10 Top Reasons Why Most Startups Fail Without Even Trying

Dreaming of a startup? Know these!

Shreyasi Das

29 days ago|7 min read

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Most of the youth these days dream of having their startup one day. But most of these dreams are hardly fulfilled as starting something new is always a challenge and it's like taking a risk that most of us don’t want to take. Studies show that about only 1% of startups end up raising their capital money and getting funded. 

But this should not hold you back from fulfilling your dream of having a startup. Running your startup is an extremely difficult job for any entrepreneur, which means that you will go through significant struggles, especially during the early months and years of this venture.

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Top Reasons Why Startups Fail

In this article, we are going to give you the reasons to not let go of your dream and the correct facts that you should know, before starting your new journey.

New businesses, small businesses, or large businesses, all kinds of business alike, take market analysis. That is because the market analysis is an essential part of any good business or its market plan. Now, before you start this dream journey of yours, we want to provide you with a market analysis template, which will help you to paint a picture of your target market that is already out there, all you need is a correct analysis of your audience. 

Market analysis is the process by which you can understand your target audience, the market trends, your competitors, and other vitalities that you must know about the market you belong to. On running a market analysis you get a clear picture of the market size, the number, and also the types of businesses your company will be competing with. You will also get a sense of idea on your opportunities for potential customer acquisitions.

With all said and done, we need to focus on the common mistakes that usually people do while they build their startup.

1. Decreasing Passion or Lack of planning

According to me, this is one of the most common reasons, why we usually get to hear about a startup that has failed. Because you don’t usually fail, you just give up. As we discussed earlier, startups require a lot of time, effort, and patience. 

Work-life balance is not something you should be expecting if you are a startup founder, at least in your initial months or years, so the chance of burning out is high. It is the ability to cut out the losses and redirect your passion when you see a dead-end that will keep your startup growing and will prevent you from burning out yourself.

Another major problem arises when you don’t have a clear cut plan of what it is that you want your company to do, what are the services you want your company to provide, how you will distribute your accounts for the major areas that your company needs, and things like these. Many startups do not plan for the future as they believe that their ideas o the product or their services are enough to garner success. 

Yes, having a great product idea is a necessity and only having your product idea does help you in the earlier stages of your business but when it comes to sustaining long term in the field of business, you will need a comprehensive business plan to survive in the market.  This business plan should also consist of your marketing strategies.

2. Lack of skills which are needed for the business

Founders need to focus on businesses that value their skills and also their educational background, along with their professional experiences.  Many founders fail to do what is needed for their business to take off. 

Also, not only you having skills are enough. Your skills are needed to be complemented with your team members’ skills as well. Always place someone good in sales, somebody capable in management as well as bookkeeping, and someone with good marketing skills and product development skills

3. Running out of cash

Money and time – these two however important, are finite, and need to be allocated judiciously.  This is the main reason why most startups fail to sustain themselves. Many startup founders, want to create the best product or provide the best solution to one problem and then launch it in the market. 

That can be a problem in the earlier stage as you are cashing from the capital amount and you want to keep the doors open and not stretch your treasury. As and when such situations arise, your best signals are – low-profit margins and high payroll expenses – the greater frequency in which your company sees such situations, the closer you are in need of cash. To prevent these situations – try and negotiate terms with the suppliers and try to only spend on essentials.

4. Expanding too quickly

If you have never run a startup before, knowing when it is time to expand your company can be a challenging task, no matter the industry you work in. You need to be ready for the responsibilities and the demands that come with the expansion of your company. This is one of the many reasons why startups fail to find success because they expand too quickly.

If you create a detailed business plan for your startup, you will have a great understanding of the gradual steps that are to be taken when trying to achieve success. And this business plan should tell you the right time to expand your business.

5. Product Mistimed

If the market is not ready for your product’s launch, and if your product is released early, the audience may mark it off as not good enough, and getting it back, when the time is right might be difficult, if the first impression of yours among your audience is negative. And, again if your product is late, you might have missed your window of opportunities.

To avoid this mistake, having a market analysis template is important. Market analysis is helpful as it gives you a first-hand idea of the market you are entering or the customer you are targeting. When you are trying to release a new product or a new service, in an existing market or capture a greater market share, an in-depth market analysis will give you the confidence to move forward with your idea.

6. Hiring the Wrong People

If you are a founder of a startup who understands the product and the market strategy and you know what it takes to make your business stand out, then you are likely to also know how important it is to hire the right people for your startup. However, many startups will start with hiring the wrong people who aren’t right for the job.

For instance, some people will hire their, who might not have the necessary expertise for the role. In the formative stages of your startup, you must hire people who are experts in their jobs.

7. Poor Product

If you have thought of a product that you believe will sell well when placed on the market, make sure your idea is backed up with well-researched work on the market. Make sure that the service or the product that you want to introduce makes an impact or adds value for your audience.

If the product or the service you have thought of has too much competition in the market, you might want to avoid investing too many resources into the product. However, if the product is in high demand it will experience initial success.

8. Not ready for feedback or criticism on the prototypes

Founders usually struggle at letting others see their prototype until they are reasonably ready. Failing or not choosing to get feedback from potential customers in the initial stages of a startup can prove to be fatal for the company. 

Do not be afraid of someone stealing your idea or criticizing your prototype or that your prototype might not be ready to be shown to the first people. Getting feedback on the prototypes is a good thing as it gives you a clear idea of how your product will fair in the market, once launched.

9. Not being Customer focused

Numerous startups fail to find success as they are not focused on the needs of their customers. If you want to continue having success in your business you need to show your customers that they are important to you. Invest in a good customer care team for your company to help your customers find a solution to their issue with your product or service, as soon as possible.

If you run a social media page on Facebook, then a great way to show the customers that they are important to you is by engaging with them.

10. High Competition

Studies show that about 20% of all startups will fail to find success, because of the high competition in the market. While you will most certainly have some competition, no matter the service or products you provide, but you most certainly don’t want your product to be competing with many other companies. 

If your company competes with big brands and big companies that have a history of success over the years, then it is unlikely for your company to gain a successful share in the market.

If you are just thinking of launching your startup then the above 10 points are most likely to be very important for you to research and know about.

No startups can thrive if they don’t know what to do when they reach a certain obstacle whilst in the business, which is why you need to have this information on hand before you create your startup.

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Shreyasi Das

Writing with a touch of imperfection and leaving a bit of sparkle here and there ;)

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