5 Mistakes Business Owners Make in the Initial Phase

Learn about the most common reasons why most of the startups fail. 

Alessia Gaspodini   ·   Sep 27 2022

According to the U.S. Small Business Administration's research, over 600,000 new businesses start up annually in the US (in fact, startups employ nearly half of the nation's total workforce). However, statistics show that the 18.4% fail within the first year, and 49.7% falter after 5 years. What are the common mistakes business owners make in the initial phase?

When starting their own businesses, entrepreneurs generally fear failure, losing money, being embarrassed, and being left out. But this doesn’t lead to anything good. Here’s a list of the 5 most common mistakes entrepreneurs make when starting up their new business.


1. Misreading the market
Failure to develop a product that meets the market's needs is one of the reasons why most startups don’t succeed. Listening to the users' issues and meeting their needs must always be a priority. Never ignore what users need, want, and expect. Focus on them!

2. Poor cash flow management
In 2018, 82% of startups that failed, they failed because of cash flow problems. Low profits or, even worse, big losses are the two main reasons for cash flow insufficiency, which might force the new business to ask for additional loans in order to avoid more missed debt repayments. Take care and strategically plan your cash flow in advance. Always be ready to face unexpected expenses!

3. Bad planning and a lack of strategy
Another big mistake to avoid when starting a new business is the lack of a viable business model, which most of the time depends on the lack of flexibility, accountability, and resources. The lack of monitoring and control is also one of the most common mistakes that startups make. Always identify the business objectives and develop a concrete, feasible, long-term strategy to achieve them.

4. No marketing platform
A business can’t survive without a strong marketing strategy. A marketing plan helps startups with a deep understanding of the market, how they can place their product, attract new customers, use advertising to create more demand, create a reputation, and maintain competition. A good, structured marketing platform is critical to success.

5. Facing legal challenges
Regulatory and legal challenges are another big issue that new businesses face in their initial phase. A strong operating agreement, knowledge of tax implications, protection of intellectual property rights, and obtaining the necessary licenses and permits are all crucial.

An important reminder: the first years of your new business are the most crucial.
Almost 70% of startups fail between the second and fifth year. 42% do so because they misread the market demand and 29% due to running out of fundings and poor cash flow management. But it’s important not to ignore any of the points listed above. Are you planning to open your new business or did you already do that? What’s your biggest fear?

More insights about startups worldwide below:


Top countries where to open a business:

United States

Countries with the most startups:
The United States is at the top of the list with 63,703 startups.
India is in the second position with 8,301 startups.
The UK is in third place with 5,377 startups.