5 Costly Mistakes Your Tech Business Might Be Making Right Now
Finding success in the tech world can be a major challenge, despite big audiences and major investment in the sector. Tech businesses of all kinds usually have to contend with serious competition, highly saturated market niches and expensive development cycles.
As a result, even small mistakes can slow down business growth and make it harder to provide the best product possible. Larger errors can be even more costly — and, in the long run, might be enough to sink even successful businesses.
These spending and decision-making mistakes are some of the worst that startups and tech businesses make. Knowing how to avoid them will help you save money and find success in a crowded market.
1. Underinvesting in Marketing
Some tech startups deprioritize their marketing efforts in favor of product development. After all, you’re trying to sell a product — and you may think that an effective product will speak for itself and find its audience in time.
Failures in branding and marketing, however, can easily cause major problems for any tech business. Many founders of failed startups cite marketing issues as one of the main reasons for their startup’s failure.
Marketing is a powerful tool for building awareness of your products and creating a strong brand image. While you may be tempted to cut marketing spending in favor of your product budget, marketing is essential to growing your business and establishing brand recognition with your target audience.
2. Skimping on Cybersecurity
Many businesses skimp on cybersecurity because, until you fall victim to a hack or data breach, there’s no apparent return on investment for security spending.
However, this can be a real mistake. The cost of a data breach can be extraordinarily high — enough to sink small businesses or seriously harm even well-established tech companies.
Research on previous data breaches shows that basic best practices can go a long way in keeping your company safe. For example, most successful attacks in 2016 targeted companies with no encryption on their stored data.
Something as simple as encrypting stored data can help reduce the potential harm of a data breach.
3. Optimizing for the Wrong Metrics
It’s not unusual for tech companies to prioritize technical metrics — lines of code, average session time, “engagement” — over customer-centric metrics that offer a better picture of business success. Customer satisfaction, number of leads generated and revenue earned can all provide a much better sense of whether or not your business is doing things correctly.
Technical metrics are often easier to measure. Something like “customer satisfaction,” after all, is pretty abstract. To find out how your customers feel about your business, you’ll also need a lot of qualitative data, which can often be hard to capture.
However, technical metrics — which may be easier to calculate — don’t always tell the full story of your business. A well-built product that doesn’t meet customer needs probably won’t be successful when it hits the market.
4. Not Focusing Enough on Indirect Spending
Tech businesses sometimes overfocus on managing their direct spending — the money going towards resources and services used in product development — at the expense of indirect spending.
Your budget’s indirect expenses category — which can include spending on procurement operations, vendor relationship management software and office supplies — can quickly bloat without proper attention. While these expenses may not seem as essential as direct spending, inefficient indirect spending management can have a big impact on business success.
Over time, inefficiencies in indirect spending can significantly reduce your business’s cash flow. As a result, you’ll have less to spend on product development, new talent and market research.
Some of the biggest tech companies worldwide, like Amazon and Cisco, are masters at careful management of indirect spending — which may be part of the reason why these companies have been able to scale so quickly when needed.
5. Losing Sight of Product/Market Fit
No matter how innovative or effective a product is, it won’t get very far if there isn’t a market that can provide the money needed for that product’s development.
Whenever you’re deciding on features to add, adjustments to make or new products to develop, it’s important to consider your current audience and the audience you want to capture in the future. These target audiences need to be large enough to justify development costs for a new product and support that product after launch.
According to research from CB Insights, nine out of the top 20 reasons for startup failure were related to customers and marketing. Pick any given year and you can find dozens of examples of startups that failed due to a poor product/market fit.
In 2019, for example, there was Aria Insights, which aimed to develop unmanned aerial vehicles for search and rescue missions. The company failed both because the tech wasn’t there yet, and because there wasn’t a major market for the product.
Validating the market is a crucial step for any tech business. Ongoing market research will prove essential if you want to make sure your products will appeal to an audience that can support their development.
Avoid These Mistakes to Save Your Tech Business Time and Money
Even if a business has a great product and a killer dev team, these mistakes may be enough to knock them out of business. Marketing, cybersecurity and indirect spending can all have a big impact on the success of a tech company — and underinvestment may have serious long-term effects.
When deciding what priorities will matter most for your business, keep these common mistakes in mind. Knowing how other companies have failed can help you avoid some of the most common pitfalls that tech businesses run into.
Lexie is a freelance web designer and UX strategist. She loves all things design and spending time with her goldendoodle. Check out her design blog, Design Roast, and follow her on Twitter @lexieludesigner.