Why do many start-ups fail?

“Success is most often achieved by those who don’t know that failure is inevitable” __Coco Chanel

There are multiple reasons behind the failure of start-ups, and it might also be different for different organizations. Reasons for failure might include money running out, lack of research, poor partnerships, ineffective marketing, etc. it is said that about 90% of the start-ups fail. Most start-ups fail during 2 to 5 years of their business, while 10% fail within the first year of their business.

Eight reasons behind the failure of startups might include:

• No demand for the brand’s product:

In recent times, there has been a need to develop products that will tackle problems rather than serve the market. Around 35% of the business startups fail because the product has no market need. Successful start-ups focus on bringing integrated solutions to the market that helps people have a better and efficient lifestyle. Many failed products have nothing to do with the product but fail due to the market introduction in the first place. This reason behind failure can be analyzed beforehand by talking to user groups and many more. It is not always about the product but the market introduction that needs to be perfect, including the marketing, sales, communication, etc.

• Lack of business management skills and associates:

Many managers and founders cannot do what is required for the business to take off at the start. Managers and founders should take more time to concentrate on the industries that will value their skills besides their professional expertise. This will help boost their ores of success, and hence the time and money dedicated to the business will not burden them. The team members should also complement these skill sets that are brought into the company by the founders. It is crucial to have a skilled team that includes someone who excels at sales, is good at management and bookkeeping, is good with the marketing of the product, and someone good at the stage of product development. During the second phase, people related to customer service, legal in-house employees, and business development employees can be given the focus. Suppose any of your team members lack the skills or abilities required for the startup company. In that case, it is vital to identify the knees early and read and learn practical knowledge that will help give you the upper hand against the competitors, which will help prevent your startup company from crashing.

• Ignoring cash burn: 

Most start-ups founders are technicians or engineers who focus on building the perfect product or the solution for their launch. The major problem is that we’re cast out at the earliest. The necessary signals to be identified to prevent the startup funding flow problems are the low-Profit margin, high petrol cost, delay in payments from clients, high churn rates, etc. The more a startup sees the situation, the closer you are to stretching the treasury and needing more cash because of the long distances between paying the suppliers and paying the customers. It is always important to negotiate terms with your suppliers. It is important to send only the essentials and not be extravagant at the beginning of the startup company’s start. 

• It is reluctant to accept feedback, reviews, and no acceptance to prototypes:

Many founders are hesitant to let others see their prototype until it is nearly complete. A startup's failure to obtain input from potential customers is usually disastrous. You should not worry about someone stealing your concept or your prototype not being excellent enough to present to the first few people. With technology democratizing prototype production for hardware and software, there's a perfect chance to make a few prototypes and have them tested with feedback from those who tested them. For example, as in focus groups – it will put you in a product improvement and learning loop that will be repeated until people demand your product.

• The market is not ready for the brand’s product: some start-ups launch their products before entering the market where the technology may not be prepared. Some launches are very late, and the founders are unaware that they have already delayed the process of launching the product. If your product is not doing well, it is essential to compare the startup company to the competitors. Start-ups should use this opportunity to place a stop loss or pivot and focus their efforts in a different market. 

• Poor leadership and weak team: 

A good leader should have the track record to inspire the vision of the startup company and the future by recruiting committed employees. More than employing top talent, leaders should focus on having committed employees that can relate to the mission and vision of the startup company. Lack of commitment by employees and poor leadership will often lead to the failure of a startup. 

• No understanding of customer’s behavior:

It is essential to launch a minimum viable product and get the required feedback from the customer time and again for the product development and testing. This will help build a bridge with the audience, and you can also incorporate the changes and create a product that will hook your customers to the upcoming versions of the products and services offered by your startup.

Conclusion

For every start-up that is funded, only one in 10,000 become a unicorn. Thus, promising entrepreneurs and founders are at significant risk in mitigation and might fall for the above reasons behind the failure of start-ups worldwide.

Now get information related to what is going on in the world of Startups through COLCO.