Where tech businesses go wrong – 6 mistakes that can spell disaster in the tech world
In a world that is dominated by technology and innovation, starting a tech business seems like a very reasonable thing to do.
After all, there’s never been a greater demand for tech products and services, so you’ll surely find an audience interested in buying whatever tech idea you put into practice, right?
But back in the real world, statistics paint a sobering picture: 90% of start-ups fail before they even get the chance to stand on their feet, and tech start-ups make no exception. Research shows that almost 21% of start-ups fail in the first year, 30% in the second year, and 50% in the fifth year. This means failure can happen at any time, even after you think you’re out of the woods.
With a survival rate of only 10%, one can’t help but wonder: where do tech start-ups go wrong? Why do so many businesses fail in such a thriving industry? While there’s a variety of reasons that can offer an explanation for this phenomenon, experts have managed to identify a few common denominators. Here’s what they’ve found.
Not developing a solid business plan
Having a great business idea doesn’t always translate into building a successful business. Unfortunately, many tech start-ups learn this the hard way. It’s very easy to get excited about putting your idea into practice and creating a new tech product that people can enjoy as soon as possible. But this excitement can cause entrepreneurs to skip important steps in the process.
No great thing has ever been achieved without thorough preparation. In other words, no tech start-up can thrive without creating a solid business plan first. A lot of entrepreneurs are so eager to get down to business that they jump into build mode too soon.
They have the skills, the passion, and the resources, so they assume they’re ready to make things happen and go straight into the action. They have the why and the what, but they don’t have the how. Without the how, tech start-ups don’t know what steps they have to follow in order to achieve their objectives. That results in numerous difficulties which can ultimately lead to failure.
Lack of research
Another aspect that tech entrepreneurs often ignore or fail to grasp the full importance of is market research. Yes, a business idea might seem brilliant on paper, but do you know how it’s going to translate into the real world? The answer to this question can only be provided by conducting detailed market research. One needs to have a deep understanding of the audience, competitors, and the market that they’re about to enter if they want to succeed.
But researching within the technology sector presents a very specific set of challenges since the tech field encompasses a wide variety of applications, services, and infrastructure. This is why tech entrepreneurs have to put a lot of effort into performing adequate market research that can provide the data and insights they need to start their business on the right foot.
Running a one-man show business
Here’s a scenario that seems to happen all too often in the tech world: we have an ambitious entrepreneur with excellent tech skills who thinks he can manage all the tasks of running a business all by himself. We can admire the will and determination that these people have, but with all due respect, this is a recipe for disaster.
While technical aspects are extremely important since we’re talking about a tech start-up here, there are many other factors to take into consideration when setting up a business. It’s virtually impossible for one single person to have all the skills, knowledge, and time to handle these tasks alone. Those who insist on doing things this way soon find themselves on the brink of burnout.
Not having the right people on the team
Speaking of teams, it’s a well-known fact that the people who are involved in running a business can either make it or break it. It’s not enough to bring some employees together randomly and hope they’ll do a great job at connecting all the dots.
Unfortunately, not all entrepreneurs know how to build an effective recruitment process that would allow them to find the type of people they need for their business. That’s how they end up having team members who do not possess the necessary skills and knowledge to properly perform their activity.
Focusing on the product alone
A tech start-up is centered around the products and services it develops. However, some entrepreneurs focus so much on their products, that they forget about everything else. They fail to realize that no matter how great a tech product is, it’s not going to sell itself.
When someone overestimates the technical part of their start-up, they inevitably fall short in other areas such as sales, marketing, and operations, which are solo vital for the success of the business. There has to be a balance in terms of the resources and energy spent on developing each area of a business, otherwise, it’s impossible for a tech start-up to function properly.
Doing the bare minimum
At the other end of the spectrum, we have entrepreneurs who don’t focus enough on the products they create. As you can assume, both these approaches can be damaging for a tech start-up.
In the first case, the resources were not spread appropriately across the different business operations. In this second case, entrepreneurs cut corners when creating their products, in order to save time and money resources, which can lead to a similar result. Thinking that you can start off with an average product and patch things up as you go might not bring you the outcome you hoped for.
The tech industry presents many opportunities for talented and passionate entrepreneurs. However, talent and passion alone will not suffice to keep a start-up afloat and turn it into a successful business. Being aware of the challenges that one might encounter along the road and the mistakes that might lead to failure can significantly increase the chances of success for tech start-ups.
Read more: Ways to save money on tech
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