8 Common Startup Pitfalls and How to Avoid Them

Working as a startup founder can sometimes feel like you’re walking through quicksand. Each time you think you have a foothold on a problem, another hole opens, and you sink deeper. Even founders with successful businesses can face stumbling blocks and make mistakes.

Fortunately, these mistakes don’t have to be detrimental. No founder is perfect, and you can build a resilient company that overcomes anything. Check out these eight common startup pitfalls that you can avoid with a little planning and know-how.

Choosing the Wrong Funding Plan

Startup founders have multiple options when it comes to funding. Some small businesses qualify for SBA loans which allow them to finance growth in the early stages.

Many businesses (as high as 34% by some estimates) choose to bootstrap their startup costs. Bootstrapping is the process of growing your business with no venture capital and relying solely on your own income.

Every company operates differently, which means certain funding options may be right or wrong for you. Some founders prefer to bootstrap so they can control their business, while others don’t have that luxury.

The best way to secure funding for your startup is to work with investors or lenders who are familiar with your business type or industry. They will understand startup pains and work to give you a fair rate and payment timeline that you can work with.

Throwing Money at Problems

One of the biggest pitfalls that startups face after funding is overspending. They rent a massive office space, hire a few dozen employees, and spend like they never have to pay the money back. It isn’t common for founders to throw money at problems, buying expensive tools or hiring people whenever there is an issue.

However, this is a big mistake. Not spending strategically will cause your startup to blow through your funding and run out of money before you ever start making any – leaving you scrambling to cut back or go out of business.

Managing Your Budget Too Frugally

On the other side of the coin, you have business owners who are too frugal in everything they do. They don’t spend money on software tools or marketing opportunities because of the expense, they don’t provide perks to employees as a way to recruit top talent, and they never pay more than the bare minimum. The goal behind these startups is to spend as little as possible to maximize profits, but that can actually hold a business back.

Make sure you have a balance between what you spend and what you save on. Both your customers and employees will know when you’re tying the purse strings too tightly, and both parties will leave your business because of it.

Scaling Too Quickly


Scaling is the kiss of death for many startups. They taste success, demand starts to grow, and then the company hires a dozen new employees to keep up with the work. Unfortunately, scaling quickly comes with its own problems – most notably, added expenses.

As you grow, so does your expenses, which starts cutting into the company’s profit margins. New employees cost money, bulk ordering supplies creates inventory management expenses, and more customers mean more customer service costs.

Scaling comes with risks. What happens when your biggest client pulls out and suddenly you have a surplus of inventory or workers?

It is better to scale slowly and take on jobs you can handle than to grow too quickly. Your employees will thank you when they’re not laid off because you lost a customer.

Failing to Understand the Market

A few years ago, cupcake shops became all the rage. Cupcake stores across the country opened each week and some even went public. Then the novelty wore off and many of these stores went out of business – or adapted to sell other baked goods. This was known as the Cupcake Bubble.

Knowing the market is essential for startups. You need to know the prices the market demands and what people want from your industry. If you don’t, you risk setting your startup to fail. If there is a market for your startup, it’s critical that you understand it and the nuances that affect it.

Limiting Delegation

Founder burnout is a real issue in the startup world. Many founders and CEOs feel pressure to get up early and work late to keep their business going. They worry that if they stop or let go, then everything they have worked for will crumble.

The fact is, people do better when they work less than 50 hours per week. Studies have shown that productivity plummets when you push on and work more. Plus, employees (and startup founders) work 21% harder when they feel like they have a good work-life balance.

If you want your startup to be around for a long time, then you need to delegate and take unnecessary tasks off your plate.

Creating Side Ventures

The creation of side ventures and other businesses also goes hand-in-hand with delegating and work-life balance. Some startup founders claim to be “serial entrepreneurs” who come up with new ideas and start businesses constantly. This is a great way to bring on burnout and exhaustion while limiting the success of your ventures.

Additionally, some startup managers start side ventures as a way to help their struggling companies. They think if their side businesses are profitable, they can funnel the profits to prop up their main company in the short run. This simply doesn’t work.

Avoiding Mentorship 

You don’t have to do it on your own. There are thousands of founders who have been in your shoes and are willing to help you overcome your obstacles. The majority of companies that break out as top performers in their industries are led by founders who work closely with mentors. Mentors push you to do more while helping you look at problems in unique ways. It is not weak to ask for help.

Additionally, there is one more startup pitfall that many founders experience: the fear of failure. Too many CEOs avoid risk to the point where they never grow into the great company that they could be. If you are prepared to take calculated risks as you enter the world of startup management, then you can see your business thrive.

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Christine Soeun Choihttps://fitsmallbusiness.com/
Christine Soeun Choi is a digital marketing associate at Fit Small Business. Currently based in NYC, she has a background in business studies and math with a passion for business development. Outside of work, Christine enjoys traveling and exploring art.

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