5 Practical Tips on Reducing Startup Failure Risks

This question must be in every entrepreneur’s mind: How to reduce my startup’s failure risks? It’s a common question popping out of your mind (if this is not on your mind, well, it should!) and it’s the number one concern of every entrepreneur. Well, no worries – because from this blog post I would like to offer you some practical tips on how to reduce your startup failure risks.

startup failure

We do know that startups are prone to failure. It’s a no brainer. Let alone making your startup a success, starting one is really difficult as you are against all odds and fight with the giants days in and days out. During your startup’s first year, surviving is your main objective, while thriving is a bonus. Getting fundingĀ  from venture debt firms can help ease the growing pains, but still, how you use your debt is all that matters.

But don’t falter! Given you have a product your target market wants, startup success is a matter of identifying risks and manage them well.

Want some tips? Let’s get down to business, shall we?

1. Don’t compete in the “who works less” game!

If you can follow Tim Ferriss’ footsteps by working only four hours a week, that’s good for you! But don’t lull yourself into believing that success is measured by how little you work for your business.

I made this mistake and I learned the hard way.

I always admire business owners and investors who generate passive income. They work very little and instead of working for money, they have money working for them. While pursuing this is recommended (not working for money and find leverages which can empower your money to work for you, instead,) getting caught in the “who work less” game is very dangerous.


Well, playing in the ‘game’ will create a new mindset for you: “Regardless of quality, I will focus on working less and improve my per-hour income.” Then you’ll start to compromise quality; you’ll produce less-than-stellar services and products – because you want that less hour. You’ll then respond to less email, because replying on most emails on timely manner means work and, again, you want that less hour. You’ll then delegate to systems and people as much as you can, because, again, you want that less hour.

While the above should be pursued, as having a business which runs well with or without you will give you time to pursue other business opportunities, have more personal/family time and so on. But losing your real focus of developing your business will bring your business down, eventually.

What’s good with plenty of time for your non-business endeavours but run a broken business?

Again, when you want to be more effective and efficient, don’t focus on the game, but on the outcome. Quite simply, if the outcome is not good (e.g. declining sales, losing clients, etc.), then stop doing it.

Keep on working hard while pursuing ways to work smart… your startup needs you!

2. Always double your startup capital requirements from your calculations

This is the advice I take from a relative of mine who has been involved in many startups – including a couple of his own: Calculate your capital needs, and double that figure – that’s your startup capital requirements.

So, if you have done your home work and come up with $20,000 startup capital required to get your startups launched, make that $40,000. This might be excessive but it’s better than running out of money to run your startup.

The figure can varies, but the idea is to always have room in your budget for ‘miscalculations’ – items and costs you forgot to add in your plan; ‘surprises’ or miscalculations in your startup phase; and so on.

3. Always plan and prepare for the worst

Akira Hirai, Founder and CEO of Cayenne Consulting, wrote a great piece of article on how to identify startup risks and how to mitigate them. He wrote: “While risk is an integral part of entrepreneurship, it doesn’t have to get the better of you. Great entrepreneurs achieve success through keen awareness and management of risks.”

Indeed, in order to improve your startup success rate, you need to be aware of potential failure risks and make a great effort to manage them. And yes, when things go wrong, make sure you have a Plan B.

I’m not a big fan of no-plan-B. Although I believe that “do or die” – or in entrepreneurship case, “succeed or die” – will motivate you to be successful, having a plan B will always give a safety net or an exit strategy for you; a cushion to fall upon; an “eject button” to push when things are getting out of your hands… so when you fail, you can fail fast; you can pick up the pieces and move on at record speed.

4. Implement 80/20 rule and solve productivity issues via hiring, outsourcing and delegating

If you are a bootstrapper like me, you are used to wear many hats: Marketing, business development, back office ops, product design, etc. But there will be a time when you wear too many hats.

You will know when that happens: You feel that you stressed out; you feel that 24 hours is not enough; you are becoming temperamental and anxiety attacks you now and then. When that happens, stop doing what you are doing for a while and start evaluating.

Do adopt Pareto Principle or 80/20 rule; it will help you evaluate what’s important for your startup survivability and what’s not. Focus on the top 20 percent of biz activities which bring 80 percent of income for your business. When an activity is important but not directly impacting your startup’s bottom line, then I think it’s time to delegate by hiring someone to do it for you.

The idea of hiring is for your employee to take care the “necessary evils” so that you can focus on how to grow your business. Outsourcing can be a great way to spend your budget to hire someone who is willing to do what you are requested to do the uninteresting-but-important works for you.

5. Focus your resources on sales and marketing

Again, this tip comes out from the horse’s mouth: The number one mistake entrepreneurs do when their startups are cash-strapped is to cut their marketing budget, and eventually, their sales and marketing efforts.

The question is this: If you don’t get the words out about your products/services, how on earth can you sell them?

In my opinion, it’s okay if you bootstrap your marketing efforts, given you have the knowledge on how to get it done at the lowest costs possible. But if you don’t, it’s better to allocate a strong budget on marketing. Of course, this is my personal opinion. Do consult about this with an expert consultant.

A client of mine was ruining his website because he built the site himself, ground up, using a WYSIWYG (what-you-see-is-what-you-get) software. While the software is good, it didn’t produce flawless coding, which makes editing the site difficult and it’s more difficult for search engines to index the site’s pages. His off-site search engine marketing efforts are wasted due to this issue. Furthermore, he doesn’t have a good sense of web design (seriously, he said this himself!) making the site less appealing to potential clients.

My advice: With all the pros and cons, if you still think DIY is the way to go for you, be sure to choose quality tools to help you out. If you can’t find any or if such tools are non-existent, invest in a good service provider to help you out in your marketing, website building, etc.


Want more tips on how to manage, even reduce, your startup failure risks? Here’s a list for you:


Remember: “Just do it” is a typical advice for entrepreneurs, but it’s probably not the best one for everybody.

I always insist that if you are looking for ways to reduce risks of startup failure, you should start with a good business plan – and start planning and managing the risks.

Be sure that you should always aim for failing fast – this way, the impact of losses is not that significant; you can restart quickly.

Good luck in starting up better!

Ivan Widjaya
Founder/Editor BizPenguin.com