Like most entrepreneurs, I know a little about failure.

I've worked for a bunch of companies, and founded a few. Fortunately for me most succeeded, but a few failed. And I've seen other entrepreneurs fail.

Here are some of the most common reasons startups fail:

1. They focus on the idea and not on the customer's problem. 

Ideas don't generate revenue. Customers generate revenue - especially when you solve their problems.

I worked at several companies that either failed or never managed to scale. The reason? They thought the industry was all-important. (You know: the "mobile is hot right now... if we get into mobile we can't miss!") Or they thought the way they wanted to provide the product (hint: their way) was more important than the way the customer wanted to use or consume the product. 

At HubSpot they call it "solving for the customer." The key is to identify a customer's pain point and then come up with ideas to solve those pains: the way the customer wants their pain to be solved.

That's how you land and retain customers, and that's how you generate revenue.

2. They spent too much on marketing.

Many startups spend too much to acquire each customer. While a high customer acquisition cost (CAC) could make sense if those customers generate consistent, long-term revenue (like in a subscription-based business), most startups can't afford to indulge in high CAC.

We made this mistake with our business card product and almost went out of business. We had a great product that customers loved.  That made us feel the need to scale quickly. In the process we started paying too much for each new customer, though, so we had to pull back our marketing fast and cut our staff by approximately 20% to get back on track. If we had kept going and not made changes, our company would have failed.

You want to scale. You need to scale. But you also need to keep the pressure to scale at bay until your numbers work. 

3. They didn't hire passionate Swiss Army Knives. 

Many Entrepreneurs look for experience and credentials. I do too.  But I really look for a great attitude and the ability to learn quickly. At a startup your business will change and what you hired a person to do may suddenly not be what you need.

Also remember that skills are irrelevant when not put to use. Experience is irrelevant when it doesn't benefit other employees. Plus, the smaller your business the more likely you are to be an expert in your field, so transferring your skills to others is fairly easy. But what you can't easily transfer is motivation, enthusiasm, a great work ethic.

Always focus on attitude and cultural fit. You can overcome a lack of skill, but you will never overcome a poor attitude or a poor fit.

4. They lost sight of the small picture.

Everyone loves to talk about staying focused on the big picture, but in a small business short-term results matter most. Focus on the long term and you can quickly run out of cash. Revenue and cash flow matter a lot more than, say, branding, especially at first. (If your company goes out of business, who cares that you built a great brand?)

Stick to short-term metrics that lead to long-term success. Focus on daily sales. Focus on weekly revenue. Set targets that ensure you can stay in business. Monitor your results and take decisive action whenever you fail to meet a target.

Feel free to create long-term plans and strategies, but focus the majority of your operations on short-term tactical moves.

You will never get to enjoy the long term if you fail in the short term.

5. They pivoted too often.

I know: pivoting is all the rage. That's how successful companies are built, right? You come up with an idea, put together an awesome team, slap together a minimum viable product, see what customers think... and then either improve that product or quickly shift to a new idea.

That sounds great... but changing focus too much can also kill your business.

Why? Maybe you're not trying to turn the Titanic, but even in a startup it takes time to get your team to understand, embrace, and focus on a new direction. Improving your product or service is great, but few startups have the resources - much less the team - required to drop one idea and successfully focus on another frequently in their history.

That's why focusing on the customer's problem is so important. When you truly understand the problem, finding a way to solve that problem is a lot easier and requires a lot less pivoting. And it helps keep your team focused on a unified vision - which is how just about every company succeeds.

Published on: Jul 5, 2016