Why Startups fail?
Over 90% of Startups Fail. How can you prevent it from happening to your business?
Startups are lovely. They represent the desire and passion for creating an empire. Unfortunately, over 90% of startups fail. We have identified 5 key reasons and appropriate solutions to prevent this from occurring to you.
Stop chasing customers. Chase a solution.
Most entrepreneurs find themselves coming up with an idea. They build it and try to sell it to the market. But no one buys it. Why? It’s because that product does not solve a problem. The successful startups have grown because they focused on providing a solution to the consumer’s problem.
Chasing a solution can help you provide a valuable product or service to your customers. When you are offering a solution to a problem they are facing, the customers come to you. But if you have a product that doesn’t solve anything. Then, you’re in trouble because 42% of the startups fail since they didn’t solve a market need (CBInsights, 2019).
Conduct critical market research to identify market gaps and needs. Develop a solution for that and sell it to the customers. No business was built on nice-to-have products. They were successful because their product was useful to the customer.
As an entrepreneur, you need to keep a keen eye on the trends and changes in the market needs and consumer trends. Make the necessary changes to your business plan and implement effective strategies, and test their results.
You can use the Business Model Canvas. It is a strategic business tool that helps you map out your business model into segments. This enables you to gain a holistic view of the business model to refine it to ensure it is stable.
Ignorant to reality!
Most entrepreneurs are under the impression that they are on the path to success and are building a new empire. I love that passion and drive – with the right decisions, you may reach achieve your vision.
However, this ideology could also be your demise. If entrepreneurs become ignorant about learning, customer needs, market changes, trends, and competition. Ultimately, they lose out to another company and shut down. This is the case with most startups and a key reason why over 90% fail.
Have a strong vision and work with a student’s mentality. Be open to new learning, exposure, experiences, and concepts – you don’t know everything, so keep a keen ear to new stuff.
Make sure to stay updated on new market changes, consumer trends, and competition. You can do this by following blogs like ours, websites, social media pages, and other platforms, where you can absorb valuable content.
Lack of Passion and Dedication
Nothing lasts without passion! If the entrepreneur is not passionate about the business, it will never sustain. Passion is a magical emotion that is vital to achieving success. It makes people go to great lengths, surpassing all their limits because they are so determined to follow their passion. Passion is the one common factor that can be seen in any successful entrepreneur. They all simply love what they do and put their blood and sweat into it. This is the reason they have built an empire for themselves.
However, entrepreneurs who lack passion or dedication inevitably fail. Being successful in today’s modern era of business is challenging because of the abundance of competition. Only entrepreneurs with the passion and commitment will be determined to make it work even if they meet adversaries, failures, or obstacles – the never give up attitude!
Find an industry you are passionate about, work hard, and focus on the path you wish to go. Make sure to focus on the users and products. This way, you will stay on track as a startup to develop the product and engage with the users. This will help you build the empire you envision, so stop focusing on stuff that doesn’t benefit you.
I’m a Lone-Wolf
It takes 3.6x longer to outgrow the startup phase if you’re a solo founder (Startup Genome, 2019). Being a lone wolf is not practical in the business arena. Human capital is one of the critical resources of any business. They bring in essential skills, expertise, knowledge, and manpower to execute operations. A balanced team with the required skill sets, especially in technology and business, has 9x more growth than an unbalanced team (Startup Genome, 2019).
No, we are not suggesting that you employ more people than you have work. But, it is ideal that at least one person from a different discipline to join you because that way, your business has a combination of people that cover the Holy Startup Triangle consisting of Hipster (designer), Hacker (engineer), and Hustler (marketer).
The most significant benefit of a good team for a startup is that you are working together on something you all believe in, pitching in different ideas, skills, and perspectives to help develop great innovative ideas and spike learning from each other. This makes the entire journey worthwhile, and the team works as the backbone of the business.
According to the Startup Genome Project, 70% of the startups scale up too early. They extend their views on how this can explain up to 90% of the failed startups (Startup Genome, 2019). Premature scaling refers to growing too much, too soon. Most businesses rush into establishing the business and scaling it. This increases costs and scale of operations, making it tough to sustain in the market with increasing profit margins. So, DO NOT scale up your business if you aren’t ready for it.
How to know when you’re ready to scale your business?
- You need to know the lifetime value of your customers. This can be calculated by price * repeated purchase, and your cost to acquire the customer. Once your cost to acquire a user is lower than their lifetime value, it is time to step on the gas and scale-up.
- Your business model must repeat. This means that you’re acquiring customers in the same way, every time.