Why do startups fail? This is a big question for everyone who wants to become an entrepreneur. In this article, I will discuss some key points why startups fail.
It takes a lot of courage to think of booting a startup knowing the fact that more than 90% of them fail. Have you ever pondered why this percentage of failure is so high?
There are many factors behind this, among them some would be discussed here. I hope this would help you to find a way to take your startup towards success.
Timing is important
When to hit the market is a very essential and critical component to create an opulence for any startup. It is mandatory to know the correct time to enter the market so that you get the optimum result. If you launched your product too early, you may not get the proper traction or if you launched your product late you may get your daddys in the market. If you are well aware of the market and at the same time you know the correct timing to hit the market then you definitely get the first-mover advantage.
Many startups fail because of the wrong timing. So if you really want to gain the first-mover advantage, research more about the time and hit the hammer at the correct time for definite success.
Conflict in founders | Find the correct team
A business or a startup cannot be built overnight and it is definitely not by one man. The success of any startup carries a lot of hard work and the correct team.
Many startups fail due to an incorrect team or due to conflicts among members. There are many reasons behind conflicts among team members some of them are:
- Clash of Ego
- Decision-making conflicts
- Hierarchy issue
- Stability issue
Other than these, one major problem with the team is to find the correct domain expertise. For example, you want to develop a startup that builds home automation systems with AI, you have members in your team from different fields but no one who knows Neural Intelligence, Cognitive Computing, etc. In this case, while building the product if you don’t have an AI expert in your team then it will be very tough for you to make your product or in that case, you will have to hire someone from the AI field.
SO if you start your idea with a good, stable and talented team, definitely you get success.
Lack of strategy and planning
There is a saying that “ a foolish person with a plan is better than an intelligent person without a plan”
It is true that if you start working on your idea without a proper plan and strategy you will definitely fail in the initial stage. There are many startups who fail in their first year because of a lack of planning and hence execution.
A proper business plan is a key element for startups and entrepreneurs. When you are going to start with a new idea or business, a strong base of business is important. It should be well organized and structured so that you will not face any glitch while execution. Proper strategy and planning include:
- Your complete knowledge of the market
- Who will be your target customer
- How much money needed to establish your business
- Who will be your team
These are a few points of planning. You can add more to your strategy so that you do not face failure due to a lack of planning.
Lack of Financial Management
Any startup does not solely depend on the planning, timing or good team, management of the finances is equally important.
It’s easy to take out money from the bank but it is tough to put it back in the bank.
Similarly, it’s easy to put in funds in your startup but it’s hard to get it back from that. Proper financial planning helps a lot to grow your business in the way you want. But still, there are many things that we need to keep in mind while establishing our startup. Some of them are:
- Try to raise initial funds from FFF
- Raise funds when actually needed
- Keep the records of all transactions
- Outsourcing can be done
- Keep an eye on cash flow
A good idea pushes you to think whether your business will hit or flop. To determine this you need to use some good techniques. Break-Even analysis is the best available financial tool to check whether your idea will be profitable or not.
Good financial management would definitely take your company to a profit-making model.
Incomplete Market Research
Incomplete market research is one of the major reasons for the failure of startups because it not only acts as a hindrance for customer’s utility but also leads to the invention of a product that is worthless and hard to market. Lack of complete market research may also create tough competitors with better products and improved efficiency on the basis of the former’s experience. We can’t assume that people will want what we offer.
A proper Market Research, feasibility study and focus group study help to challenge our hypothesis for consumer’s requirements.
Lack of Competitor Research
Before entering into the never-ending cycle of better efficiency and fulfilling consumer’s utility between competitors providing the same products/services, it is important to determine:
- the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage,
- the barriers that can be developed in order to prevent competition from entering your market, and
- any weaknesses that can be exploited within the product development cycle.
This is one of those factors which should be done in priority because the one who learns about the flowchart of competition first and makes a way through it efficiently gets a headstart in the rest of the factors which help to provide a strong and reliable startup module.
Any startup can fail if that not work towards these are the six major reasons. Ignorance of these will definitely lead your startup business towards failure.