For startups, the difference between failure and success can be a fine line. From your product and team to acquiring funding and business model, there are many areas where things might go awry. However, when boiled down, the most pressure rides on the ability to start generating revenue quickly.

If your company isn’t hitting your revenue goals yet, it could be for a variety of reasons. Here are a few common ones and how you can avoid them.

Product Issues

If something is off with your product, pricing, or marketing strategy, making revenue will likely be an uphill battle.

Is Your Product Viable?

A viable product is one that fills a core need at the right cost for the end-user. Testing your minimum viable product (MVP) should give you an idea as to whether or not there is a need for your product. If there seems to be a need, but your product isn’t selling, you may have a pricing issue.

Is Your MVP Really Viable?

Pricing is Off

Rather than looking at the current market for pricing, the best way to price your product is to work backward. If you’re going off of what everyone else is doing, you’re missing a major point – the number that should make your company profitable. So, how do you get there? We need to determine the minimum gross revenue.

For simplicity’s sake, we’ll use the following formula:

(Business Expenses + Total Salary) / (1 – Tax Liability Percentage) = Minimum Gross Revenue

Where,

Business Expenses = Things like rent, loans, payroll, software, etc.

Total Salary = Your desired salary, if you choose to take one

Tax Liability Percentage = The percentage of your business that will go to paying taxes as a decimal

Once you know what your minimum gross revenue is, you can work from there to figure out how to structure your pricing to work towards profitability.

Haven’t Found the Right Customer

If you’ve achieved the right product/market fit, it will be pretty obvious – you’ll have a steady demand for your product. If you’re having issues with acquiring and retaining customers, it could be that you aren’t targeting the right audience yet.

The right customer is the person whose problem your product solves. If your current target isn’t biting, it’s time to rethink your target persona. One way to do this is to see who of your current customers already love your product. Check your social media mentions, review past emails, and see if you can learn more about those people and how they use your product. Once you’ve got a better idea of who this user is, you can better tailor your product to meet their needs.

Finding Your Product/Market Fit

Structural Issues

Outside your product, issues with your overall business structure may also be negatively affecting your bottom line.

Raised Too Early

Startups need money to grow; that’s just a fact of life. However, if you start raising money too soon, it can be easy to lose sight of your end goal – generating revenue. Once you can prove that your product can generate revenue, the better off your business will be, and it improves the chances that investors will take you seriously.

Once your product has some traction, you can begin to outline your funding strategy. Efficiency is key here – raise too little and you’ll have to raise again sooner than anticipated, raising too much can lead to greater dilution or a down round the next time you raise. If bootstrapping is an option, we would recommend doing that before going after outside investors.

First-time Startup Funding Mistakes to Avoid

Invested in Growth Prematurely

As a founder, your company is likely your pride and joy. You’ve probably daydreamed about your office, what your online presence will look like, having a killer app, what kind of swag you want, what kind of leadership you want to bring on. While it’s great to have a vision for these things, this is a classic case of putting the cart before the horse. Yes, all of these things can make you seem more legitimate as a business; however, if you don’t have revenue first, these may be unnecessary expenses that can detract from your path towards revenue.

Failed to Track Cash Flow & Income

There’s no way to know how your business is performing if you’re not tracking metrics consistently. Ideally, you set a time to update your cash flow and income statements on a weekly basis and stick to that schedule. If you’re doing this consistently, it’s much easier to course-correct than if you’ve left it on the backburner.

Turning the Ship Around

Startups are risky, and if your business is experiencing any of these issues, you’re certainly not alone! If you’re experiencing issues generating revenue, use these points to examine your product and business critically. A practical approach and an open mind can generally solve most problems.