Common Reasons Why Startups Fail

Why Do Startups Fail, and What to Do About It
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Common Reasons Why Startups Fail.Starting up is hard, and the fact that 90%  of them fail within the initial three years makes it look even more dreadful. Intelligent entrepreneurs always learn from other’s mistakes and try to avoid them in their own startups.

Consider some of the following tips for how to avoid startup failure and think about ways that you can implement these strategies in your daily life.

Why Startups Fail ## Poor Management Team

An incredibly common problem that causes startups to fail is a poor management team.  Poor management skills carry long-lasting effects and may infect an entire organization. The results of toxic, misguided leadership reach far and wide.

Improve Team Management:

  • Communicate your expectations clearly and accurately.
  • Develop relationships with the people you manage.
  • Explain all goals and objectives.
  • Create a positive work environment

RELATED:6 Things to know Before Starting your Business

 Why Startups Fail ## Product Problems

Another reason that companies fail is because they fail to develop a product that meets the market need. This can either be due to simple execution. Or it can be a far more strategic problem, which is a failure to achieve Product/Market fit.

Most of the time the first product that a startup brings to market won’t meet the market need. In the best cases, it will take a few revisions to get the product/market fit right. In the worst cases, the product will be way off base, and a complete re-think is required. If this happens it is a clear indication of a team that didn’t do the work to get out and validate their ideas with customers before, and during, development.

READ  Top 10 Effective Ways to Build Trust Within Your Team

Lack of skills needed for the business

Many founders can’t do what is needed for a business to take off. They should concentrate in industries that value their skills and educational background, besides their professional expertise. This will boost their odds of success and the practice and dedication they will inject in the business will not be a burden for them. Your skills must be complemented with the ones of your team. Always have someone good at sales, someone good at management and bookkeeping, someone good at marketing and someone good at product development. 

Why Startups Fail ## Business Model Failure

Business model is the skeleton of every business and dictates the commercial and economical viability of your business to make money and value.

Growing profit proves your business model works and funds more marketing, investment and builds a cash war chest that can help you sustain rough times.

Inefficient business model is characterized by high cost to acquire a customers, low or unknown lifetime value of customers and having no scalable ways to acquire customers.

Here are the ways to improve your Business Model

Improve Business Model:

  • Exploit the latent market.
  • Confirm that your product or service solves the problem.
  •  Up your technology investment .
  • Focus on collecting customer references.

 Why Startups Fail ## Running out of Cash

Major reason that startups fail is because they ran out of cash. Cash flow keeps the business alive. Despite the fact that cash is the lifeblood of a business the fuel that keeps the engine running most business owners don’t truly have a handle on their cash flow.

READ  How to Manage Business Risk

Twenty-four percent of startups said that running out of money contributed to failure, while another 13% struggled to get financing. Cash is king for startups. Even a successful business model will fail without proper cash flow.

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Trying to run a business without managing cash flow can land even the richest round raisers in trouble.

Being a One-Person Team

“Individuals don’t build great companies, teams do.” Mark Suster.

Being a One-Person Team is also reason for startups failure

Teamwork involves different people and different groups across your business working together to maximize their efficiency and reach a common goal.

Some companies use teams and teamwork to create a work environment which excels at creativity.  Teamwork can help companies to be more flexible .

At any stage, a good leader has the charisma and track record to inspire a compelling vision for the company and its future, recruiting committed employees instead of top talent who will fly to the next offer very soon. Employees committed with the company mission and vision will help the founders realize their vision, not the so much “top talent” cherished by the media.

Why Startups Fail ## Poor Marketing

A great product can fail if it is not backed by adequate marketing efforts. A marketing strategy  is the backbone of any business. It generates the required awareness about your products or services among customers. A good marketing strategy  should correlate well with the long-term marketing plans and goals of the business.

 Why Startups Fail ## Ignorance of what your customers want

There is not enough stress I can put on how important it is to launch a minimum viable product and get feedback from customers again and again, for product development and testing over and over. This allows you to build a bridge with your audience and incorporate changes in the product that will hook your customers to the next versions of your products and services.

READ  Setting Financial Goals for Your Future

Thank you for reading this article on Why Do Startups Fail, and What to Do About It. If you have any better tips that you would like to share, please feel free to comment below! or you can write an article to us by CONTACTING us.


 Ganesh is an Entrepreneur and a Successful Stock Market investor. Ganesh help finance professionals and Fin-tech startups to build an audience and get more paying clients online. Ganesh is  available for Sales,Marketing,Finance , as well as private consultations.

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