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There are three mistakes that, if a software startup makes, will cause certain failure. As an entrepreneur with a few companies under my belt I have made all of them, even in the same company. So I can tell you from experience, any of these will take you down.
1. Stupid Hiring - Friends and family make terrible employees, unless you're extremely lucky or have the kinds of friends and family relationships that can withstand contract execution. Hiring family members to do things like answer the phone might work, but for the stuff you need to get your company profitable like software development, sales, and business management, don't do it. You'll have some difficult decisions to make as it is. The ability to hire AND fire well is a skill you'll have to develop and firing friends and family just doesn't go well. Again, unless you're either extremely lucky or have a such a superb repiore with your buddies and siblings, making tough business decisions just doesn't go well.
On the same note, another stupid hiring decision you don't want to make is hiring inexperienced developers for your critical project. Yes, if you can bring in an intern from the local university. It could work out if the intern is ambitious, highly skilled, and humble (hard to find in a college student). You'll need a developer on staff who can mentor the intern, or you'll just waste a ton of time training someone that doesn't produce anything for your company. Your time is too valuable in the early days to spend bringing someone up to speed on critical functions. Stick with experienced software developers who have shipped software on a critical schedule. Make sure that they left their past bosses and managers happy. They will cost more (much more sometimes) but they are worth every penny.
2. Trying to Look Bigger Than You Are - As with Stupid Hiring, many software (and non-software) startups have fallen into the trap of trying to look like a big company. The thinking goes like this: no one would take a one or two-man show seriously. Well, it depends on who you're trying to reach. Selling software to a large corporation may require manpower resources that you don't have. Larger companies are averse to taking risks with critical software purchases and if you look too small they will likely pass you over. However, I have sold some serious enterprise-level software to a large organization, when we only had two people total. We were the only company that had this software for one thing. We also a partnership with another company to provide support. The latter was critical. We never would have sold that software without a strong support partnership. It is stupid to take on a project that will fail. While there's nothing wrong with stretching yourself and your resources to land a big fish, trying to do the impossible just doesn't make sense.
Also, building a big corporate looking website with 3-5 pages total is stupid as well. It looks shallow. Using the words "we" and "us" all over the place will just make you look like you're trying to be deceitful. Nobody believes that there is a "we" or an "us" when there is only a "you" trying to build a company as a side job. It just blows your credibility, and is more likely to keep you small by scaring away the real customers who would want your product. Besides, someone from a large company might recommend you to a friend or a smaller subsidiary company, so long as the website doesn't blow it trying to seem like something it isn't.
Don't waste your money trying to look big. Be professional, yes, but anybody who cares how "big" you are will be more trouble than they're worth. Trust me on this: there are some customers you just don't want. I may write about that later.
3. Forgetting to Make Money - This is a biggie. Yes, you're trying to change the world, save the whales, or make an Impact on Society. But if you forget to be profitable you fail. This will sound pretty harsh, but it's true and you might as well understand it sooner rather than later: nobody, nobody cares what your goal in life is (except for your Mom). We all care about what's in it for us. Period. And if you forget that you'll struggle to make a profit. Creating a software startup can be about many different things besides making a profit: these are your personal or company goals. But your company had better be about earning more revenue than it spends or it will cease to exist.
There are so many hobbyists hoping to sell some software package that they created. Some of that software is quite useful, attractive, and well designed. But the developer will have to invest some resources (time, money, or both) into marketing and selling that software package. I've talked to many many software entrepreneurs who have built great products that haven't made a dime. When I ask them the fundamental question, "who's your customer?", they balk and cannot answer. Most of them have never even considered the question, and few even try to answer the question. They just go back to tinkering with their creation; perfecting this genius product that will never ever make them a penny. Don't do this. (listen to episode 3 of our podcast at our website "Ship It On the Side" for more on "who is your customer").
Learn how to market and sell. It is absolutely fundamental. Learn how to give a presentation. Learn to be persuasive. Acquiring the art of persuasion will help you to build a team of enthusiastic customers and employees. With it you'll grow your company, and if you get good, you'll grow it fast.
So don't make these three mistakes. You've been warned. Ignoring this advice will likely cost you your company.
Be smart!
Curtis Gray is a software developer and serial entrepreneur. He writes primarily for "Ship It On the Side" on topics relating to creating a software startup as a side job. Visit http://ShipItOnTheSide.com for more on creating a software startup.
His company is building FlowerPot - easy, no nonsense, online sales software for small and very small business. They will invite select business owners to test-drive the software while it is tweaked to perfection.
Request an invitation from http://GetFlowerpot.com
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