Common Mistakes in Startups

Stirring my first cup of coffee while facing my favourite lavender painted wall in my kitchen, a review of a conversation held after yesterday’s sermon with a young man interrupted the admirable swirl of the black coffee. The young man had gone into the drinking water sales business and the venture was clocking a year in existence about this season. I had seen him at least twice every week as I drove past the famous Saba Saba cross junction in Mombasa.

A scene to behold; at least twelve young men in their youth selling drinking water packed in well marked bottles each bottle holding 500ml according to the labels, each one of them tactfully criss crossing the busy roads in attempt to woo the thirsty passengers in noisy minivans buy their merchandise. A number of them carrying the packed water in small but overloaded buckets giving enough view to the intended customers that the water is practically at a perfectly low temperature probably even thawing from the heat of the day.
Evidently, the number of the hawkers; as they are commonly called in Kenya never goes down at this spot in the hot season.

Gathering information from this gentleman among several others on how they were running their startups and then comparing notes, it is now unmistakable that some of these young men could end up stuck in their startups and probably quit before they can actually see the fruits of their businesses.

In this article, I address three of the most common mistakes made by these and other young people in the startups. These are the same mistakes that I made at the starting of my business and hence none is too new to me. In fact each one of these reflects situations that I have had to persuade myself to keep tab of as I correct the wrong in the process of my growth in business. This is the first part of the series so be sure to follow up as I share the fine wealth of wisdom on common mistakes in startups.

For every five startup cases I have had an opportunity to mentor so far, 4 out of 5 are experiencing stagnancy to a point of giving up or worse still making bigger mistakes.

1.       Absence of Tracking Records

No matter the type of product that the entrepreneur is selling to his or her customer, it is necessary to keep track of events involved in the business by record keeping. It is essential for the entrepreneur to note down the following:

• Amount of capital spent while purchasing the product; this has to include any ingredients used, transport cost spent in the course of selling the product and the time spent while preparing the product needs to be accounted for as labour.
• Number of products sold in a day. In the case of services, number of clients served in a day.
• End of day collections
• Profit made
• Amount to be saved for future re-investment or progressing to other business.

Where records are not faithfully kept, the ability to track growth fails. This would mean that the entrepreneur does not really know if he is making a profit or a loss. The inability to account for the activities of one month may finally land the startup on its knees with major unnoticed losses, crumbling to its grave in less than one year.

2.       Lack of Progressive Planning

“What do you want to achieve in six months?”

Most of the entrepreneurs I have interviewed and mentored evidently lack written down plans of progressive growth. There is no set direction of preferred development. The gentlemen selling packed water and home-made soap for example, had not planned the goals they wanted to achieve in the months ahead of them. When the entrepreneur fails to plan what signposts of achievements he or she would like to show in say 6 months, 1 year, 3 years; it is a clear disaster. 

Worth noting, most of the startups were not planned to grow into major businesses, they were just a way of earning the daily bread and hence no progress planned.

Progressive mentoring has seen those interested in growth finally take seriously the idea of brainstorming and writing down their plans of progress and slowly implement them.

3.       Abused Saving Culture

In several occasions when I have had the opportunity to mentor the youth in a group, I emphasize the need to save part of profit collected from the startups. “Profits are for Progress” goes the phrase. Having kept track of the amount of profit collected in a week, it is important to put aside at least 20% of that profit in a saving account in order to be able to finance the desired progress without necessarily borrowing the whole amount required.

In one mentoring session where the entrepreneur wanted to purchase a cooler box by the end of the first year in business instead of utilizing the rented one that came with an extra cost, we agreed to put aside 30% of daily profits in a mobile banking account for a period of eight months. This would earn the entrepreneur an opportunity to buy his long desired cooler box and the freedom to stock it as he wished, an option he did not have while renting one since renting was on a sharing basis.

Regardless of the business you choose to venture in, walk with a mentor whom you can access at least in a weekly basis at the beginning of the business. Such a mentor will help you be accountable for every move you make. That way you can be sure to succeed in the venture with maximum learning.

#Magwealth