Every start-up will make some mistakes along the way, it's only natural in the progression of business as they refine their strategy and processes. There are certain missteps can seriously hamper a company's odds of success, though. And on a positive note, avoiding mistakes can keep a start-up and its valuation on a stellar path.
So, with that said, here is a sample of some of the biggest mistakes founders make.
Building a Product that isn't Needed: The last thing you want to do is spend time and money building a product only to realize that few people will either use it or pay for it. This is why it's essential to do market research before diving in. Along these lines, don't be scared off if there are competitors already in the market—their presence is a good thing because it suggests that other people see the problem and opportunity.
A Failure to Plan: As the old saying goes, you plan to fail if you fail to plan. To successfully plan as a founder, you'll need to sit down and figure out what's required to build your product and a sales strategy to take it to market. You will also need a plan to pay people.
Hiring the Wrong People: Every SaaS company would love to have a CMO and a CFO from Day 1. But that's unnecessary, and chances are you can't afford it anyway. Instead, focus your attention and precious funds on your product firstly and sales/marketing teams when trying to get the product out to customers. Regarding the latter, aim for sales professionals with 3-4 years' experience. You'll be able to afford them, and they'll already have some background in the role that you'll benefit from.
Investing Too Much in Product or Sales: A classic mistake is for start-ups to put most of their eggs in the product or sales basket. When you invest too much in product but neglect sales, your revenue won't reflect how good your product is. And the reverse is also true: A great sales team can't do much with a subpar product.
Paying Too Little Attention to Customer Experience: Customers are everything to a SaaS business, so it's crucial to keep them in mind from the get-go. That's why successful companies beta-test before going to market, incorporating feedback from early users to make the final product as customer-friendly as it can be. Customer experience also matters as the business matures: Having representatives that people can call for help with onboarding or troubleshooting can make a world of difference to your sales.
Trying to Solve Too Many Problems at Once: There's a time and a place for multi-tasking, but start-ups should only focus on one product initially. That's what a company you may have heard of did (Google ring a bell?) ---they became the best search engine around and only expanded into other areas when that was mastered. Trying to solve too many problems and introduce multiple products when you're a start-up is a recipe for spreading yourself too thin and losing focus.
Lack of Financial Foresight: Failing to properly plan for your funding needs can be the difference between your start-up flourishing or failing. And that holds true whether you're talking about mundane outlays (office rent, salaries, etc.) or financing requirements 12-18 months ahead. Unfortunately, many start-ups have wound down because they didn't keep enough of an eye on their cash burn, so watch your bank balance like a hawk – CASH IS ALWAYS KING!
Handshake Deals: You'll know that unwritten agreements can turn into bitter feuds if you've seen The Social Network (i.e., the Facebook movie). This is especially true when a start-up turns into a roaring success, and the bad side of human nature throws ethics to the wind. So, long story short, get key agreements written down before you lose friends and make some lawyers rich.
There's a lot of advice about how founders can succeed. But as any tennis player will tell you, avoiding unforced errors can be just as helpful as hitting winners. And when it comes to SaaS startups, steering clear of common mistakes can be essential to your eventual success.
Interested in taking your SaaS business to the next level? We're Element Finance, and we provide easy-to-understand term loans for companies just like yours. Give us a shout anytime for a chat. We never ask for board seats or personal guarantees, and our loans contain no hidden covenants.