How Hasty Decisions Can Ruin a Startup

How Hasty Decisions Can Ruin a Startup

The startup concept has reached an almost mythical status in the Western culture. The smartest people you can imagine get together to work on the most brilliant idea you have ever heard of. Then, they work tirelessly for 20 hours a day, making their vision come to life. They jump from one funding round to another, they hire new people, they start doing marketing, they pivot, they struggle…

This mythical startup ecosystem almost invariably includes decisions that are made on the spot and that are never wrong, always finding new ways for this feisty little company to survive and become better.

In reality, things are much different. Like in any other business ecosystem, hasty and careless decisions most often spell doom for startups. Considering how many people still believe the former Tale of the Feisty Agile Startup, we feel there is a need to dispel some myths and point out the different ways in which hasty decisions can ruin startups.

Rushing the Money Decisions

As much as we like to think of a startup’s life in terms of innovation, product and interaction with customers, the reality is much more business-like, meaning that it all comes down to money, sooner or later.

Startup founders often rush money decisions in order to get the whole project off the ground. For example, they will accept all kinds of terms set by the potential investors, handing over too much equity in their future endeavour. In later funding rounds, they will dilute the stock too much, thinking only in terms of the funds they can get to keep the whole machine churning.

Even when they go the different path and they start dealing with more traditional business loans, startups often make mistakes. For instance, they will go for a major loan long before they are ready for it and when they might be more suitable for a bridging loan (read more about bridging loans in this article by ALC Commercial), or a online installment loans instant approval over a large bank loan.

All money decisions have to be made only after long and meticulous consideration. Moreover, it is always a good idea to talk to a financial consultant of some kind before getting into any financial deals that might affect the future of the startup.

Hiring and Firing Erratically

As little financial knowledge as startup founders usually have, they understand even less about the matters that pertain to human resources, i.e. hiring, engaging the employees and preventing turnover. More often than not, startups tend to handle these matters as an afterthought and it is not uncommon for hiring and firing decisions to be made on the spot, hastily.

To someone who has never been in a situation to run a business of any kind, this may not seem as too big of an issue. So, you hire the wrong person, so what?

Well, for a startup, bad hiring and firing decisions can have dramatic negative effects on the future of the company and the way it does business. Startups hire rarely and if they handle this in a hurry, they get burdened with employees who have no idea what they are doing and who will take months before they become productive. No startup in the world can afford months of paying someone for a job that doesn’t get done.

It is even more harmful when startups get rid of people in a hurry, often over matters that can be tolerated (at least to a certain extent). When startups lose a long-time employee, they do not simply lose a worker – they lose someone who knows the company from the inside out and who knows the innumerable idiosyncrasies that make every startup a somewhat closed-off and impenetrable ecosystem to “outsiders”.

Pivoting at a Moment’s Notice

Pivoting is one of those concepts that have been devalued and perhaps even bastardised by pure insistence on them. Before people learn the basics of running a startup, they get all entranced by the concept of pivoting and switching lanes at the first sign of trouble.

We can point fingers until they fall off, but the fact is that many startups tend to be far too hasty in retooling their entire existence just because it sounds cool to say that your startup decided to pivot.

This is where startups can learn from the more traditional small businesses. Small businesses are masters in survival and grinding it out. A small business cannot pivot. A tiny car dealership cannot decide to start selling space shuttles. An accountancy practice cannot decide to start doing massages (they could, theoretically but they would stop being an accountancy practice).

They find ways to refine the original recipe before they call quits. They modify the way in which they operate before they decide to shut it all down.

Quite often, startups will have far more chance to succeed if they did the same instead of rushing into unnecessary and rarely successful pivots.

Closing Word

There are times when it pays off for startups to make quick decisions and take advantage of a particular moment. That being said, there are far more situations where it will be a better idea to take pause and analyse the situation.

Hasty decisions can spell doom for startups and it is best to avoid them altogether.