Embroker Team June 19, 2023 6 min read

Common Startup Mistakes and How to Avoid Them

Woman holding up notepad which lists common startup mistakes with rocket ship blasting off in background

Startups may seem superabundant, and perhaps they are, but startups are prone to make startup mistakes. The harsh reality is that 90% of startups fail. And when one bites the dust, there is another one ready to capture the attention of investors and customers alike. With this bleak success rate comes a plethora of hard lessons learned. Take advantage of the startups that have come before you and let their startup mistakes show you what not to do. 

Laptop monitor displaying green verification checkmark to demonstrate insurance for non-funded tech e&o startups

Are you prepared for cyber risks?

Read our 2023 Cyber Risk Index Report to find out what businesses are worried about, how they’re protecting themselves, and what the future holds.

Download the Report

Here are the top ten most common startup mistakes – and how to avoid them. 

Woman using pointer to point to list outlining 10 common startup mistakes

1. Spending money on the wrong things 

Instead of investing in talent, benefits for said talent–like 401Ks and competitive health care plans – and tools that can help track analytics, manage projects and jumpstart collaboration, many businesses make one of the most common startup mistakes: spending money on fancy office spaces and cool swag. 

Before committing to a workspace with all of the bells and whistles, especially given the known preference by the majority of workers, consider the benefits of remote work–especially for the first few years of operation. Many job seekers see this as an incentive, and you can reallocate some of that seed money for things that can better enhance your product or service. 

2. Rushing through the hiring and onboarding process

The second of the startup mistakes involves time, or lack thereof. We know that in the beginning there is so much to do and so little time. If you’re running your own startup you’re wearing all of the hats and you are probably more than ready to take a few off. So when funding comes through, it can feel like recruiting season gone wild.

But try to be mindful and ensure you are putting in the appropriate time up front when it comes to staffing. Consider factors like cognitive diversity, company culture, skill level, and overall willingness to learn and work as a team. Putting in the time now can help save you both money and time later. 

In the startup world, it’s not uncommon for new hires to start on day one without a plan, without a schedule, and sometimes even without a desk. They don’t know who to meet or where to start. The easy thing to say to them is “Figure it out, that’s why we hired you.” But, that’s not always the best mentality.

Spending some time creating an onboarding checklist including the names of people the new hire should meet can really help jumpstart their first few weeks. And the more they learn in the beginning, the better equipped they’ll be to start working in a productive way.

3. Acting without planning 

One of the great things about startups is that you are rarely stalled by red tape and the bureaucracy of big business. That being said, guardrails can be useful. An audit and competitive analysis of your overall business sector will provide you with a basis to work off of for the next year. Take time to identify and assess your competition. Make a business plan and make a marketing plan. These are all critical components that should not be overlooked, but often are skipped over. 

Creating these habits now will also help when, if you haven’t already, receive VC funding. Investors won’t tolerate planless decisions and projections. Their money and reputations are on the line. So, get ahead while you can. 

4. Operating without a style guide or brand persona 

You may think you know who you are–but have you put those thoughts down on paper? What do you care about? What are your values? How do you speak to your customers? Answer these questions up front and share them out with every single member of your team. This will help keep messaging consistent and individuals mission oriented. 

Establish your employer brand too–who are you as a company and what is your culture? Use your findings to create an employee handbook, which will also help enhance the onboarding process. 

5. Being afraid to test and learn

When your business is new, everything you try is new. Not everything will work out, but you can’t be afraid to try more new things and learn from your mistakes. Being agile and able to pivot shows strength and can benefit your business much more than sticking with a plan that has only proven itself to fail. 

Your employees have to feel safe knowing that they can try and fail, as long as they also

learn and improve. Playing it too safe can limit your success and can easily become a startup mistake that leads to the end of your business. Take risks.

Laptop monitor displaying green verification checkmark to demonstrate insurance for non-funded tech e&o startups

Customize a program of policies to fit your unique business needs.

Save time with Embroker’s single-destination solution.

Find a Policy

6. Partnering with the wrong investors 

Investor calls, pitches–call them what you will, just be sure to remember that the conversation goes both ways. Sure, you want the investment, but don’t let the money blind you, or force you into conceding your vision if that makes you uncomfortable. Being selective now may benefit you in the long run. 

Of course, it can be difficult to turn down interest in your company. As you’re considering your options, start networking. Find out what the community thinks of certain funds, and use that knowledge and those relationships to your advantage.

7. Giving too little or too much power to the customer 

Customers can eat you alive. A bad review or social post can go viral and in turn damage your business in both short and long term ways. Consumers are important, that is a fact. But don’t let them scare or bully you to the point where you’re compromised. In a hostile public customer interaction, work to get the issue offline and private.

If the issue is too difficult to rectify, perhaps they were not a customer worth having–but at least the back and forth won’t go down in the feed history for all to see. 

But be aware of edge cases as well. One email from one person isn’t going to sink your business, and shouldn’t completely shift your direction or shut down an idea. Keep a level head and consider the context.

8. Getting too big too fast

Growth is a given for startups. If you are going to be successful you need good people. But ensure you are hiring talent and not just bodies. Invest in creating detailed job descriptions so you get better candidates aligned for the kind of work you need done. Create a yearly growth plan and have an idea of the roles you need to fill and when. Ultimately, focus on quality and perfecting your team–not just building a bigger one.  

9. Not considering your employer brand’s impact 

We mentioned earlier that you should define your employer brand and communicate it out to your team. However, you need to make sure that you don’t forget about it yourself. One of the common startup mistakes is to lose sight of who you are as a company and what you mean to your internal staff when you are so focused on external perception. But your employee’s experience will have a lasting impact and their opinions matter to consumers too

10. Forgetting why you got into this business in the first place

Whether investors are forcing your attention one way or your own ambitions are pushing you in another, remember why you wanted to get started in the first place. Believe in your pitch. Believe in your mission and perform gut checks with yourself and your staff to ensure you are still driving in the direction you planned. 

The odds may not always be in your favor, but with smart decisions and the right team at the helm, your startup has every chance of succeeding. As a bonus, Embroker is on your side. We work with startups every day to not only insure businessbut also help ensure success long-term. Take a look at our latest Startup Newsletter and come back for more business tips and advice.  

Protect yourself from common startup mistakes and find the right coverage for your business, check out Embroker’s digital insurance platform.

Related Articles

A person walks down the street holding a to-go cup of coffee or tea. They're probably looking forward to reading an essential it consultants insurance guide. Probably.
The Essential IT Consultants Insurance Guide

The Essential IT Consultants Insurance Guide

5 min read

IT professionals help set up computer systems, monitor digital security, and improve functionalities for a wide variety of clients. They’re also often called when there’s a problem. So, if something goes wrong, IT consultants need to make sure that they have insurance policies in place to keep them protected. That’s why we’ve created this IT […]

Read More
Embroker Announces New Consultants Insurance Program

Embroker Announces New Consultants Insurance Program

3 min read

Embroker is thrilled to announce the launch of our newest vertical insurance program, designed specifically to meet the unique needs and risks faced by consultants. This comprehensive coverage program is now available on our ONE platform, offering a streamlined and transparent insurance buying experience for consulting professionals. Consultants play a vital role in helping businesses […]

Read More