The Entrepreneur Insider network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “What are some common mistakes young entrepreneurs make?” is written by Joy Randels, CEO of New Market Partners.
Launching a new venture is exhilarating. It’s easy to get caught up in the moment and overlook key elements required for success. Everyone makes mistakes, but when it comes to your startup, even harmless ones could cost you a lot in the long run. Here are some of the most common slipups that you can easily avoid:
Equating funding with success
One of the biggest mistakes young founders make is defining success with getting funding. When this happens, they often spend too much time chasing investors instead of customers, but effective bootstrapping is a much-needed survival skill.
Not understanding the customer
When you focus on the customer first, you can validate before building. But validation goes beyond product features — it’s about how and why customers buy, and specifically what they are willing to pay for. It’s this knowledge that allows you to create realistic projections and prove your company is worthy of investment.
Being “pitch perfect”
The real world of startups isn’t like Shark Tank. While being able to pitch your product is important, winning pitch contests has little merit. All too often startups focus on winning contests, but have little substance behind the pitch.
Drinking their own juice
Fake traction isn’t traction — it’s an illusion, and you can’t believe all the stories you tell. If you’re not brutally honest with yourself, you can’t make informed decisions necessary to improve your company. A dose of healthy skepticism keeps your head in the game. Statements like, “All of our users love us” when you only have three customers make for an uncomfortable conversation when investors dig deeper.
Avoiding paying lawyers
You need them, and while it seems expensive today, your future self will thank you. When starting out, everyone is happy, but when times get tough, it’s hard to get consensus. You’re building a company that may raise capital and could eventually be acquired. You need the right agreements to protect you, your cofounders and your intellectual property. It’s the classic case of pay now or pay later.
Launching too early
Don’t confuse a minimal viable product — or MVP — with a proof-of-concept and launch it. Build something that someone would pay for. It doesn’t have to be perfect, but it should look polished and professional.
Not knowing the math
Revenue and cash flow are paramount. Investors require you know your customer acquisition cost (CAC), lifetime value (LTV) and burn rate, as these metrics are key for building your business. Cash flow is king for startups and knowing your math keeps you focused.
Being too secretive
Okay, so you’re scared someone will steal your idea. Don’t be. It’s a rookie mistake. You can’t find product-market fit unless you talk about your plan. You need to talk a lot and to a lot of people.
Be passionate, but don’t let passion blind you. If you’re getting strong pushback, stop and listen, then ask questions to understand the “why” behind the criticism. Are you targeting the wrong market or person, or is it just a bad idea? Learn from criticism and adjust to find the right fit. Once you do, there won’t be any doubt.
Bottom line, don’t half-ass it. Building a business is hard and you have to put in the work. Your business should be a part of you, and therefore worthy of your best effort. If you’ve got it right, you should be excited and terrified at the same time, but that’s what will drive you. And while lessons learned along the way will be specific to you, it helps to think ahead and gain some knowledge from those who have traveled the road before you.
Joy Randels is CEO of New Market Partners. An entrepreneur, author, and investor, Joy has seen the tech world from all angles in going from bootstrapped founder to $4B revenues across 13 startups, 9 acquisitions, 2 epic failures, and an IPO. Joy nurtures the Florida community as director of Startup Grind Tampa Bay.
Read all responses to the Entrepreneur Insider question: What are some common mistakes young entrepreneurs make?
This is why so many startups end up in financial trouble by David Smith, founder of Vexti.
This is where most startups go wrong by Stephen Lake, CEO of Thalmic Labs.
Doing these 3 things will destroy your startup by Michael Gasiorek, editor-in-chief of Startup Grind.
The avoidable mistake every entrepreneur makes by Andrew Filev, founder and CEO of Wrike.