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3 mistakes that will sink your startup – and the fixes to keep it afloat

From the outside looking in, the startup world is a game of chance.

As the oft-circulated statistic tells us, nine out of ten new businesses fail. And while this finding may be stretching the truth, it does point to a clear fact: As an entrepreneur with a new venture, the odds are against you. Some entrepreneurs view this failure rate as a mandate to be cautious. Others see it as an opportunity to defy the odds with a bold and rapid growth mindset.

But across startups, one constant holds true: New businesses always seem to make the exact same mistakes.

It makes sense why this happens. The process of launching and building a business is imbued with a sense of urgency. There’s competitors to consider, investors to appease, and benchmarks to hit. In the midst of this frenzy, it seems much more important to make decisions than to question why you’re making them.

Yet from a longevity perspective, a bit of introspection is critical. Because when it comes to what differentiates that one successful business from the nine that flounder and sink, it’s not an ingenious product or service (though that helps). It’s an intentional and informed business strategy.

As an entrepreneur, I haven’t made all the right business decisions, and I have definitely experienced the pains of making some of the typical startup mistakes. But I have learned from both my own mistakes and by studying fellow entrepreneurs around me for a long time. And by understanding these errors, I’ve put together a list of three typical mistakes that sink startups – and my suggested fixes:

Making impulsive hiring decisions: In a period of rapid growth, it can be tempting to find and hire specialists who fulfill a very specific need. As a result, many hiring managers at startups will aggressively recruit for very granular skills. But when a business evolves past the point of requiring those skills, the hires are no longer needed. Instead of building a talent pool, these companies become a revolving door of talent. 

The fix: A true growth mindset means recognizing and recruiting talent that will scale alongside your business. Instead of hiring on a skill-specific basis, take a broad-based approach. View your first 10 to 20 hires through the lens of longevity. Who are the people you want to lead your company three years down the line? To me, it’s about identifying “T-shaped” people – prospects who are open, leadership-minded and adaptable. It’s much easier to skill up an adaptable generalist than turn a specialist into a leader.

Failing to prioritize onboarding: Startups are defined by their fast and uncompromising pace. But too often, the mandate to grow quickly comes at the expense of good onboarding processes – or any onboarding processes at all. In these situations, the onus is on new hires to learn the ropes. To justify this with a survivalist mantra – “Only the strong will survive” – ignores an undeniable fact: Without clear onboarding functions, you cannot have business efficiency. You won’t have the processes in place to achieve it.

The fix: The fix here starts by acknowledging that efficient onboarding functions are indispensable to building a successful business. Once you’re committed to effective onboarding, it helps to devise a system that’s defined, above all, by transparency. I advise situating onboarding within a highly visual workflow in which new hires can always know where they fall in terms of onboarding and the boxes they have yet to check. Companies can significantly augment the onboarding process by assigning new hires a “buddy” – a more senior employee well-acquainted with established functions – to guide them through the process.

Losing agility to a relentless growth mindset: As startups grow, they often start to lose the spirit of adaptability that enabled that growth in the first place. They hire big corp managers, insert complicated processes, and generally build hierarchy and bureaucracy all under the flag of becoming a “serious company.” This is all a huge mistake.

The fix: While it can be difficult to preserve agility as companies grow, it’s critical to do this. Maintaining agility during rapid growth can be done by organizing in autonomous teams empowered with the tools and resources to fulfill their missions. Managers need to be servant leaders to the teams aligning them towards the bigger goals of the organization. Leadership is about culture rather than micromanagement, and company-wide processes are designed to be intuitive and support autonomy rather than create centralized bureaucracy. An organization’s ability to adapt to change across all teams and all levels of command will define its ability to grow without breaking under pressure.

While the failure rate of startups paints a daunting picture, that’s not the full story. The fact is that the graveyard of failed ventures is filled with companies that all made the same mistakes – that hired too quickly, ignored onboarding, and became complacent. By avoiding these pitfalls and embracing an adaptable mindset, new companies can significantly heighten their chances of success.

Written by: Patric Palm, Founder and CEO of Favro.

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