At Atomic, we are often approached by entrepreneurs who want to start a new business. Their ideas involve technology, are creative, and cover everything you can imagine—like building a service business on top of Uber, or starting a niche e-commerce website focused on a specific group of people. Some are copies of existing successful companies with a slight tweak. Others are trying to use new technology to corner a marketplace.
The reality is that there are always more ideas than money, and a unique idea isn’t enough. The quality of execution is often what differentiates success from failure. And that requires a lot of thinking and planning before you start writing a single line of code for your product.
Through a lot of conversations, we’ve noticed some patterns in the challenges startups face. To help you get ahead of the game, here are six common startup mistakes and how you can avoid them.
1. A Lack of Clear Vision
Vision should be the starting point for anyone founding a business. Your startup’s vision provides a view of what the future world will look like and how your business will add value to it. Having a clear vision gives meaning and weight to the work you’re doing and provides a rally point for your team. It gives your product a reason for being. And it provides another way in which your desired customer can connect with you.
But, sadly, the shiny solution often gets all the focus, and the vision is overlooked. People forget about how they’re changing the world for the better or why they are doing it in the first place. Without a clear purpose, a startup can lose momentum, and when the stress builds, there’s no foundational element to rally the team.
So how do you develop a clear vision? Lean Startup experts will tell you that your strategy will change as you learn. But your startup’s vision cannot change. If it does, it’s a new company, not the one you started with.
Simon likes to say, “People don’t buy what you do; they buy why you do it.” If your customers believe in your mission, they will warm to you and pay attention to what you do and how you do it. Remember that most buying decisions are based on emotion rather than logic.
Another helpful tool is Roman Pichler’s Product Vision Board.
Once you’ve developed a clear vision, you can start to define the strategy behind making it a reality.
2. A Lack of Focus
Startups are often guilty of trying to do too much too soon. Without focus, time and money will bleed out, slowing the momentum of your startup and preventing you from hitting timelines or making anything real.
Instead, take the lead from other success stories by doing one thing really well. (Instagram is a great example of this. They made it easy for users to add filters to photos without a heavy tool like Photoshop. Without these simple filters, it’s just another place to share photos.)
It’s natural to want to add features. Your creativity can run amok with new functionality ideas for your product, and additional pressure can come from customers, investors, or even other team members.
When this happens, remember that you have a limited runway of time and money to get something done. And speed-to-market is critical to learn if your product has any value. Establishing a focus upfront allows you to direct your limited money toward high-value activity.
My own experience with a startup showed how distracting money can be. When we received a large cash infusion from a Venture Capitalist (VC), we lost focus. The sudden swell of money led to a hunt for shiny objects that didn’t align to a vision or strategy. This resulted in financial losses and an eventual takeover by the VCs. The CEO was moved to an innovation role, and the company was eventually sold.
Establishing a focus can help you avoid a similar fate. One way to stay focused is to use a Business Model Canvas or Lean Canvas to define your business model. This will help you understand which actions to take to develop your startup.
Another technique is to make a list of things you won’t do with your startup. This helps you make better decisions and keep your eye on the ball.
It takes discipline to stay on track.
3. Creating Something Nobody Wants
A successful startup has something that is simple and compelling. Its value is immediately obvious and meaningful.
There are many products that look great on the surface, but the deeper you go, the less value you see. Either the solution fails to align with an actual problem, or it’s not a big enough problem that people will change their behaviors to use the product.
Before you spend lots of money on your product, it’s important to test your hypothesis and assumptions. You need to find simple ways to do this quickly.
For example, suppose you want to create a new two-sided market to solve a specific problem. One way to test interest is to create a simple website where people can sign up for a limited-service offering. You can use a manual process to manage requests and schedule the service on the backend, while working to sign up and manage the service providers at the same time. If you get people to sign up and they are happy with the results, you will have some evidence that your idea works.
You can also test your idea using paper prototypes to see if people understand how to use it. You might also set up a website using a service like Wix.com to gauge interest in your idea, or create a web storefront using something like shopify.com to see if people will buy your products. Remember that, when testing your ideas, you want to go as simple as you can and spend the least amount of money possible.
At Atomic, when we talk to entrepreneurs about their ideas, we look for evidence of testing. If they haven’t taken this step yet, we usually prompt them to do so before going any further with their product. It makes no sense to invest in a product unless there is evidence that there is a need for it.
4. Not Listening
Entrepreneurs who have been working on their ideas for a long time have a polished sales pitch. They may have convinced themselves of the rightness of their solution, and they’re looking for people to validate their assumptions and solution.
Perhaps this is good if you’re looking for funding or want to influence people to join your team. However, the danger is that you may have a cognitive bias that’s making you blind to what people have to say. Business Insider has a nice list of 20 cognitive biases that screw up your decisions. A blind-spot bias with a confirmation-bias can easily set you up for disappointment. It is important to keep an open mind, stop talking, and listen to what people are telling you.
I was once approached by an entrepreneur who wanted build a score tracking app for pool halls. It was based on a wooden model his father had built, and it even had buttons and knobs to record the score for a pool game. He was convinced money could be made if we would only build the app.
What he hadn’t done was explore Apple’s App Store to see if an app already existed (many did). He also hadn’t been to a pool hall and was not aware of how people were playing pool and keeping score today. Our recommendation was for him to do the research before taking his product idea any further.
To avoid this trap, you can go to the places your customers are and observe them. You may even want to do some informal interviews without telling them about your solution. Your goal is to understand their world and see if there is alignment in the problems you’re trying to solve. To do this well, you need to ask questions and listen more than talk.
Build a business, not a perfect pitch.
5. Ignoring Design at the Start
You’ve got a vision for your startup. You’ve defined the problem you are solving, refined your focus, and proven that there is a market for your product. At this point, some founders rush into building the technical solution.
The mistake they make is failing to invest in the design of their product at the very beginning. They miss out on the chance to create a product that will make happy customers. Happy customers end up spending more money. They will also tell their friends about the product, and word-of-mouth marketing is a powerful way to communicate the value and develop sales.
At Atomic, product development starts with a Research, Design, and Planning (RDP) engagement. We take a human-centered design (HCD) approach, which provides a way to think about and frame context on a product. Through this effort, we can quickly test our assumptions for this product.
6. Undercapitalizing Product Development
Custom software is a big investment. New entrepreneurs often don’t have a good understanding of the capital required. This is the scariest part of the whole endeavor.
The hope is that they can get something going “for as little as possible.” It’s the right way to think, but if they are not careful, they will run out of money before the product has seen the light of day. And that means being out of a job.
At Atomic, we’ve put a lot of thought behind how to get the money right for product development. We want to manage the risk, make smart decisions around tradeoffs, and maximize value within a budget. If we do this well, we know that our clients will trust us. And because of this, there will be more work to do (because good software is never done).
So what is the correct amount to spend on a customer’s software products? I like to refer clients to the Cost & Value section on our home page. There, you can get a ballpark number for common projects at Atomic. Our projects start around $50K, with most involving $150K or more.
If that’s a stretch for your startup, you may want to consider using a freelance developer. You can find them through services like Upwork. They will be more affordable than an agency like Atomic, but you will take on more risk and have to manage the work directly with them.
You may also be thinking about hiring your own designer and/or developer. Before you do this, you will want to read Carl’s excellent post on The True Cost of Hiring Your Own Developer. It’s important to know if you’re ready to create the right culture for success.
Here is a list of links to help you understand the money side of custom software development.
- Turning the right amount of capital into a strong release
- Get better software estimates by combining different perspectives
- Fixed Price vs Time & Materials vs Fixed-Budget, Scoped-Controlled
- 5 Tips for Estimating and the Point of Maximum Ignorance
- Getting the Most for Your Money
- Spending Too Little is Worse Than Spending Too Much
Creating a startup is an exciting proposition. It takes courage, a passionate idea, a beginner’s mind, and an ability to act quickly. Hopefully, this post will help you avoid a few common traps we’ve seen in getting products off the ground.
While Atomic’s sweet spot tends to involve larger clients with more complex projects, we still look for ways to help startups with interesting ideas. If you’re interested in doing this, our first meetings with you will likely cover a lot of this same information.
If you are looking for more help to get your startup going, consider a local support group, such as Start Garden in Grand Rapids or SPARK in Ann Arbor. Both offer resources on issues in accounting, legal, marketing, and more.
As to when the time is right? Seth Godin has a nice riff on when to start. He says the best time is last year. The second best time is right now.