Why do startups fail, and what can entrepreneurs do to prevent this? Entrepreneurs and investors have different opinions on this matter, but very few have data-driven responses. The main goal is to identify and communicate specific lessons learned in this area, and the timing could not be better.
This post will be extremely helpful for you if you’ve founded your own startup or are planning to do so soon but are concerned about failing.
1. No Online Presence
Many companies fail because they focus only on getting their product or service to market without considering the importance of having an internet presence. It is a good idea to invest in website design, since a well-designed website is a necessary component of running a company. You must provide everything about your company on your website since people will learn about your company by visiting your website. They should have a positive initial impression of your website when they visit it. This implies that every color, font, picture, symbol, text, and other element you choose to design your website should leave a lasting impression on your visitors. In addition to having a website, you should also make sure to have some form of social media presence, depending on the type of business you are running.
2. Uncertain Business Concept
The first and most important step in any business is to brainstorm and finalize the greatest startup ideas. Who knows, it could be worth millions or billions. However, many firms fail at this area due to lack of the correct mindset. If you’re having trouble coming up with a business idea, these three secret techniques for finding a profitable startup idea will come in handy:
3. Insufficient Cash and Capital
Money and time are needed to be allocated judiciously. For most startups, running out of cash — tied with the inability to secure financing/investor interest — was one of the main causes startups cited for failing.
4. Incompetent Market Research
Effective market research allows the budding startup to obtain valuable information about their competitors and customers. You may have the best product, but if you don’t know how these products fit with your customers, then it doesn’t matter what you have. Identify your target audience, its demands and think about how you are going to convert these demands into a service or product.
5. Poor Management
An unbelievably common factor that makes startups fail is weak leadership. A startup usually consists of a promising team that unites people with diverse points of view. This may lead to chaos and needs the right leader to find ways on how these problems could be solved and not harm the success of the startup. The management should not only decide, but also deal with minor problems that may occur which in turn, might affect the company.
6. (Wrong) Timing
It saddens us every time we see this. You had the best concept. Turn it into a beautiful project. You have identified your audience. You have good leadership skills and are good in managing your people. But it is too early or too late on the market. Knowing and waiting for the perfect time can be risky as you will lose money month after month. This strategy has a great risk of losing everything you’ve worked and invested so hard for.
7. Luck (Or lack thereof)
Sometimes, you just need luck. Some startups fail in selling a completely exceptional product or service. You can have an average product and service but excellent management and still succeed. You may already have stiff competition in the market, but still be successful… If you’re lucky. That means meeting a quality investor with good connections, starting your business on time, linking their marketing to something that helps them, etc. Like the increase in tourism in Puerto Rico when the song Despacito became famous. Simple – the luck.
8. Product and Service not Needed
This means that your solution does not cover the present needs of the market or, in other words, the market does not need what your product or service provides. Unfortunately, many startups launch their markets without enough market research and in-depth trials. The main reasons for this are: it does not fill a gap in the market and there is no market for that specific gap. The market is already full of solutions that offer the same products and services or solve the same problems in a similar manner. To identify prospect customers, the company needs a thorough market analysis, and to carefully study customer demands and plan its goals in the future accordingly. If the company looks at the customer’s needs in the wrong direction, it can and will never be profitable.