The statistics are brutal. More startups are failing faster than ever. In 2023 alone, venture-backed startups failed at a rate not seen in over a decade. What’s happening? The same pitfalls continue: lack of focus, poor financial discipline, and founders who confuse activity with progress.
As I discuss in my book “Guardrailing: Authentically Guide Your Natural Products Company from Spark to Sale,” businesses don’t fail all at once; they fail one poor decision at a time. The key to survival isn’t about working harder—it’s about making the right choices at the right time with the appropriate guardrails in place. Here’s how to avoid the most common mistakes that sink startups before they have a chance to succeed.
1. Chasing Growth Instead of Building a Business
Many startups don’t fail due to slow growth; they fail because they grow too quickly in the wrong direction. I’ve seen companies spend millions on flashy marketing campaigns without first proving they had a product that people genuinely wanted. One founder I worked with was fixated on top-line revenue. He secured a deal with a big-box retailer early on but overlooked one crucial detail: their margins were terrible. Every unit sold resulted in a loss. Within a year, the company collapsed under its own weight.
The solution? Focus on product-market fit before anything else. A strong business isn’t built on hype—it’s built on repeat customers and sustainable margins. Get those right first.
2. The Cash Flow Mirage
The single biggest killer of startups isn’t competition; it’s running out of money. This isn’t always due to a lack of sales. I once worked with a supplement brand that generated $10 million in revenue but was still on the verge of bankruptcy. Why? They lacked cash flow control. Their inventory strategy was chaotic, they offered overly generous payment terms to retailers, and they didn’t realize they were operating at negative margins until it was too late.
Every founder needs to know one thing: revenue is different from cash. Manage your finances early—monitor your burn rate, negotiate better payment terms, and don’t scale faster than your cash flow can support.
3. Too Many Pivots, No Clear Direction
Adaptability is a strength—until it spirals into chaos. I’ve witnessed startups pivot themselves into the ground, changing their product, market, and business model so frequently that they lose all momentum. One SaaS company I advised adopted three different business models in just two years. Each time they switched, they lost customers, depleted investor goodwill, and had to restart their marketing efforts.
The best founders set clear strategic guardrails: What problem are we solving? Who are we solving it for? What makes us different? If a pivot doesn’t align with those answers, it’s just a distraction.
4. Founders Who Won’t Let Go
Sometimes, the biggest bottleneck can be the founder. One natural products startup I worked with had an incredible product and a loyal customer base. Still, the CEO insisted on approving every decision—from hiring to marketing and even social media posts. While he represented the brand, he ultimately became the bottleneck. The company couldn’t scale because no one else had the authority to make significant decisions.
The best founders understand when to take a step back. Build a leadership team that can manage the business independently, without your micromanagement. Otherwise, your startup will struggle to outgrow you, and potential buyers will avoid a company that cannot operate without its founder.
5. Ignoring the Exit Strategy
Many founders establish their businesses without a defined endgame. Eventually, they may feel exhausted and prepared to sell, only to discover they lack what buyers desire: clear financials, scalable systems, and a strong leadership team.
A business should be designed for optionality from day one. Even if you’re not considering selling now, operate as if you might in the future. Strong financials, efficient operations, and a leadership team that isn’t reliant on you will enhance your startup’s value—regardless of whether you sell or not.
The Bottom Line: Guardrails Keep You Alive
The startups that survive and thrive are not always those with the best ideas; they are the ones that avoid obvious pitfalls. They manage cash flow, focus on real customers, and build a company that does not rely on the founder’s constant presence.
If you want to endure, establish the appropriate guardrails. It’s not only about launching a startup—it’s about sustaining it long enough to achieve success.
