John Osher, a serial entrepreneur who launched several successful companies (notoriously, Cap Toys with sales of $125 million per year and sold it to Hasbro Inc. in 1997 ), came up with an informal list of “16 Mistakes Start-Ups Make” – since expanded to 17 – where he put every blunder and error he made during his entrepreneurial career. Ever since, this list has been used in Harvard Business School case studies and in many business publications. He also used the list in 1999 – he wanted to build a company and product deprived of all his previous blunders – when he started SpinBrush, $5 electric toothbrush (hitherto costing circa $80), which he sold to P&G for $475 million in 2001. Below is his “17 mistakes start-ups make” list:
- Failing to spend enough time researching the business idea to see if it’s viable.
- Miscalculating market size, timing, ease of entry and potential market share.
- Underestimating financial requirements and timing.
- Overprojecting sales volume and timing.
- Making cost projections that are too low.
- Hiring too many people and spending too much on offices and facilities.
- Lacking a contingency plan for a shortfall in expectations.
- Bringing in unnecessary partners.
- Hiring for convenience rather than skill requirements.
- Neglecting to manage the entire company as a whole.
- Accepting that it’s “not possible” too easily rather than finding a way.
- Focusing too much on sales volume and company size rather than profit.
- Seeking confirmation of your actions rather than seeking the truth.
- Lacking simplicity in your vision.
- Lacking clarity of your long-term aim and business purpose.
- Lacking focus and identity.
- Lacking an exit strategy.
And finally, one of the commenters on this article, Trevas from eBookGuru, suggested an essential mistake which causes many (which have inexperienced founders) of startups fail (and is not explicitly present among the 17 mistakes above).
18. Lack of commitment to see the idea through.