3 Ways to Kill your Company

Kill Your Company

There are many ways for a startup to fail. Some factors, like regulatory changes or input cost increases, are beyond the founder’s control. However, there are three significant actions that entrepreneurs are often guilty of that can kill your company as fast as anything.

  1. You are too nice

Everyone wants to be a popular person. However, leadership can be a lonely place, particularly if you are a sole founder. With a small team, there can be a propensity to be too accommodating or hold back criticism. This is well and good for team-building, but it may not be overly effective in driving performance or negotiating a contract with suppliers.

In effect, you need to be able to be “schizophrenic.” There are times to be pleasant, but there are likewise times to be a “hard-ass.” You have got to know when to stand firm and be outright harsh if the circumstances require. I have seen few truly successful entrepreneurs that at one point or another haven’t “blown a gasket.”

There is a huge difference between being “nice” and being compassionate and empathetic with your team. Understand the true limitations (human, material, and financial) that exist in your company, but always demand performance. In the end, you are their leader not their friend. They will not be successful unless you are and they need to understand that.

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  1. You gave it away

This is the corollary to being “too nice.” You simply did not adequately value your idea. You failed to price your product to make a profit. You left money on the table.

At early stages of deploying a product or service, there may be a tendency to want to underprice the perceived market. This is the “loss leader” strategy used by retailers: get them in the door with the bargain and make it up when they buy the other stuff. The problem is twofold. First, you may not have any other products on which to make up the margin. Second, prices can be “sticky.” Once you cut your price, it can be very difficult to raise them.

There is also a dynamic tension between building a user base and making a profit. If you don’t have customers, it doesn’t matter how big the margin. If you don’t make a profit, it doesn’t matter how many customers you have. Honestly, there is no easy one answer, but you must be aware of the issue every time you enter a negotiation or price a product.

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  1. You lost your way

The path to developing your product or service and growing your company is never a straight line, regardless of what your business plan says. There will always be detours, changes and revisions.

Is this a market pivot or simply chasing a “shiny object?” Are those costs essential to your Minimum Viable Product or are those “nice to have” features? You must be adaptable enough to deal with such questions; however, if you are not careful you can lose your focus.

This is where strategic thinking is so important. Never forget that your resources are limited and you have got to prioritize your goals. Always know where you are going and keep the overall objective in your sights.

In many ways all three of these factors are within your control. The key to avoiding these pitfall is to recognize them before they begin to control your actions. The most important common denominator is confidence: in yourself, in your idea and in the path you are on.

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Dave Clark