When it comes to entrepreneurship, Wade mentor Marcus Powe has been around the traps. He’s also seen entrepreneurs trip up on said traps, time and time again.
From founding and managing organisations across a range of industries such as textiles, IT, education, science and tourism to advising boards, senior decision-makers and governments about entrepreneurship and innovation, Marcus brings extensive experience to Wade Institute.
In his time mentoring emerging entrepreneurs he’s seen them face many of the same barriers to success, which can undoubtedly prevent any startup from getting off the ground. Barriers he calls ‘the 10 fatal flaws of entrepreneurship’.
We sat down with Marcus to learn these 10 fatal flaws and how entrepreneurs can avoid succumbing to them.
1. The market – is there one? Are you sure?
If the market is too small, or doesn’t even exist, then the product or innovation will fail. According to Marcus, you can have an amazing idea but if there isn’t a substantial market for that idea then it will never go anywhere, and it’s back to the drawing board for you.
2. Cost of entry
How much does it cost you to get your product or service to market? High cost of entry is a significant barrier for many startups, says Marcus. An idea needs significant financial backing in order to overcome cost of entry, and entrepreneurs need to be prepared for this. Do your numbers.
3. Overwhelming competition
If you have developed a product that has a market then there is bound to be competition. If that competition is too strong or you fail to consider that competition – including what their products are and their pricing – then Marcus says your startup will succumb to this fatal flaw. Make sure you’re well across what’s out there and what they’re up to.
4. Price control
There are many government regulations and market forces that will limit your business’ ability to control its prices. A startup needs to be able to navigate these barriers and maintain some hold over its pricing model, according to Marcus. A startup which has absolutely zero control over its prices is more likely to fail.
5. Controlling product development
Some businesses struggle to gain control of product development and the consequences can be lethal. You need to be proactive and ensure your products and services can change to meet customer demands. Startups that can’t manage this quickly become irrelevant to the market.
6. Controlling distribution
There seems to be a theme of control developing, and for good reason. Once again, Marcus emphasises the importance of being able to manage the distribution process of your product or service. If government regulations or other barriers are too great and you relinquish all control over distribution, your startup will fail.
7. Your plan to expand
Every startup must have the ability to expand its offering beyond one product or service. As Marcus puts it: “There exists no single company that focuses solely on one product or service. Apple, Amazon, Netflix… you name it! Any successful company has numerous products and services. If you can’t expand your idea, your startup won’t succeed.”
It may be the most obvious flaw in the book, we all know you need money to grow. Marcus says many startups fail because they are unable to raise the finances they need to see their idea through. However, this can be because entrepreneurs don’t know how to sell their idea, or who to sell it to. Marcus’ advice? Get familiar with the investor landscape and perfect your pitch.
9. Harvesting opportunities
According to Marcus, investors want to see ‘harvesting opportunities’ or evidence to support your claim that they can profit from your startup. Startups with limited harvesting opportunities (or those who cannot effectively communicate the financial gain for investors) make for unattractive investment opportunities, and will fail to raise funding. Again, know your numbers, says Marcus.
10. The team
Last, but certainly not least, the team is crucial to the success of a startup. Marcus says, “More than anything, venture capitalists are investing in the team because they believe those people can and will grow a successful business.” It’s vital to ensure you have the right people around you.
Marcus’ ultimate tip?
Separate your idea from your ego. You need to be able to receive constructive criticism and accept that if your idea encounters one of these fatal flaws then it’s time to set it aside, and start again.
The University of Melbourne’s Master of Entrepreneurship is designed to support the development of new businesses, products, services, or processes, creating value and generating new revenue growth through entrepreneurial thought and action. The program is co-delivered by the University of Melbourne and Wade Institute of Entrepreneurship. Learn more or enquire now.