Failures – exposed, reflected, considered

17 Mistakes Start-ups Make

with 17 comments

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:

  1. Failing to spend enough time researching the business idea to see if it’s viable.
  2. Miscalculating market size, timing, ease of entry and potential market share.
  3. Underestimating financial requirements and timing.
  4. Overprojecting sales volume and timing.
  5. Making cost projections that are too low.
  6. Hiring too many people and spending too much on offices and facilities.
  7. Lacking a contingency plan for a shortfall in expectations.
  8. Bringing in unnecessary partners.
  9. Hiring for convenience rather than skill requirements.
  10. Neglecting to manage the entire company as a whole.
  11. Accepting that it’s “not possible” too easily rather than finding a way.
  12. Focusing too much on sales volume and company size rather than profit.
  13. Seeking confirmation of your actions rather than seeking the truth.
  14. Lacking simplicity in your vision.
  15. Lacking clarity of your long-term aim and business purpose.
  16. Lacking focus and identity.
  17. 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.

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17 Responses

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  1. Although #11 sort of says it – I think the list misses the biggest one: Lack of commitment to see the idea through.

    Cheers,
    Trevas

    eBookGuru

    January 26, 2009 at 4:31 am

  2. very interesting, especially having an exit strategy and bringing unnecessary partners.

    seenaghost

    January 26, 2009 at 4:58 am

  3. Interesting, well presented, simple articulation. This should serve well every new start up. I think Hayk deserves all credit for living up to the task of being objective about the failures. The lessons learnt have enough clues for all the companies that failed recently.

    myprayers02

    January 26, 2009 at 5:17 am

  4. I totally agree with the author and the list, but don’t you think if prior to starting a business one has to wait to get these 17MSM list checked out, one may never start a business?

    ochuko

    January 26, 2009 at 5:55 am

  5. Trevas, after checking the list, I couldn’t help but agree with you!

    Indeed, the list is missing:

    – Lack of commitment to see the idea through.

    I will add this to this list, making it 18 !

    Thanks a lot again for your brilliant addition!

    fail92fail

    January 26, 2009 at 9:45 am

  6. seenaghost, if you haven’t already, do check Guy Kawasaki’s latest book “Reality Check.” This book is one mine of a treasure for startups and ongoing businesses. Importance of having an exit strategy (and from the moment of incorporation, especially) is few times emphasized in this book as well.

    Thank you for your feedback!

    fail92fail

    January 26, 2009 at 9:49 am

  7. myprayers02, thank you for all the warm words!

    Articulation is one thing that used to put me off of many business blogs and articles. In this blog I try to make it as simple as possible by focusing on essentials and causes and leaving out (unnecessary) details.

    fail92fail

    January 26, 2009 at 9:55 am

  8. ochuko, I completely agree with you. One starts a business with certain ideas, prior experience and business knowledge.

    Many successful businessmen and entrepreneurs already have “built-in” gut feeling, intuition, knowledge and experience to avoid these mistakes!

    However a prior academic knowledge of these items is not necessary, in my view.

    This is list must serve a reminder for experienced and an information for inexperienced!

    Thank you for your feedback!

    fail92fail

    January 26, 2009 at 10:01 am

  9. Interesting and well presented, simple but true.
    This should help every new start up on the first few months.

    Living up to tasks and goal is very hard and i remove my hat to these people

    food-cook

    January 26, 2009 at 4:01 pm

  10. [...] The list of startup mistakes could be huge. There’s so much that could go wrong, that it could make you insane if you think about it. Make sure you have a business plan and are willing to put in the necessary work. If you have that in check, you should be alright. [...]

  11. Yea, an exit strategy is key

    Timothy

    January 26, 2009 at 6:14 pm

  12. Cool – I made the list! Thanks for the link.

    Cheers,
    Trevas

    eBookGuru

    January 27, 2009 at 1:25 am

  13. food-cook, thank you for kind words! Indeed the transformation of ideas to implementation is one of major milestones especially in the beginning stage of startups.

    The list below is an illustration of that idea:

    Type 1 Amateur Entrepreneur: All ideas, no implementation.
    Type 2 Amateur Entrepreneur: Lots of ideas and half assed implementations.
    Type 3 Amateur Entrepreneur: Lots of ideas, lots of implementations, and absolutely no focus.

    via “Why 99% of entrepreneurs fail” ( http://www.coloradostartups.com/2009/01/22/why-99-of-entrepreneurs-fail/ )

    fail92fail

    January 27, 2009 at 12:19 pm

  14. Timothy, unfortunately many startups fail to perceive the importance of having the exit strategy, relegating it to a later stage (when the business would be more established), and which usually becomes an important issue with a little advance warning.

    It is then that these startups face questions of make or break, founder separation, and other unanticipated matters of how to get out of, transform or terminate their businesses.

    fail92fail

    January 27, 2009 at 12:26 pm

  15. Very informative post thank you!

    Ann Mobile

    http://www.iperinfo.com/

    Ann Mobile

    January 31, 2009 at 2:12 am

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    Alexwebmaster

    March 3, 2009 at 11:22 am

  17. [...] StandoutJobs . As for main reasons why statups fail, have a look at Paul Graham’s article and my previous blog post. Finally, here is good set of lessons from Mark Goldenson, founder of PlayCafe (one of failed [...]


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