Starting a business means you must master multitasking. Products and plans and a push for publicity all require your attention, and that’s just the beginning. With so much on your plate, it could be easy to commit common startup mistakes.

With your mind on the accelerator, focusing on what must be done, you may not give any thought to what NOT to do. It’s important to note that hundreds of thousands of startups are created each year in the U.S., and about 20% of them don’t survive beyond the first year. Common startup mistakes typically are the culprit, and many of them are avoidable if you are aware of their potential impact on your business. Here are a few facts about startups, followed by our top 10 startup mistakes to avoid. 

  • A startup is a business that is less than a year old, according to the Small Business Administration.
  • Nearly 90% of startups have fewer than five employees.
  • The best year for startup firms was 2006. More than 550,000 startups were launched, resulting in 3.4 million new jobs.

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Startup Mistakes to Avoid

The difference between having a bustling business and a busted business model may come down to avoiding these startup mistakes


Overspending is one of the most common startup mistakes that hinders business success.

Cash flow issues derail first-year businesses more than any other single problem. Don’t drain your initial capital until at least the point when the business develops positive cash flow.

Even then, you still need to be careful about how you are spending money or you will find yourself out of business. Every small business owner dreams of growing their business into a global conglomerate with branches all over the world.

However, if you are not careful, your desire to scale quickly could see you overspend on basic business needs. And when all is said and done, overspending harms your bottom line and you will find yourself deep in debt.

Overspending can also be a sign of poor financial planning. If your business overspends regularly, examine your budget and compare it with your actual spend.

Identify the discrepancies between the two to figure out how you ended up overpaying for certain products or services. Going forward, you’ll want to use an expense tracker to get a clear picture of how you are spending your money.

That said, here are some of the avenues where you could be overspending and how to stop that:


One of the most common startup mistakes that can cause a business entity to fail is overspending on marketing without considering how it affects the overall performance of the company. While marketing is crucial to attract customers, the lack of a clear strategy could see you overpay for most services.

Whether you’re paying for influencer marketing on Instagram, PPC ads on Google, or running Facebook Ads, it’s easy to go overboard with your marketing spend.

Here’s how to get strategic with your marketing and reduce your spend:

  • Work with micro-influencers for your marketing campaigns. Micro-influencers have built trust with their followers and provide brands with authentic product endorsement at a lower price tag.Gvantsa Ivanishvili is a fashion influencer with 14.7K followers on Instagram. If you are starting a clothing brand, she’d be a great candidate as a micro-influencer.

    In the image below, she’s promoting a dress designed by Key Couture.

Image via Instagram

  • Use analytics to determine the efficiency of your marketing campaigns. Drop campaigns that are not working well and amplify those with favorable results.
  • Advertise where your customers are. Don’t spend money on channels or platforms that are not popular with your target audience.


Premium software products can be expensive. As a small business owner, you could be overpaying for software, yet there are free tools that provide the same functionality.

To avoid overpaying for software, do the following:

  • Follow tech news to find cheaper software alternatives
  • Cancel the subscription to software you’re not actively using
  • Use the free version of a software until you can afford the paid plans

Do you need an affordable POS for your retail business? Check out this reliable point-of-sale system by Square.

Office Space

It’s easy for many entrepreneurs to feel the need to buy shiny new equipment when launching a big business. While this may lend legitimacy to your new business, the truth is that high-end office supplies can drain your resources.

To avoid overspending on office space and supplies, do the following:

  • Rent a shared office space with another small business
  • Look into office equipment rental services
  • Run your business from home until you get enough money for a physical location

Lack of a Business Plan

Your idea to sell products or services has to be accompanied by details, details and more details. At a minimum, you need a financial plan and a marketing plan that include ways to adapt based on various contingencies.

Unfortunately, many new business owners still make one of the biggest startup mistakes of not creating a business plan before starting operations. They don’t take time to understand the market, plan their finances, create a business model, and sort their logistics.

The lack of planning, understanding, and financial forecasting costs time, effort, and money when things go wrong.

To run a successful startup, create a business plan before starting your operations. A business plan will help you figure out what you need to do to make your business successful. It will also help you spot gaps you need to fill.

For example, as you develop your business plan, you may realize you don’t have a mission statement. With this realization, you’ll go ahead to create a mission statement that outlines what your brand stands for.

Let’s now take a look at the elements you need to include in your business plan to make it effective:

  • Executive summary – An overview of your company and your plans. It includes your mission statement and other important details about the company such as the leadership, location, and operations.
  • Products and services – Outline the products and services you will offer. You can include details such as pricing, benefits to the customers, and the product lifespan.Other details that you may add to this section include the manufacturing process, any patents you have, and research on product development.
  • Market analysis – Every business needs a good handle on its market and target customers. Use the market analysis section to analyze the competition and how your business fits in the market.Also, describe the expected consumer demand for your products and how easy or difficult it will be to gain market share from your competitors.
  • Marketing strategy – How will you attract and retain your potential customers? Develop a strategy that will inform your marketing activities. Spell all the advertising and marketing campaigns you’ll run and the type of media you’ll use for those campaigns.
  • Financial planning – Use this section to outline your company’s financial planning and projection to avoid common startup mistakes. Established businesses can add their financial statements but new businesses only need to share their estimates and targets for the first year.
  • Budget – One effective way to avoid financial startup mistakes is through budgeting. A budget guides you on how and where to spend your limited resources and prevents overspending.When creating your budget, ensure you include costs related to product development, staffing, marketing, and other business-related expenses.

Spreading Yourself Too Thin

Another common startup mistake small business owners make is taking on too many tasks. For instance, a startup founder could be:

  • A developer in the morning
  • An SEO specialist in the afternoon
  • A marketer in the evening

While performing these roles, this business owner still needs to make time to engage prospects and talk to suppliers.

Unfortunately, this is true with many startup founders who perform many roles in the company. While the commitment is admirable, you want to spend most of your time on activities that generate money for the business.

You don’t want to spend a lot of time on activities like HR and payroll that can be delegated to another person or organization without any loss in quality. That’s why we recommend hiring employees so you can have more time to do the things that matter.

If you have employees, train them with the end goal of being able to eventually delegate more important tasks. If you are a one-person operation, consider outsourcing routine duties that can be handled elsewhere affordably. This could help prevent fatal business burnout.

You also have the option of automating some of your business tasks. Bear in mind that these processes cost money, but the heartache they save you outweighs the amount of money you will spend.

Some of the tasks you can automate to free yourself up to do other important tasks include:

  • Social media posting
  • Sending invoices
  • Scheduling meetings
  • Customer communication
  • Sales lead nurturing
  • Backing up data

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Not Picking the Right Location

Not choosing the right business location is one of the common startup mistakes small business owners make that hurts a business’s growth.

Many small businesses are home- or e-commerce-based, but many are not. Make sure your location is convenient for your target customers.

Depending on the nature of your business, your retail store location should be refined and inviting. For example, if you are starting a retail clothing business, your store should be on a busy street where customers can pop in to buy the clothes they need.

Uniqlo wanted a refined location for its flagship store in the US and chose to open a store in Soho, New York. The choice of New York for its retail location helped them create a positive impression on customers so they can think highly of the business.

Image via New York Simply

When choosing a location for your business, you want to pay attention to certain things to ensure you’re making the right choice and increasing your chances for startup success.

  • Do your research – Take time to understand local zoning laws and study your competitor locations when searching for a location for your business. You should also research your target market and find out if there are any benefits or restrictions from the local government.
  • Consider taxes – Find out the tax implications of setting up your business in your prospective location. If possible, consider locations outside a certain zone to enjoy tax benefits.
  • Research government incentives – You may qualify for certain incentives from the federal and state government when you start a business in a certain location.
  • Ease of access – Can your prospective customers find your business easily? A good location can significantly boost your long-term performance by making it easier for customers to find you. However, prime locations can be expensive and out of reach for most small businesses.
  • Access to talent – To access the best employees to grow your business, your business needs to be located close to a city center where most people live. Employees care about where they are based to optimize their work-life balance. They would even turn down a job that takes them away from the good things they enjoy in life.

Setting Price Points Too Low

Of all the startup mistakes you can make, none is as costly as setting a low price for your products. You’ve spent a lot of time and effort to develop your product and it’s only fair that you charge a price that matches the investment.

It’s understandable that you may want to set a low price tag to attract customers. But you run the risk of not being able to raise enough funds from product sales to meet your operational expenses.

Know the value of your offerings and stick to it. It’s normal to feel uncertain about whether customers will really pay X amount for your product or service, but if you discount too heavily, your bottom line — and your survival chances — will suffer.

Use the following tips to determine the right price for your products:

  • Study your competitors – How much do your competitors charge for their products? Analyzing your competitor’s pricing is a great way to determine how much to charge for your product and avoid the startup mistakes that can put you out of business.You don’t want to set a price that’s too high or too low from the competition. A ridiculously high price will not motivate customers to leave the competition and buy from you. On the other hand, a ridiculously low price will make customers doubt the quality of your products.
  • Determine your break-even point – How much money do you need to raise from product sales to recover your investment in the business? This is what is called a break-even point and has a huge bearing on how much you can charge for your products.
  • Craft a unique selling point – Why should customers choose you over other businesses? What’s so unique about your products that will make customers choose them over what’s offered by the competition?Your USP allows you to differentiate your business from the rest and even charge a slightly higher price than the competition.

    Take The Farmer’s Dog for example. The brand sells human-grade dog food developed by vets. For a USP, it doesn’t get better than that since it differentiates them from other brands that sell dog food made from synthetic ingredients.

Image via The Farmer’s Dog

Not Using Social Media

One of the worst startup mistakes you can make as a business owner is not using social media to promote your business.

In the absence of a mega marketing department, it’s imperative to engage your customers via social media. You can’t be afraid to handle your own marketing.

Social media marketing is cheaper than other marketing channels, yet delivers the most value. Not using social media in this day and age is almost criminal since all your target users are on one or the other social media platforms.

With the right tactics, you can connect with them on their preferred platforms and let them know about your business.

Below are some of the strategies you can use to promote your business on social media:

    • Identify the right platforms – Find the best platform to promote your business. This will be determined by the target audience and the nature of the products you sell.For example, if your products are visual in nature, you should use Instagram to promote them like Sincerely Tommy does to promote its clothing brand.

Image via Instagram

  • Create a content calendar – Create your social media content in advance and schedule to have it published on your page on specific days. This will ensure you have enough content to engage your social media followers regularly.
  • Share videos – Video content performs well on social media because users prefer it over text and other content formats. Just make sure your videos are short so as not to bore viewers.Pizza Hut is big on video and uses them to promote its different types of pizzas.

Image via Facebook

Ignoring Valuable Resources

You cannot run your business successfully without technology. Those who don’t leverage technology to perform specific tasks commit startup mistakes that hurt your business’s potential.

There are many other ways to leverage technology. Customer-friendly apps, software that simplifies payroll and billing, and expert online business advice are just a few examples of what’s available.

Some of the valuable tools you can use to perform certain tasks in the business include:

  • HubSpot – Manage your customer relationships and sales with HubSpot’s full-fledged marketing software
  • MailChimp – To build customizable email campaigns
  • Buffer – To create and schedule your social media posts
  • QuickBooks – To manage your accounting
  • Surfer SEO – For content marketing and SEO
  • Grammarly – To improve your business writing
  • Slack – For communication
  • Trello – For project management
  • Google Analytics – To track your online campaigns

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This may seem like a contradiction to No. 1, but there’s a happy medium. Certain facets of your business are worth additional investments. Examples include keeping adequate inventory on hand and remedying any issues that otherwise would make the business appear cheap.

Underspending in one area can also lead to underspending in other areas. Getting used to spending less than the projected budget can stifle business growth since it could encourage the use of substandard products and services.

This will harm your reputation among customers who will want nothing to do with you and your poor-quality product or service.

Poor Customer Service

Unless you are both uncaring and a monopoly with no competitor in sight, the customer remains king. Be especially sure that your shipping company is reliable.

To improve your customer service, do the following:

  • Understand customer needs – Find out what customers want through surveys and act on their needs.
  • Set clear service standards – Define how the company will engage with its clients. Ask your employees to take note of the standards when interacting with customers.

Lack of Commitment

Lastly, don’t let a lack of commitment be the reason to close your business.

Revenue rules when it comes to a business’s survivability, but if you aren’t passionate about your work and/or your industry, calling it quits might become overly tempting at some point.

The following tips will help you stay committed to your business goals:

  • Set achievable goals – Ensure the goals you set for your business are achievable. Unrealistic goals will demotivate you and cause you to lose commitment to the business.
  • Assign responsibility for certain goals – Delegate some tasks to your employees or team members and let them be responsible for the achievement.
  • Have a mission statement – When things get tough, your mission statement will help you remember why you started the business.

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1. What is the #1 mistake startups can make?

The top mistake startups can make is overspending. Startups have limited resources and overspending could see them burn their cash reserves before they become profitable.

2. What is the #1 reason why startup businesses fail?

The top reason for startup failure is the lack of planning. When a business cannot plan its affairs properly, it cannot survive in a competitive environment.

Q3. What can go wrong in a startup?

A lot can go wrong in a startup, especially if it doesn’t have a business plan. A business plan helps a company determine the things it needs to do to become successful.

4. What are the common startup mistakes most entrepreneurs make?

The common startup mistakes that can cripple a business include:

  • Overspending
  • Lack of a business plan
  • Not choosing the right location
  • Setting low prices for your products
  • Not using social media to market your business

5. Why do most startups fail?

Startups fail for various reasons such as overspending their budget, lack of a business plan, and not choosing the right business location.

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About the author

From selling flowers door-to-door at hair salons when he was 16 to starting his own auto detailing business, Brett Shapiro has had an entrepreneurial spirit since he was young. After earning a Bachelor of Arts degree in Global and International Studies from the University of California, Santa Barbara, and years traveling the world planning and executing cause marketing events, Brett decided to test out his entrepreneurial chops with his own medical supply distribution company.

During the formation of this business, Brett made a handful of simple, avoidable mistakes due to lack of experience and guidance. It was then that Brett realized there was a real, consistent need for a company to support businesses as they start, build and grow. He set his sights on creating Easy Doc Filing — an honest, transparent and simple resource center that takes care of the mundane, yet critical, formation documentation. Brett continues to lead Easy Doc Filing in developing services and partnerships that support and encourage entrepreneurship across all industries.