Launching a startup takes a lot of effort, time, and investment. Everybody tries to come up with new and innovative ideas, whereas in actuality, most of the initiatives look unique and promising but fail in the long run. The overnight success stories that we get to know through TED talks and influencers are just the end product. The series of efforts that went behind it and the failures are not shown to the world. Let me tell you startup failures are far more real. One should always think of both negative and positive outcomes before investing.
According to a survey done by the Bureau of Labor Statistics, roughly a fifth of new businesses shut down in their first year. It shows that it is quite common and failure is a part of life, but it should not stop young entrepreneurs from starting a new business. This article covers the top ten reasons that fail startups and how you can avoid them to make your venture prosper.
1. Not Enough Research
All businesses around the world, whatever niche they belong to, require proper prior research. Most businesses fail right away just because they were not fitting in where they were launched. If a person would have done his homework he would know that this is not the right place for a specific product. It should be the first step in launching a startup. If you want your startup to be long-lasting and revenue-generating, Plan, Plan, and Plan!
2. Not Enough Cash
Certain businesses require more investment than others. Many startups go through failure because they were launched with a big budget, but that budget ended within just the first spell. Avoid getting into the businesses that require a lot of money to finally start generating revenue. If you cut your dress according to your clothes you will not face failure; rather, your business will flourish and make profits within the first three months.
3. Poor Marketing Strategies
A very crucial reason when it comes to failure in startups is the poor marketing strategy. Companies fail to reach the target audience just because they are not good enough in the game of promotion. In these times of innovation where everybody is coming up with startling ads that make heads turn, if your commercial is like average ads, you are already failing. Use different means to visualize your marketing videos. A professional executive video with a touch of catchy colors, 3D effects, and aesthetic music always goes a long way.
4. The Essence of the Business Model
Entrepreneurs are often too optimistic regarding their startups which sooner or later becomes the prime reason for their failure. David Skok, founder of four successfully running companies gave a tip for new businessmen in one of his articles that, in order to save your company, one should follow the rule ‘CAC must be lesser than LTV’, where CAC stands for the cost of acquiring a customer and LTV stands for the Lifetime Value of a customer. This smart gameplay will let you invest less while bagging a lifetime customer. A critical thought given to the numbers will assist your business greatly.
5. Poor Management
Management is the backbone of any startup, said Tom Eisenmann in his book Why Startups Fail. You should be wise with your team selection. Pick those who will assist in building the startup together to the status it deserves rather than those sleek minds that are only there to pull each other’s legs. The perfect management should have unity, they should be hardworking with keen attention to detail, they should be friendly with the team members and have a single motive to make the startup work.
6. Problem with the End Product
If your startup is primarily based on a single niche of product and your company fails to produce them error-free then we can not help your startup from falling. Unfortunately, you can not stop the failure coming from a faulty product. To avoid such misery, try to focus on your end product; make it as presentable as possible. Never compromise on the quality, and the packaging should also be given due importance.
7. Product Mistimed
There is no such thing as ‘the time’ for a product launch. You can launch your product or business all around the year whenever you feel ready, but if seen from a marketers perspective, your product launch should align with the times. A mask selling company has done wonders because they started the initiative right on the onset of Covid-19, compared to those companies who launched their business when almost everybody has got vaccinated.
8. Lack of Passion
Another common reason why startups fail is due to the lack of passion. This generation likes to follow the trend, and they end up going behind the most sought-after business idea, but what if that is totally out of your liking? When passion and career come together, nobody can stop you from being successful. Always pick the niche you like, and your passion will drive you through the initial stages smoothly. To make your startup thrive and reach the right audience is a significant point.
9. Ignored Customers
For a company to do wonders, it is important that its customers should be happy. Customers are a company’s asset, and if you ignore their needs and requirements your product won’t do good. They should always be prioritized. A happy customer is like a walking ad; he will promote your business product to the masses. Make your vision that you are putting all this effort for the people out there who need it. Put yourself in their shoes and think about why they need it and how your product can contribute to their life. It will give you a clearer idea of what and how your product should be.
10. Get Outcompeted
Nothing hurts more than being outgrown by those who were once your competitors. Startups fail right away as soon as they fall out of the competition with the competitor brands. Keep reviewing your marketing policies and your product quality to stay in the competition. Your product should speak for itself. No amount of promotion and marketing tactics can grow your audience as the best-provided quality will.
These were the top reasons for startups to fail, making young entrepreneurs heartbroken right at the start of their careers. Just a little bit of attention to small things will save you from an early failure. We hope you find them helpful.