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Here's What Entrepreneurs Should Not Do While Starting up 'A common mistake founders make after a round of funding is to start hiring people even before calculating the budget'

By Komal Nathani

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Over 90 per cent startups fail every year in India, a country well recognized for being the third largest ecosystem in the world.

Lack of innovation, non-availability of skilled workforce, insufficient funding and lack of unique ideas are reasons widely known and established. The pertinent question, however, is how to cut down on risk factors of these enterprises.

As much as we focus on the tips to succeed, it's equally important to mull over the reasons of failure.

Out of a number of mistakes that entrepreneurs make, here's a list of six that could ruin your startup:

Think Before Getting on a Hiring Spree

Founders should tread cautiously while hiring and constantly monitor his/her company's growth to ensure that the human resource is proportional to the size of the firm and the problem of plenty never arise.

"A common mistake founders make after a round of funding is to start hiring people even before calculating the budget. At times, this move backfires," stated Subramanya SV, Co-founder of Fisdom.

Subramanya explained that an increase in headcount can sometimes cause unnecessary cash burn. "Often founders try to justify recruitment with the work load. And to balance the cash burn with revenue, founders invest in marketing gimmicks with the hope of doubling the earnings. In the process, the cash flow dries up quicker than anticipated," he added.

Inability to Procure Funds

Sometimes to expand business overnight, startups spend unnecessarily without having a monetization plan in place. This results in high debts.

"Procurement of funds is very important, no matter what stage the business is in and for startups it's the most important thing they should focus on," said MiStay Co-founder Sandeep Jaiswal. Business owners must realize that funds fuel business growth and it could be used at any point of time. Therefore, startups should always focus on funding.

Wrong-time Expansion

"Most startups fail to make market-fit products. Setting up a lucrative business out of customer needs is what most of them should learn," said Manish Lunia, Co-founder of FlexiLoans. Entrepreneurs often stumble in assessing the market needs of a product and the right time to launch it in the market. A thorough market research will help founders understand the business and the trends.

They should be innovative enough to come up with a clear business proposition and not remain trapped in customer acquisition gimmicks.

Too Many Steps at a Time

A famous Chinese proverb says, "To get through the hardest journey, we need to take only one step at a time, but we must keep on stepping." Too many steps at a time can lead to loss of focus and clarity on the goals," said Gaurav Goel, Co-founder Research and Ranking. Goel explained that at times startups think that they would be able to do multi-tasking by taking too many major steps at a time. But eventually they fail.

Bankruptcy of Ideas

One of the fundamental reasons, especially among the struggling tech-startups, is lack of understanding of the real business needs. They have a habit of chasing solutions looking for a problem rather than the other way round, said Vivek Malhotra, Co-founder, 4tigo. You cannot export or import the same business model that you have seen in US, or in any other country. People's needs in every country are different, and a startup should keep this in mind, he added.

Unable to Identify the Market Gap

Startups dominate the market share only when these are able to identify the gap in the need and supply. Flipkart and Paytm could detect the prevalent gap at the right time and thus emerged as the first movers in the e-commerce and electronic payments space respectively.

Komal Nathani

Former Correspondent, Entrepreneur Asia Pacific

A firm believer of hard work and patience. Love to cover stories that hold a potential to change the momentum of business world. Currently, a part of all-women web team of Entrepreneur’s Asia Pacific edition to jig the wheel of business journalism!

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