9 Deadly Sins Startup Founders Commit Most

small business pitfalls

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4. Emphasis on Execution Instead of Hypotheses, Testing, Learning, and Iteration

Startup cultures emphasize “get it done, and get it done fast.” So it’s natural that heads of engineering, sales and marketing all believe they are hired for what they know how to do, not what they can learn.

They assume that their experience is relevant to this new venture and that all they need do is put that knowledge to work managing the execution that’s worked for them before.

While established companies execute business models where customers, problems, and necessary product features are all knowns, startups need to operate in a “search” mode as they test and prove every one of their initial hypotheses. They learn from the results of each test, refine the hypothesis and test again, all in search of a repeatable, scalable and profitable business model.

In practice, startups begin with a set of initial hypotheses (guesses), most of which will end up being wrong. Therefore, focusing on execution and delivering a product or service based on those initial, untested hypotheses is a going-out-of- business strategy.

In contrast, the traditional product introduction model assumes that building a startup is a step-by-step, sequential, execution-oriented process.

Each step unfolds in a logical progression that can be captured in a PERT chart (a project management technique that maps the steps and time required for project completion), with mile- stones and resources assigned for the completion of each step. But anyone who has ever taken a new product out to a set of potential customers knows that a good day in front of customers is two steps forward and one step back.

The ability to learn from these missteps distinguishes a successful startup from those that have vanished.

5. Traditional Business Plans Presume No Trial and No Errors

The one great advantage of the traditional product development model: it provides boards and founders an unambiguous path with clearly defined milestones the board presumes will be achieved.

Most engineers know what alpha test, beta test, and first customer ship mean. If the product fails to work, everyone stops to fix it. In stark contrast, before first customer ship, sales and marketing activities are ad hoc and fuzzy, and seldom have measurable, concrete objectives.

They lack any way to stop and fix what’s broken (and don’t even know if it’s broken or how to stop).

Financial progress is tracked using metrics like income statement, balance sheet and cash flow even when there’s no revenue to measure. In reality, none of these are useful for startups.

Board directors have simply adopted the traditional metrics used in large companies with existing customers and known business models. In a startup, these metrics don’t track progress against the startup’s only goal: to find a repeatable and scalable business model. Instead, traditional metrics get in the way.

Instead of asking, “How many days to the beta test?” or, “What’s in our sales pipeline?” a startup’s board and management team need to ask specific questions about results of its long list of tests and experiments to validate all components of its business model.

If a startup’s board of directors isn’t asking these kinds of questions, it’s wasting time without adding value.

No matter what, directors and founders must stay focused on one financial metric that always matters: cash burn rate and number of months’ worth of cash left in the bank.

6. Confusing Traditional Job Titles with What a Startup Needs to Accomplish

Most startups have simply borrowed job titles from established companies. But remember, these are jobs in an organization that’s executing a known business model.

The title Sales in an existing company reflects a team repeatedly selling a known product to a well-understood group of customers with standard presentations, prices, terms, and conditions. Startups by definition have few if any of these known elements. In fact, they’re out searching for them!

Because target customers, product specs and product presentations may change daily, early-stage startup executives need dramatically different skills from executives who are working in an established company selling established products or line extensions.

The demands of customer discovery require people who are comfortable with change, chaos, and learning from failure and are at ease working in risky, unstable situations without a roadmap. In short, startups should welcome the rare breed generally known as entrepreneurs.

They’re open to learning and discovery— highly curious, inquisitive, and creative. They must be eager to search for a repeat- able and scalable business model.

Agile enough to deal with daily change and operating “without a map.” Readily able to wear multiple hats, often on the same day, and comfortable celebrating failure when it leads to learning and iteration.

Next page- Deadly sins 7 through 9 for start ups

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About the author

Bob Dorf

Bob Dorf is among the world’s leading Lean Startup and Customer Development experts, who trains and coaches startups throughout the world, with a particular focus on Latin America.  Bob co-authored the Startup Owner’s Manual, a global bestseller, with startup legend Steve Blank. Now in 18 languages, the Manual details every step in transforming an idea into a repeatable, scalable, profitable business. Bob focuses particularly on training programs for the startup educators, coaches, and investors, and has done so repeatedly in Mexico, Colombia, Brazil and many more. Hes also an Entrepreneur-in-Residence at Columbia Business School. Earlier, Bob founded seven startups--“two homeruns, two base hits, and three tax losses.” His 30+ angel investments delivered 7 IPO’s and six disasters. Learn more at www.bobdorf.nyc or contact bob via bobdorf@gmail.com

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