Why most Startups fail? Good question, right?
First of all is absolutely natural that newcomers are more likely to sink in a tank full of waves and sharks. Most of the startups fail for almost the same reasons. If you are building a new company or a startup, or your company is a newcomer with few months or years of operations read below some to the most common reasons new companies can fail to be established.
No market for the product or service.
This is difficult to believe but the truth is that 42% of new companies according to surveys don’t make it the first few years because of low or no market need. This is the top reason why startup companies fail. Companies are created to solve a problem, offering a product or service. The thing is that this problem has to be universal or be able to scale in the market. Many companies come up with a solution that is smart, effective and fancy but there is no enough need in the market rather than a small segment or group.
A deep analysis and wide research is what is needed in order to stay away from troubles like this. Many startups ignore this crucial step. Make research sent questionnaires, speak with people or market segments and find out the need, before coming up with a solution.
Run out of cash early.
29% of the companies fail early because of cash liquidity. Good cash flow management is essential for every organisation. But for startups and newcomers is crucial.
Startups usually need to invest money in various aspects of the business development, therefore they need a stable cash flow. That is why many startups are supported with investors. In other cases, they try to make it organically and develop with their own income. This is sometimes the safest way to go. In any case cash flow and control is essential for new businesses. Is importance to focus on this aspect of your business otherwise hiring a professional financial advisor can help you maintain a healthy balance and expenditure.
No good team chemistry.
Team chemistry or members that misfit is the reason 23% of the companies fail. Team chemistry can ether be between the founders or the team members hired. Founders have to be definitely in the same track, “speak the same language” and have a common vision, setting aside and personal interests or targets. Regarding the early hires is important that the new members have similar mindset and are willing to be part of the rest of the team.
Team members have to complete each other regarding their skills but also mentally. Leaders are useful in a team and help pushing the rest to achieve more. This is something very important to create.
The number 4 reason companies fail with the rate of 19% is because they are out of competition soon after they start. When a new company enters a market is essential that it has to offer something better, smarter, cheaper or a combination of these in order to be accepted. If you try to launch something that is already on the market without any substantial differentiation your chances are not many.
If is something totally new and fresh then the market might give you a chance. You have to be sure and as solid as possible so you make a first good impression. I refer to that because many new companies that offer something new and interesting fail to make the first good impression and the customer never comes back.Make sure you have something special and be as ready as possible before you launch.
Bad pricing and cost.
Wrong pricing and cost issues are the reason of 18% of startups failure. Even larger enterprises often price their product or service wrong and fail to make the profit they could. Pricing your product to be competitive but also help you cover expenses and be profitable is one of the most essential elements of your business success. Price and product should meet the customers expectations. Are they willing to pay this amount for your product? Are they getting what they were expecting from you? You need to have a balance.
Put down your costs and expenses. You need to calculate wisely and also thing for the future. How the price can develop? What could also be offered.
Not user-friendly product.
As we already mentioned above, the first time a user/customer tries your product or service is very crucial. Is like meeting a person for the first time. You want to make the best impression you can. Be ready for this moment and be ready to reconsider possible changes and updates. Faults and issues might appear on the way. You don’t want to lose the customer on his first experience with your service. This is a reason why 17% of the new companies fail.
Poor marketing/ No Marketing.
Marketing is king. No one can doubt this. 14% of the new Startups never make it because of poor or no marketing.
Make sure you make a good marketing plan for your company and follow precisely. Set a budget that is doable. Investors usually are a good way to push your startup in the market. Having the funds to advertise for the first 6-12 months is a great value for every startup although marketing should never stop anyway. Spent your budget wisely. Don’t overspent and count every action you make to see if is effective. If you don’t have any investor you have to be extra cautious. But marketing is the only way to reach markets and start establishing your brand. Remember that many successful startups have a marketer in their founding members. This will mean a lot for a new startup.
There are many other reasons a startup can fail but the above mentioned are the most common. Other reasons include running your business without a clear business model, constantly ignoring customers and their opinion regarding your service, arguments between founders or investors, bad timing or wrong geographical expansion. Leave nothing to chance. If you wish to succeed, you have to make sure all of the above are under control and never hesitate to ask for a professional help.