5 Preventable Disasters That Have Ruined Countless Startups

5 min read
Opinions expressed by Entrepreneur contributors are their own.

Disasters happen, it’s the natural course of the world. An earthquake may strike unexpectedly, a car may collide with ours or a fire may destroy our homes. Most of these disasters are unexpected, unpredictable and random, and are therefore unpreventable. When they happen, it’s tragic, but at some point you have to accept the fact that they happened and move on.

There are some disasters in the business world with similar characteristics: they strike randomly, unexpectedly and can dismantle a business before you even know what’s going on. But most business disasters are the opposite -- they are predictable and completely preventable, yet they have still ruined countless startups with otherwise promising potential.

Related: Full Speed Ahead? The 7 'Icebergs' That Sink Most Startups.

Allowing your business to succumb to one of these entirely preventable fates will lead to regret. Don’t let these preventable disasters happen to you:

1. Having your intellectual property stolen

Let’s say you have a product that nobody else is producing, and you’re desperate to get it to the market. You might forgo the traditional trademarking process in favor of establishing the groundwork for your production capacity. Or maybe you have a signature process you use in your core service, which you end up disclosing to a potential partner without a non-disclosure agreement -- because what’s the worst that could happen? A competitor can steal your product design. Your partner can sell your unique process to another interested company. And you could be left with nothing that makes your business unique.

It’s easy to get excited about your business and rush into the early stages of full operations, but you have to protect yourself. Do your research ahead of time, register your business name, trademark your products whenever you can and protect your intellectual property with NDAs.

2. Using someone else’s intellectual property

There is, of course, a flip side to this. If you use someone else’s intellectual property without their consent, you could become the subject of a lawsuit. If the lawsuit doesn’t bankrupt your company immediately, the lengthy trial process and bad publicity might be enough to bury your business before you even have a chance to get started.

Of course, most cases of intellectual property misuse aren’t intentional. It could be that you chose a name for your company that happened to be taken already, or you used an image that you thought was free to use. Before you use anything for profit, be sure you do your research in advance. It could save your business.

3. Running out of capital

If your company isn’t profitable or if your idea isn’t as marketable as it seemed on paper, that’s one thing, but running out of capital is an entirely preventable disaster. Your working capital is the blood that keeps your business running. If it runs dry, you won’t be able to pay your bills, or your employees for that matter. It’s entirely possible to have a functional, profitable business and still run out of capital because you weren’t prepared.

Related: 15 Tips to Prepare for Security Threats Big and Small

To prevent this, guard your cash flow carefully. Establish firm payment terms, run background checks on your clients and use best practices to ensure your cash flow stays positive. Then, if it ever looks like you’re remotely close to danger, secure more funding or a line of credit to help you close that gap.

4. Getting outcompeted

Most cases of a business being outcompeted are completely preventable. Either an existing business proves to be too formidable to take on, your business idea wasn’t unique enough to stand on its own, or a new competitor emerged to compete with you in a new way. All of these scenarios can be avoided by doing more research, responding more quickly or some combination of the two.

Keep a close eye on your competition at all times and respond accordingly as quickly as possible.

5. Losing your core team

Your team is what drives your business forward, and in the early stages of your startup, you might only have a few employees. If they all leave, you might be forced to close up shop for good.

You can prevent this disaster in a few ways. First, be more thorough in your hiring process to eliminate volatile workers. Second, implement morale boosters to keep your employees happy. Finally, set up some level of redundancy, a backup plan, to kick in should any one of your team members decide to leave.

Take action now to ensure none of these disasters strikes your company. With a handful of simple preparatory measures, you can equip yourself to not only fend off these impending calamities, but also mitigate their effects should they ever inch toward manifestation. You’ll never be able to prepare for everything, but the more you can prepare for, the better chances you’ll have at long-term success.

Related: What 9 Successful Entrepreneurs Wish They Had Done Differently

More from Entrepreneur
Entrepreneur Select: A Fund For Entrepreneurs, By Entrepreneurs

Entrepreneurs require more than just money, which is why we aim to empower you, as well as act as a catalyst for value creation.

Make sure you’re covered if an employee gets injured at work by
  • Providing us with basic information about your business
  • Verifying details about your business with one of our specialists
  • Speaking with an agent who is specifically suited to insure your business
Try a risk-free trial of Entrepreneur’s BIZ PLANNING PLUS powered by LivePlan for 60 days:
  • Get step-by-step guidance for writing your plan
  • Gain inspiration from 500+ sample plans
  • Utilize business and legal templates
  • And much more

Latest on Entrepreneur