Almost half a million U.S. businesses will die this year. But it doesn't have to be your company, at least if you mitigate the pitfalls that commonly trip young companies. That's according to serial entrepreneur Georgianna Oliver, CEO of package locker system company Package Concierge, who says the many mistakes she made prior to the success she's having with her current startup qualify her to give advice on the subject. Here are the mistakes she says companies about to fail most commonly make.
1. Believing that a good idea alone can be a business.
An inestimable number of great ideas for new companies are hatched every year by people who think they've come up with something original. "Then they'll start to do some research and see that there are, in fact, lots of people with the same idea," Oliver says. "So it really is the execution of an idea that makes a business. And it's developing the right culture, the right tools, the right systems, and an accountability structure."
2. Inexperienced founders who go it alone.
While energy and passion for an idea help, if you're trying to get a fledgling company off the ground without experience in business, you're going to have problems due to the fact that you'll be learning as you go. Be smart, and bring someone who knows what he or she is doing onboard. Or, wait until you get educated about an industry before trying to launch a company in it. "My recommendation is to work somewhere else for five years and learn everything you can about how that business or a similar business might work," she says.
3. Not having a strong CFO, or at least a good bookkeeper.
Tight accounting breeds trust with the people you need to support your company. "Someone has to be really good at being accountable with the finances so any potential investors, future employees, and even your customers feel comfortable that your company is a very viable organization," she says.
4. Launching at the wrong time.
If Oliver had started Package Concierge--which markets to real estate developers and apartment building managers and owners--in 2009, the business never would have worked because real estate had crashed. "But right now is a great time to have a product in the apartment space because everybody is feeling very excited and making lots of investments and building high quality properties and adding amenities and things like that," she says. "So timing is very, very important."
5. Not understanding laws in different parts of the country.
"For example, what may be perfectly appropriate in Washington, D.C., you can't do in Boston because of local laws," she says.
6. Trying to do B2C, when B2B might be easier.
If you don't have connections in retail, you're in for an uphill battle if you want to sell to consumers. But if you are already entrenched in an industry, understand how it operates, and have a wealth of connections within it, why not use your knowledge and influence to make traction with other businesses? "It's a lot easier to get momentum in your own industry by talking to, collaborating, and problem solving with people you know who are your colleagues, or industry veterans or people that you can really bounce an idea off of that's in a safe place, versus somebody coming from the outside," she says.
7. Trying to start a business without fully understanding the industry.
The most successful entrepreneurs have domain expertise, meaning they've worked in an industry long enough to understand it backward and forward, inside and out. "If you want to have a successful business, you absolutely have to go with something that you know," she says. "Every business I have ever started has been in the apartment space.... I wouldn't go and start a business in the retail space because that's not my experience."
8. Trying to launch a product company without enough funding.
Instead of paying for prototypes, programmers, and salespeople, can you begin with a consulting business, which won't need a lot of working capital? "It's hard for product companies to grow organically because they have to have such a big investment to startup," she says.
9. Taking money from the wrong kind of investor.
"For example, if you're in the apartment niche it would be really smart to have an investor who's one of the big apartment owners, or a REIT [real estate investment trust]," she says. "If they buy into your product and if they're an opinion leader in your space, that really helps [because] they're going to put your product in all their properties. That can be really strategic."