Business Startup

3 Basic Mistakes That Startups Make In The First Year

Startup MIstakes
Written by MicroStartups

We all know how risky it is to start a new business. Around 20% of startups don’t make it through their first year. In the UK, 6 out of 10 don’t last five years. But the failure of other startups doesn’t stop us.

The reason we keep going is because when it works, a startup can turn into something big that can support not only our family but the community too. And there are plenty of inspiring examples of startups and businesses built by people who really care, such as Andrew Nisbet, founder of Nisbets PLC, Craig Newman founder of Craigslist, and climate-change entrepreneur Johan Eliasch.

But the real reason why so many startups fail is that they ignore these three basics.

Don’t expand too quickly – you’ve not tested your idea

At the start you’re excited, full of energy and drive. You are convinced your idea is nailed on; it’s a winner, for sure. But it’s not. It never is in the first year because you haven’t had time to test it and you don’t have enough experience to be sure of success.

The first year is about creating product-market fit, and nothing else. It’s not about growth but about testing to see the changes you need to make to ensure your product or service is exactly what your customers want.

That’s great but the problem is, most entrepreneurs are impatient. It goes with the territory. So rather than accepting that the business is very unlikely to do much business in its first year, or even make a profit, many founders start hiring. I’ve come across founders who have hired as many as four staff in the first six months. By the end of the year they can’t pay the wage bill.

When you start a new business, do not expand in the first year. It’s painful and exhausting but by the end of that first year, I promise you’ll be glad you flew solo. If your idea is huge and you just can’t cope, you’re better off teaming up with a co-founder. It helps you spread the load without the responsibilities, and wage bill, that comes with being a fully-fledged employer.  

Focus on your current customers – build loyalty and repeat sales

Most startup founders hate waiting for growth. They want everything to happen right now and are desperate to secure as many new customers as possible. Of course, new customers are really important, but as a young startup it’s your existing customers that really count.

It might seem obvious but you’re small and you don’t have a lot of staff (or time). That means you have to think smart about your resources. If you focus on client acquisition too heavily you’ll start losing your current customers because you’ll drop the ball and stop delivering on your promises to them.

Chasing new customers on limited resources always comes at the expense of the existing ones. This creates a vicious circle. Your old clients get angry and upset at the same time as your new clients are delighted. Once the new ones are onboarded you forget them and move on to the next set of customers, and the cycle repeats. The worst thing is that these disgruntled customers will use social media to tell their friends all about their bad experience – and this is something you just cannot afford.

To build a successful business you need to retain your customers and build loyalty. Real long-term success does not come from churning customers until there’s no one left who will buy your products or hire you for your services.

Get the processes in place now

One of the key reasons why startups fail in the first year is that they have no processes. They have nothing written down. All they do is dash wildly from one idea and task to the next, working on what’s directly in front of them. They don’t have a plan that goes further than the end of the week, or month. This is a huge trap and most entrepreneurs fall into it in the first year – and often regularly thereafter too! But the ones that can spot that they’ve fallen into it will survive.

To avoid this you need processes and you need to write them down. The very act of doing this will show you immediately where you can make savings and efficiencies; how you can cut out tasks that are not adding any real value and where you can combine or streamline processes. It’ll also show you where you need to invest, especially in tech such as customer relationship management tools.

So sit down and think about the jobs that need doing every day; about who does them, how they do them and, importantly, why they are doing them. Break each job down into tiny steps or operations. This will show you how you can speed things up and where you lack resources.

Lots of startups do make it through the first year, and many go on to expand and become successful, giving them the power to make a positive impact in their local community and even globally. But to gain this leverage and build successfully you must stay patient, don’t expand too quickly, and get those processes in place today.  


About the author


A team of writers and marketers, MicroStartups was founded to inspire the entrepreneurial and business community to give back. We believe in business growth through giving and supporting the local community.

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