“Startups don’t win by attacking. They win by transcending.” – Paul Graham

Whether you run a small, family-owned business or a large-scale company, your business cannot survive without the ideal combination of competence, strategy, and execution. And, of course, a marketable product.

While the rate of failed startups varies across industries, the risk involved in starting a new business can often deter top talent from pursuing their business dreams. However, failure isn’t a given. Determined entrepreneurs can beat the odds by studying the mistakes of previous CEOs, and with a lot of hard work and a little bit of luck, their company can come out on top.

But in order to set your startup on the path to success, it’s critical to understand the top reasons they go belly up before even getting off the ground. Make sure to avoid these classic pitfalls, and there’s a chance your company could make a lasting economic impact.

1. Inadequate Capital
Inadequate capital refers to the financial miscalculations or gaps that hinder the growth and success of a business. Typically, a startup acquires funding from private investors, venture capitalists, banks, or personal savings. However, if the costs of production, marketing, and manufacturing exceed profits, the business cannot succeed.

In order to avoid this mistake, the business owner must know their numbers. This includes operational costs, inventory, payroll, overhead expenses, and sales. Entrepreneurs who know their numbers have a far better chance of securing adequate funding to operate a business and begin turning a profit. Remember that investors will only consider dishing out the cash if a startup has a strong financial plan that reduces the risk of losing their investment.

2. Improper Preparation
Opting out of research and preparation is a sure way to kill a startup. Prior to opening a business, an entrepreneur should conduct thorough research to learn the market, competition, and pricing of the industry that they’re entering. This insight also facilitates the drafting of the business plan—a critical component of a startup’s success.

A sound business plan should include:

1) A clear description of the business
2) An understanding of current and future employee and management needs
3) A thorough competitor analysis to understand the gaps in the industry
4) A projected cash flow and detailed budget plans for all departments
5) Marketing initiatives that increase company visibility

3. Incompetent Team
An incompetent team results from either poor hiring or a lack of hiring — which occurs when an overly ambitious entrepreneur takes on every role. No matter how multitalented and experienced you may be, experts agree that delegating tasks to trusted professionals spares you from burning out and making preventable mistakes.

In addition to an accountant, lawyer, and banker (depending on size and risk of the company), a successful startup is composed of a cohesive and competent team of professionals that share a common goal and company culture.

In order to avoid the perils of incompetence that can easily kill a startup:
1) Screen potential affiliates with TransUnion Shareable for Hires
2) Conduct multiple rounds of interviews
3) Hire candidates based on results and fit

4. Inefficient Execution
A grave mistake startups frequently make is focusing too much on an idea instead of the execution of that idea. Major companies like Google and Apple did not become successful by being the first to visualize search engines and cell phones; they became successful by innovating quicker than their competitors.

Proper execution is a disciplined process that requires strategy, clear priorities, measurable goals, and consistent discussion. When you focus too much on a concept instead of concrete action, that’s when your startup can get into hot water.

5. Inflexibility
Inflexibility, or the inability to pivot when change is necessary, will stifle any startup no matter how successful. For the starry-eyed visionary, it can be quite challenging to shift core aspects of you creation; but the ebb and flow of the economy is the market’s only constant, and businesses have to adjust to accommodate it.

In order to stay afloat, a startup needs a “bigger picture” to guide their decisions that can adapt alongside industry trends. While it’s important to stick to core values, the product or service your startup offers should be built with the wiggle room to change according to the needs of your customers and the market as a whole.

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