5 Common Mistakes Startups make and How to Avoid Them

5 Common Mistakes Startups make and How to Avoid Them
The Siliconreview
09 May, 2022

Any entrepreneur will tell you that starting your own company is one of the most challenging things you can do. It requires a lot of hard work, dedication, and determination. However, even the most prepared entrepreneurs can make mistakes that can jeopardize their business. Here are six common startup mistakes and how to avoid them:

1.  Failing to cater to a market need

The top reason that startups fail is that they don’t cater to a specific market need. Most businesses fall into the trap of creating a product that their founders think is innovative, without considering whether there’s an actual demand for it. Since many companies begin with a product and try to create a market for it, they ultimately fail.

According to the jobs-to-be-done theory, the key to creating an intuitive and successful product is identifying and solving a specific problem for your target market. To determine whether there’s a market need for your product or service, you need to do your research. This includes talking to potential customers, conducting surveys, and analyzing data.

The jobs-to-be-done theory defines markets as the collection of “jobs” that people are trying to get done. In order to be successful, your product must help your target market do a specific job better than any other available option.

For example, when Uber was first launched, it helped taxi riders accomplish several jobs that they previously weren't able to. Instead of just getting from point A to point B, Uber riders could now get a ride that was reliable, safe, and convenient.

By understanding the jobs their target market wanted to be done, they were able to develop a winning product and bring it to market effectively.

2.  Running out of cash

Another common mistake that startups make is running out of cash. This is often due to overspending on unnecessary things or failing to generate enough revenue. Startups need to be very mindful of their spending in order to avoid this pitfall.

There are a few ways to keep your costs low in the early stages of your business. One way is to use free or low-cost tools and resources. For example, an in-house marketing team may not be worth the money when you have limited resources. Here are a few things you could do instead:

  • Work with freelancers on Upwork
  • Hire a reasonably-priced agency on a retainer basis
  • Learn to do some processes yourself
  • Find a CMO to manage marketing operations

Another way to cut costs is by outsourcing non-essential tasks. Especially if you have a tech-related business, you may not need to have a full-time customer support team. Instead, you could outsource this to a company that specializes in providing excellent customer support.

In addition to cutting costs, you also need to focus on generating revenue. This can be done by selling products or services, running ads, or getting investment funding. To ensure that your startup doesn’t run out of cash, it’s important to track your burn rate and keep a close eye on your spending. You must also develop a budget according to your revenue targets and stick to it.

3.  Legal trouble

Lots of startup founders find themselves in legal trouble because they’re not familiar with the laws and regulations that apply to their business. This can be a costly mistake, both in terms of money and time.

To avoid legal trouble, it’s important to do your research and seek out professional help when needed. You may need to reach out to a reputable firm like Cohen Schneider Law P.C. in order to get the guidance you need. Some common legal mistakes that startups make include:

  • Failing to properly register their business
  • Not understanding intellectual property law
  • Violating employment laws
  • Ignoring tax laws and regulations

It’s also important to have proper contracts in place when working with vendors, suppliers, and customers. This will help protect your business in the event of a dispute.

4.   Disagreement between team and investors

Angel investors and VCs generally want to see a return on their investment within five to seven years. Since they put forth lots of money, they also want to ensure that it is being put to good use. This can often lead to disagreements between the startup team and the investors. In order to foster a good relationship with your investors, here are a few things you should do:

  • Respect their value outside of finances: Your investors can provide mentorship, connections, and valuable advice that many young entrepreneurs don't have access to.
  • Keep them in the loop: Send regular updates on your progress and be transparent about both successes and failures so that they don't wonder where their money is going.
  • Don’t make promises you can’t keep: You may be tempted to over promise to seek your investors' approval, but this will only backfire in the long run if you cannot meet an unrealistic target.
  • Listen to their concerns: Even if you don't agree with everything they say, it's important to listen to their feedback and take it into consideration.

5.  Ignoring customers

A customer-centric mentality can carry a startup a long way. After all, without customers, there would be no business. Startups often make the mistake of ignoring their customers when developing new products or updating their existing offerings. This can lead to products that are not well-received by the market.

Fixing this is easy enough: simply make sure that you're always considering your customers' needs when making decisions about your business. This can be done by conducting customer surveys, focus groups, and interviews.

When rolling out new products, conduct user tests to get feedback and make sure that the product is actually solving a problem that people have as well. If it isn't, then you need to go back to the ideation stage of product development.

Finally, don't forget about customer support. Customer support is one of the best ways to give your customers a positive experience with your brand. It is also a fantastic way to gather data about your customers' needs and pain points.


Startups are full of potential but they also come with lots of risks. By being aware of the most common mistakes, you can put yourself in a better position to avoid them. If you do find yourself in trouble, don't hesitate to seek out professional help. A little bit of guidance can go a long way.