quickly to test the market, rather than a massively impressive, but product late for the market.

“Many of the companies we have worked with make the mistake of being fixated on the final version of the product and don’t create a simpler version first,” said Smith.

BlackBerry delayed building an Android version of its popular BBM service until after WhatsApp, which initially launched a simple chat service, expanded into multimedia messaging.

5. Not targeting early adopters

Ignitor advised that startups should narrow their focus to ensure that they met expectations.

“The final mistake we see many of the companies that we work with make is not focusing on a single customer segment, but rather trying to target a whole market at the same time. This unfortunately, results in unfocused efforts, little traction and often limited mindshare in the different customer segments,” Smith said.

Ignitor allows an exit after 12 weeks of coaching to find profitability in small businesses but is open to continued support to help grow small companies.

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