Beginner Bad Habits

To keep yourself and your startup afloat, dodge these three dead zones.
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This story appears in the March 2009 issue of Entrepreneur. Subscribe »

You can't avoid every hurdle along the startup path, but you can keep yourself afloat by steering clear of these tendencies:

  1. Undercapitalization: "I always hear lack of capital is the root cause of failure for startups," says Alex Avendano, co-founder of Solid Foundation LLC, an action-oriented think tank and management team for entrepreneurs. Avendano advises aspiring entrepreneurs to do a careful cost analysis by talking to others in the industry and considering all costs, including hidden ones. Then double that estimate and prepare for two years without any revenue. Is money short? Look into starting a business that requires a minimal investment.
  2. Choosing the wrong business partner: Attorney Joy R. Butler has frequently been contacted by entrepreneurs whose business partnerships have imploded. How to avoid this? "Make an honest assessment of what you want from the working relationship," she advises. "Discuss expectations candidly with your prospective partners. Put your agreement in writing--ideally with the assistance of a qualified attorney."
  3. Focusing too much energy on one client or partner: Avi Karnani, co-founder with Ori Schnaps, 33, of Thrive, a personal finance company in New York City backed by nearly $2 million in funding, remembers the extensive efforts they undertook to woo one large company. "In the end, we wasted capital and three precious months, served the team an unnecessary defeat and, in doing so, made our own [office] culture more hesitant to take risks, which took another year to overcome," says Karnani, 27. They now set monthly and quarterly targets that they track on a weekly basis and make sure potential partners put "some political or monetary skin in the game."

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