In India failure in business has not been looked upon kindly; all kinds of negative connotations colour failure. So much so that in a traditional Indian family prospects of a good bride diminish if you were to be an entrepreneur as against someone who has a stable job in a large company. Maybe there is good reason to feel this way: as over 80 per cent of all start-ups fail in the first few years. It is still a high risk, high reward game. The opportunity cost of getting into an entrepreneurial venture is quite high. I was asked many questions when I wanted to become an entrepreneur in the late 80s. Given my experience of having started nine ventures, four of which failed, I feel I am qualified enough by now to write on this subject.
Stereotypes changing
Fortunately, the stereotype that all first-time startups are bound to fail is one that is changing with companies, such as Flipkart, Snapdeal, Zomato, Zoho, Ola and the like. The kind of capital and valuations that these companies have attracted are phenomenal. Whether they are sustainable is anyone’s guess but for now they have completely transformed the start- up landscape.
Many of these venture’s funders are also willing to fund more start-ups knowing well that eight of the 10 investments will be failures but the two that succeed should more than make up for the others.
From my own entrepreneurial experience, I have found that failure will always be a part and parcel of the entrepreneurial journey. In fact, they are a very essential step in every entrepreneur’s journey.
There are generally two benefits of failure. First, you learn what does and doesn't work; and second, the failure gives you an opportunity to try an entirely new approach. If you have made mistakes, even serious ones, there is always another chance. What we call failure is not the falling down, but the staying down. Frequently the only difference between success and failure is persistence.
Budding entrepreneurs
Hence is my advice to budding entrepreneurs – make enough mistakes and make them fast. Even experienced serial entrepreneurs make mistakes; only they have been there, done that and so they realise soon enough that it is a mistake and therefore immediate corrective steps need to be taken. The cost of such mistakes is minimised.
Let me outline some of the common mistakes that entrepreneurs make in the start-up process;
(i) No long term vision
Many entrepreneurs are not driven by any long-term vision they jump into a business to leverage on an opportunity that presents itself. This cannot inspire good talent to join their venture, neither can it attract investment.
(ii) Undercapitalis ation
Many entrepreneurs list a shortage of finance as a major stumbling block to progress in business. Often the risk factors associated with start-ups make would-be financiers shy of investing. However unless there is adequate finance to run the business before it generates cash, there is the risk of not being able to attract the right talent, since on is cash strapped and therefore not effectively being able to implement decisions taken.
(iii) Lack of business expertise
This problem manifests itself in many ways, particularly when the entrepreneur or inventor has a great commercial concept, but doesn't think like a businessperson. Rather than creating value for customers and asking what a product or service can do for them, they are more focused on making the product or on selling.
(iv) Poor research and planning
Insufficient market research can lead to big disappointments down the track. Even with a lot of customer research, more often than not, most new product introductions bomb in the marketplace. It's true that primary research initiatives can be extremely expensive, complex, and time intensive and this puts off entrepreneurs. However, there is a wealth of free information available if one knows where to look.
(v) Hiring the wrong people
It's all about matching people with the right job, and staff promotion can be a particularly tricky area. It's easy to promote people past their level of competence. Just because someone's good technically, doesn't mean they'll make a good business manager.
(vi) Insufficient marketing
For every rupee spent in developing a product, many times that amount should be spent on marketing it. Unfortunately a large number of entrepreneurs fail to grasp the importance of marketing and assume the product (or service) will sell itself, and customers will just come. This is an oft repeated mistake.
(vii) Inadequate systems and processes
While you may initially get away with inadequate systems, further down the road it can wreak havoc. Inadequate systems and processes, one of the casualties of growing too fast, can take a toll in terms of not meeting customer expectations.
(viii)Partnering with friends, family or the wrong people
Going into partnerships with friends and family is always risky. If there are no complementary skills while forming partnerships, and personal relationships are the only basis, it can in future years lead to a lot of heartburn. We spent a number of years trying to sort out issues that crop up as a result of such a partnership. This is time better spent on growing the business.
A mere knowledge of the common mistakes doesn’t make one immune to them. However, it is good to guard oneself against these and take immediate corrective steps should one make one or more of the above mistakes.