July 20, 2016
Did you know that 90% of all startups fail? By all means, this is a staggering piece of statistics that can scare anyone planning to start a business. But what really goes on? Most of these businesses fail because their owners don’t invest the time and effort it takes to learn what it really takes to make a business a success. This article highlights the 10 top reasons why so many startups are crashing into oblivion.
1. Lack of Market Need
However good your product or products are, your business is going to fail if there isn’t enough market need for it. This is actually the biggest reason why most new businesses fail. So if you’re going to spend your time, resources and hard-earned startup cash making a product, you want to make sure that it’s the right product for the market. Otherwise, you’re just going to end up wasting a lot more of your time, money, and energy. When it comes to starting a new business, you should conduct thorough research to make sure that whatever you want to come up with is something that people actually need and are willing to pay for.
2. Ran Out of Cash
Of course, this can be expected to be a major issue. Most startups rely on the founders’ own funding, which can get depleted within more time. The new business will need to spend money getting legalized, making its product(s), and promote in the market. If it doesn’t come up with new ways of replenishing the funding before it can start making good enough money, a new business is headed to doom.
3. Inadequate Team
Hiring the right folks can be critical to the success of a startup. Each employee’s contribution matters a lot when it comes to determining whether the business will succeed or not. It’s important that whoever is in charge invests the time and effort needed to bring onboard passionate people who will be willing to go the extra mile in order to make the business a success. When Amazon.com started out, it didn’t make money for the first few years. It took the extraordinary leadership of Jeff Bezos (who really believed in the idea of online shopping) to make it hold. Today, Amazon is the world’s leading e-commerce outlet.
4. Getting Caught Up
In a startup, the CEO often thinks that it’s his or her job to lead. They focus on delegating duties and roles, forgetting that even the smallest thing can mature into large problems. Some of the critical issues in a startup are those pesky details related to business process, scalability and business model. It’s inevitable that roles will mix. When the management fails to understand this, and sits on the roof waiting for everyone else to do everything else, there’s a high probability that the business will fail.
5. Getting Outcompeted
This is another key reason why most startups fail. They have a good product, and there’s market need for the product, but they just aren’t able to put up with the competition. The big brands spend more money to market their products as better and superior, and the startup gets trampled into nothing. Startup entrepreneurs should leverage creative marketing ideas that make up for the lack of adequate funds to promote their products.
6. Poor Product
Maybe there’s need for the product in the market, but it just ranks very poorly when compared to what the competition are offering. This is another key issue that most startup entrepreneurs really have to think about. There should be no compromise on product quality. Businesses succeed because their customers like the products that they are selling to them. So if you just make a less-than-impressive product and hope to make a run for it, you’ll probably end up failing.
7. Lack of Business Model
If there’s something wrong with your business model, there’s a high likelihood that the business will fail. Have it in mind that startups are delicate and the smallest error in terms of conducting the business can lead to doom. Spend the time to iron out your business plan and think out of the box when it comes to finding new ways to scale.
8. Poor Marketing
It’s no surprise that poor marketing is a major reason why most startups fail. How you approach your marketing can make or break your business. It’s important that a new business spends its marketing dollars wisely. If it doesn’t have the adequate funds to compete with the competition, relying on creative marketing strategies is probably a good way to go. All the same, have it in mind that how you approach your marketing is going to have a major impact on the prospects of your new firm.
9. Poor Customer Handling Skills
In any business, the customer is everything. If you don’t treat your customers well, then it goes without saying that they will drift to the competition. Most startups spend a lot of time, effort, and financial resources trying to procure new customers. In so doing, they fail to recognize the value of their existing customers. Have it in mind that satisfied customers can greatly boost your business through repeat business, positive feedback and referrals.
10. Failure to Use Network
A new business will obviously face challenges that it didn’t expect. If there’s no network or advisors to help out, things can go south. Startups should find a seasoned industry professional who can guide them in the right direction. This support can especially be essential when launching products, looking for funding and making major growth decisions. The likes of Google, Facebook and many other of today’s leading companies all relied on expert help to break it through the challenges of the first few years.
If you’re looking to start a new business anytime soon, maybe you should spend more of your time writing the business plan. Do you think that people are going to need your product? If so, do you think that you can price it well enough for people to buy in large quantities? Do you have enough money for marketing? How are you going to offset the competition? These are some of the key questions that you should ask early on.