Why Do 1 In 3 Startups Fail?

source: smallbizdaily.com

Why do businesses fail in their early startups? Whether it’s a bigor a small startup, business failure is not a thing you’d like to think about when starting a business.

But if you want your business to prosper, you need to perceive and avoid these common reasons why one in every three startups fail.

1. Market Problems

One of the significant reasons why startups fail, they jump into the problem of there being little or no market for the product built. The following symptoms are common:

  • There is no compelling event or no compelling preposition to cause the buyer to commit to purchasing the product truly.
  • Wrong marketing time. A startup company could be ahead of the market by quite a few years, but the targets are not ready for the product or that particular solution.
  • The market size of people with pain and the funds are not large enough.

Therefore, it’s essential to focus on matters in your business market. Look at these simple questions;

  • Is there a scalable way to acquire customers?
  • Then, can you monetize those customers at a reasonably higher level than the cost of your production or acquisition?

Thinking about such simple things can be helpful.

2. Team problems

Another common reason that makes startups fail is a mediocre management team. A strong management team will be smart and take caution of avoidable mistakes. The weak management team will fall into multiple errors, usually from the execution to a complete product.

  • Over or under-experienced team; Why both side? We’ll look at it this way; a startupcan fail because the management running things was not adequately experienced to handle issues like hiring, marketing and finances.

On the other side, if the team may be too expensive, probably due to the skills and expertise possessed. They can cause failure to a startup unless they can deliver fast result to compensate for the vast amount spent on hiring them.

  • Lack of enough Flexibility;most startups have in mind specific goals that they want to achieve. But with the fast-changing online territory, these plans and goals might call for a re-visit, and if the team cannot adopt the changes, the business will eventually fail.
  • Failure to keep requirements in mind. Early on, it’s essential to define the requirements for the business. Failing to put the customers first or hiring a team member who does not fit the business culture is another killer.

3. Insufficient capital

A typical money mistake for failed startups. New business owners don’t understand cash flow and end up underestimating the amount needed to fund the business. Later, they are forced to close at their early startup just before a fair chance to prosper. Others have unrealistic goals of income revenues from sales.

4. Stiff competition

This is the primary reason why one in every three startups fail. It is tough to launch a product that doesn’t have the market. However, it can be tougher to start one in an already saturated market with the product of the same kind.

When you are developing a product with too much competition, it has to be unique, address a problem better than any other product, or do it better.

5. Poor Networking

Networking means a lot when it comes to business and failing to utilize your network correctly can lead to possible business failure. Many startup entrepreneurs are often caught lamenting on their lack of proper network or proper network connections. To that far, don’t make a mistake of trying to do everything yourself. Get your mentors and investors involved, right from the start during and after building your product.

6. Product problems

Another reason why companies fail is that they bring a product that doesn’t meet the market need. Product problems mainly result from either a simple execution or a critical strategic problem.

Mostly, the first product a startup launch won’t achieve the market fit. The best case is that it can take some revision to fit the market right.

The worst case is that the product can be away far from the market base, demanding a complete re-think. It is crucial to validate ideas with customers during product development.

The reasons why most of the startups fail are often tied to reasons why the owner started the business. Therefore, the right attitude and passion for starting a business could lead to a successful business.