NEWS1 July 2024
SETsquared Surrey’s Entrepreneurs in Residence share expert insights into the most common mistakes start-ups make, with practical advice on how to avoid these setbacks and position your business to reap the rewards of success.
Navigating the challenges of running a new business inevitably involves making mistakes. Whilst mistakes are part of the entrepreneurial experience, shaping your growth and resilience, certain common errors can be detrimental if overlooked.
Here to shed light on the subject are Keith Dixon, Ian James and Chris Pett, three esteemed business minds who, along with others, form SETsquared Surrey’s Entrepreneurs in Residence.
Let’s explore the three most significant mistakes that start-ups often encounter…
Falling in love with the solution rather than focusing on a customer problem
As American entrepreneur Steve Blank, a key figure in the start-up community and author of The Four Steps to the Epiphany, emphasises, falling in love with the solution rather than focusing on a customer problem is a widespread issue.
Identifying this as a common mistake start-ups make, Keith explains: “Many founders often experience a problem or challenge themselves and immediately dive into developing a solution. They become deeply invested in their idea, both emotionally and mentally, without first checking if others share the same problem. In essence, they fail to validate if there’s a market for their solution.
“The crux of the issue is whether customers need and are willing to pay for the solution. You might create something innovative, but if people are not bothered enough by the problem to spend money on your solution, the business won’t succeed.”
Early attachment to an idea often means that when faced with challenges, founders push harder on their original solution rather than exploring if there might be better ways to address the problem.
This stubbornness, Keith says, can prevent them from considering alternatives or pivoting. Therefore, start-ups must continuously reassess if their solution truly meets a customer’s need and if it can sustain a viable business.
A key factor in avoiding common start-up pitfalls is by being part of an incubator like SETsquared Surrey. “It’s crucial to have people around you who can point out when you’re becoming too attached to your solution rather than focusing on the customer’s problem,” Keith underscores. “Often, start-ups put on ‘blinkers’ and can’t see beyond their initial idea. Being surrounded by experienced individuals who are willing to provide honest feedback is essential.”
SETsquared Surrey addresses these kinds of issues through various programmes and workshops, beginning with the ‘Entrepreneur’s Programme.’ One of the core principles emphasised is the importance of re-evaluating the original problem that start-ups set out to solve. This approach encourages participants to open their minds to different perspectives and remain flexible in their strategies to ensure that their ideas genuinely align with market needs.
Not generating revenue fast enough
Building on the discussion is the common start-up mistake of not generating revenue quickly. Ian offers his insights: “Many companies, even successful ones, rely heavily on grants. They secure funding and develop their product, but then find themselves needing more money for market capture or awareness campaigns.
“For example, we work with a tech company with brilliant software developed with their funds, yet they lack customers and visibility. They’re at a standstill, unable to afford ongoing platform costs and struggling to gain traction. We recommend they demonstrate the value of their solution by setting up a series of trials with key potential customers, asking each customer to cover reasonable expenses and to allocate one or two of their staff to collaborate on the trial. This establishes relationships and commitment from the customer and perhaps more importantly, it adds the company as a supplier to the customer’s procurement system, making it far easier to establish follow-up business.”
To support its members, SETsquared Surrey regularly holds pricing workshops to highlight the importance of validating a solution’s value and charging accordingly.
“At our workshops, we guide start-ups through these financial insights,” says Ian. “We explain the basic math – what’s needed to achieve a user base that generates revenue and breaks even over time. We also share examples of companies that successfully scaled, exploring how they managed their finances and whether their solution filled a critical need. Ultimately, it boils down to hard work – getting out there and making a name for yourself.”
Working in isolation and not building relationships across your business ecosystem
Another critical mistake start-ups often make is working in isolation and not actively cultivating relationships across their business ecosystem.
Chris recognises that the essence of a start-up lies in innovating and exploring uncharted territories to solve problems. However, he notes that the fear of uncertainty often compels founders to retreat into their comfort zones, relying solely on their knowledge and perspectives.
Chris explains: “The danger here is falling into a ‘bunker mentality’, where you believe you already possess all the necessary information. You might think that through clever and thorough analysis, you’ll emerge with a brilliant solution that everyone is going to love. However, you can’t anticipate how others perceive the problem, nor how they will view your solution.
“There are flaws in your approach that you haven’t considered, and there are unforeseen benefits and insights that emerge only through collaboration with partners. Referencing Steve Blank once again, who said it best: ‘There are no facts inside the building so get the heck outside’.”
Effective partnerships with diverse stakeholders – customers, potential partners and even competitors – are crucial for start-ups. These collaborations offer significant financial benefits, including grants and revenue from paid trials. More importantly, they provide invaluable market insights and perspectives and open up opportunities for collaboration.
Chris advises prioritising partnerships based on their immediate impact:
- Core partnerships: These partnerships are essential for immediate progress. For example, securing partners to support grant funding for a proof of concept.
- Strategic partnerships: Vital for market entry, this could involve value-added resellers or systems integrators that facilitate reaching customers who prefer trusted intermediaries over new start-ups.
- Aspirational partnerships: Long-term collaborations with government organisations, foundations or major industry players that could become valuable as the start-up grows and demonstrates more value.
Chris concludes: “By categorising partnerships into these tiers – core, strategic and aspirational – you can better allocate your limited resources and time, which are often scarce in a start-up environment. Our upcoming courses, available exclusively to SETsquared Surrey members, will provide more detailed guidance on this topic.”
The key takeaway
As a start-up, you are bound to encounter challenges and make mistakes that could impede your business’ growth and success. However, each obstacle offers a valuable opportunity to learn and pivot.
Harnessing the expertise of Entrepreneurs in Residence like Keith, Ian and Chris, SETsquared Surrey provides tailored support, including one-on-one mentorship, specialised workshops and a vast network of connections, to help your business scale up and thrive.