26 Feb, 2018

How To Avoid The Feared Startup Failure

"Failure isn't fatal, but failure to change might be." - John Wooden 

According to several studies, 9 out of 10 startups fail. Aspiring entrepreneurs should be very interested in finding out the reasons behind this harsh truth and also how 10% of startups manage to succeed. The biggest mistake would be feeling discouraged, when it facts they should be more focused than ever before on working hard and doing enough research.

 

So why is the failure rate so high?

Let’s explore some of the major reasons for startup business failure dictated by today’s world.

 

No need for the products or services

More than 40% of the startups that don’t succeed provide products or services that the market doesn’t actually need.

According to Treehouse Logic, “Startups fail when they are not solving a market problem. We were not solving a large enough problem that we could universally serve with a scalable solution. We had great technology, great data on shopping behavior, great reputation as a though leader, great expertise, great advisors, etc, but what we didn’t have was technology or business model that solved a pain point in a scalable way.”

 

Lack of funds

Almost 30% of businesses that contribute to the shocking startup failure rate run out of funds to continue supporting operations. Allocating cash for at least a year is essential for the company’s future.

 

Wrong team

Choosing a team that proves to be ineffective can easily lead a startup business to failure. Employees who lack motivation and the right set of skills will definitely stand in the way of a company’s success. This happens 23% of the time when businesses fail.

 

Poor business model or no business model

Without a proper structure of your business, a tendency towards failure is quite likely. After their business had to close, Tutorspree stated: “Although we achieved a lot with Tutorspree, we failed to create a scalable business…Tutorspree didn’t scale because we were single channel dependent and that channel shifted on us radically and suddenly... In March 2013, Google cut the ground from under us and reduced our traffic by 80% overnight. Though we could not be 100 percent certain, the timing strongly indicated that we had been caught in the latest Panda algorithm update.”

 

Unsuitable product for the market

Ignoring the market’s needs can cost entrepreneurs a lot, even their whole business. Creating and providing a product and service that is suitable for the customer’s needs, can determine the whole potential of a company.

 

Poor leadership

Poor leadership often means lack of vision from the people in charge of establishing success. Without a clear corporate perspective and in turn with a flawed strategy, the business will most likely face trouble ahead.

 

Left behind by competitors

Entering the market at the right time is fundamental and equally as important as researching and getting to know your business’s competitors. If you don’t provide something extra or offer the products or services to customers in a better way, your business can suffer and even fail.

 

Weak marketing strategy

Properly getting the attention of your target audience is an essential step in a company’s growth and development. The inability to do so will ultimately end your business’s path early on.

After failing because of poor marketing, Overto stated: “Thin line between life and death of internet service is a number of users. For the initial period of time the numbers were growing systematically. Then we hit the ceiling of what we could achieve effortlessly. It was a time to do some marketing. Unfortunately no one of us was skilled in that area. Even worse, no one had enough time to fill the gap. That would be another stopper if we dealt with the problems mentioned above.”

 

 

No passion

Starting a business only to get a high income out of it won’t do. Lack of passion and interest when it comes to the products or services that your company provides can stand in the way of its progress and ultimately tear it apart.

 

 

So, now that we’ve narrowed down the main reasons of business startups failures, let’s take a closer look at what the 10% of the startups - that are successfully operating – are doing.

 

Businesses that become highly successful offer products and services that the market needs. Another important thing that entrepreneurs who succeed keep in mind is the fact the nothing regarding their startup can be neglected. Dijiwan’s leadership team stated that: “A good product idea and a strong technical team are not a guarantee of a sustainable business. One should not ignore the business process and issues of a company because it is not their job. It can eventually deprive them from any future in that company.”

 

Focusing on growth even from the beginning is another aspect that successful businessmen do. A startup should never be satisfied with single-digit growth rates after months of being open. A business that is not busy growing is definitely busy shrinking down. Businesses run out of cash often times because they don’t grow as fast as they should.

Courageous entrepreneurs are also the ones who are never afraid of searching for greatness. As John D. Rockefeller – a well known oil industry business magnate, industrialist, and philanthropist who is widely considered the wealthiest American of all time, as well as the richest person in modern history. – once said, "Don’t be afraid to give up the good to go for the great."

 

With an excellent team of experts – who have the right set of skills – behind them, successful startups usually thrive. Versatile individuals are all it takes to form the ideal group meant to lead a business on the ladder to success and guarantee a safe trajectory. Also according to a few studies, companies that have two founder or more are more likely to have a high success rate. Creating a partnership automatically means that two people have power over necessary decisions and as everyone knows two heads are definitely better than one.

 

All in all, keeping a close eye on these last aspects mentioned when you start a business may help you improve your company’s development and maintain steady growth. To end this on a positive note: dear aspiring entrepreneurs remember that "The road to success and the road to failure are almost exactly the same." -- Colin R. Davis