7 early warning signs startups should watch out for

“The only thing worse than starting something and failing is not starting something.” Seth Godin

You’ve probably heard talk of startups pivoting. Conventional wisdom is that among the reasons for startups to effect a change of direction is an acknowledgement that things may not be going quite to plan. The question for the startup founder is when should that realization set in? Let us look at seven early warning signs you should pay attention to – the fat lady may not be signing just yet but chances are she’s waiting in the wings clearing her throat.

1. Stuck on the sales plateau: The initial wins came easily enough – your immediate network and references liked what they heard from you and signed up but over the last few quarters it seems like new customers are getting harder and harder to find. Another version of this malaise is the loss of older customers through the revolving door at the same rate as the entry of new customers. The net impact is a monthly billing figure that refuses to shift into higher gear.
2. At someone else’s party: Your startup seeks to address a genuine enough customer pain point but it seems like everyone else is talking about another, cooler way to address the problem. This is probably what podcasting startup Odeo went through when most potential customers warmed to newly launched iTunes for their podcast needs. It may be time to move on or like Odeo reincarnate as Twitter!
3. Mystery shopper: Arthur Schopenhauer said, “Genius hits a target no one else can see,” but he probably did not intend for the easily influenced startup to lose sight of their target customer. It’s hard to see this as a problem sometimes – the revenue is coming in isn’t it? The issue is if you don’t know why customers are buying what you have to offer or worse if you don’t even know exactly who your customers are, it’s a fair assumption you won’t know what to do when they stop buying.
4. Difficult delivery: Does it seem like you’re spending more and more time dealing with irate customers upset at not getting what they expected from you? A steadily increasing rate of customer reported issues or an un-arrested downward trend in customer satisfaction is a sure sign that your startup is unable to walk the talk. It’s probably time for a long hard look at whether you are doing all you can to meet the expectations of your customers – if you’re doing all you can and still falling short then it may be time for some hard decisions.
5. Can’t hire, can’t keep: If you are unable to convince potential new hires of the viability of your vision and at the same time are also losing those who bought into that vision early in the piece then something has gone seriously wrong either with the vision or with your execution. Soon enough all manners of unsavoury things are likely to follow – like Joe Krauss of Google Ventures said, “The cost of hiring someone bad is so much greater than missing out on someone good.”
6. No interest to invest: Author Robert A Rice Jr. Says, “An entrepreneur without funding is like a musician without an instrument.” While not all startups will agree, most will concede that at some time or the other they have made the pitch to potential investors – money in the bank never hurt anybody. While making those pitches if you are unable to capture or sustain the attention of investor after investor then it may be a hint worth taking about the long term viability or growth potential of your business.
7. Monday blues: This is very personal – the fuel that startups run on is passion and the founder has to contribute more than most. If you as the founder find yourself dreading Monday morning and the return to the grind then it’s a message from your subconscious – you’re probably not enjoying it as much as you should. A drop in your personal motivation will communicate itself to the rest of the outfit soon enough and this is a downward spiral that can be hard to bail out from.

There is a lot of research out there on why startups fail and several surveys and reports that clearly identify the reason these bright sparks faded out. Don’t be a statistic – pay heed to these early warning signs and ensure your baby stays healthy and lives long!

About the author:

Rashmi Khurana, executive director at Clarion Venture Partners. Rashmi’s specific role is that of a Venture Evangelist. She is focused on identifying Technologies and Entrepreneurs with potential, engaging them and helping them get started.