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Management mistakes

27 February, 2015 - 16:20

Of course, start-ups often make management mistakes in pursuing growth.

A classic first mistake is in the choice of a product or service—and/or even worse, a market—with no potential for growth. The only safeguard against this mistake is to conduct careful market and competitor analysis (See Adding products and services) to estimate the total market potential. This analysis must be complemented by the choice of a strategy for capturing the market with which an assumed market potential can be developed, taking into account the given financial restrictions. A second mistake is the failure to choose one of the aforementioned growth strategies early on. A third mistake is to not recruit competent and professional staff to implement the planned strategies. A fourth mistake is not to align product-market growth strategies with the firm’s other strategies, especially finance, HR, and organizational strategies. A fifth mistake is to choose the wrong finance model. Here, an almost classic mistake is for firms to refinance long-term fixed capital with short-term returns, or with short-term revolving loans. A sixth mistake is to force growth. If growth occurs too rapidly, the firm is in danger of losing sight of the risks involved in the individual activities of the value chain, even when this growth can be financed. Here, continuous development is better than erratic growth (cf. Hutzschenreuter 2001), because it enables management to fill the gaps in their knowledge. We will go into several of these management mistakes in more detail in the following.