Everything you need to know about factors leading to startup failure and how to avoid them

Business giants, including Amazon, Airbnb, Uber, and Instagram, could have easily become another failed startup. But instead, they grew into a billion-dollar business by not making some key mistakes. Let’s explore more of these mistakes and how to escape them-

Key Points

• About 90% of startups fail. 10% of startups fail within the first year.
• 63% of all startup failures are in the?IT sector .
• 75% of venture capital-financed startups fail.
• The United States is the most promising country for startups, followed by China, India, and the United Kingdom.

Startups: An introduction

The idea of having a startup, then seeing it become a big name in the market is a fantasy every business lover has. But do you know the downsides which can shatter the dream of your perfect startup? Well, here we will explore those and much more. Before we begin, let’s develop a basic idea for startups.

A startup is a firm or a company in its early stages. Innovative products or services, a dynamic team, high uncertainty, and risk characterize it. Startups generally involve an innovative business model or a new technology. They are small and agile and have a limited number of employees. Their goal is to grow rapidly and scale up their operations.

Mostly,?entrepreneurs?with a vision for solving a problem they are passionate about are behind many startups. They are often risk-takers willing to put almost anything and everything on the line to make their vision a reality.

The Booming Rise of Startups

The 21st century is witnessing a glorious thunder in the rise of startups. It is attributable to several factors, including the advent of?5G ?and the ultimate?globalization ?of business. Startups receive laud for their innovation, creativity, and outside-the-box thinking.

This rise in startups has had a striking impact on the economy. They have created new jobs and industries and injected new life into existing ones. Startups have made it possible for dreamers to attain their dreams and have changed how we think about business and entrepreneurship.

Let’s now explore 8 reasons why startups fail and tips not to be one of those startups:

1. Missing Market/ Demand

One of the big reasons startups fail is missing market or demand. Let’s understand this with an example. Suppose there is a continuous recession period, and you are a businessman. The market is facing a severe financial crunch, but you increase your service’s price amidst these circumstances. Sounds stupid, right? Because why would you increase the price of any service when the market is already suffering? The same goes with a startup venture that doesn’t have any demand or market because any such startup will drastically fail, no matter the amount of effort or finance you pour into it.

To overcome this, startups need to clearly understand their target market and what needs or wants their product or service fulfills. One also needs to ensure that the product or service has competitive prices and a clear marketing strategy to reach the target market.

2. Not Monitoring the Competitive Landscape

Another potential reason that startups fail is that they need to monitor the?competitive landscape. There’s a saying that watching others’ steps drags you behind in a race. But, the quote fits in the physical race only and suffers setbacks when applied in the race of business ventures. Because in this scenario, you may only improvise if you keep an agile eye on your competitors. If you don’t track what other companies are doing and how they’re doing it, you will fall behind and eventually fail. To overcome this, startups need to be constantly monitoring the competitive landscape. A competitive strategy is the only way to track and beat the competition.

3. Absence of a Skilled Team

A lack of skilled or knowledgeable team members will inevitably lead your startup nowhere. The most promising way to avoid this pitfall is to carefully consider the skills and knowledge necessary to make your business successful and seek out team members who possess those qualities. Take the time to interview potential team members and ask for references; do more than settle for anyone. With a strong, skilled team in your corner, you’ll be good on your way to a successful startup. But if you skimp on team quality, you’ll likely regret it.

4. Improper Resource Management

Most startups fail because they have an ambiguous approach to?resource management . They either need more resources or don’t properly allocate their resources. By resources, we mean?financial assets , manual labor, and?technology. It can lead to numerous problems, such as the inability to complete their product, not reaching their target market, or needing more money to sustain their business.

There are varied and versatile ways to manage resources properly. When beginning a startup venture, have a clear idea of what your product is and who your?target market ?is. You must also allocate the resources properly, ensuring you have enough money to complete the product and reach the target market. Finally, you must carefully monitor resources and their inventory, ensuring mindful resource utilization.

5. Inappropriate Branding or Advertising

You worked day and night, in and out, on your dream startup project. You planned everything carefully but not brand positioning or promotion. Have you ever wondered how your customers will know what you sell when you don’t have a?brand positioning ?or promotional strategy in line? Your services will lose somewhere in the plethora of already available services out there.

You can clear the cloud of inappropriate branding or advertising by relying more on exclusive promotional strategies than conventional ones. You can combine?digital marketing ,?social media marketing ,?influencer marketing , and many such exclusive marketing types to share the word about your project with the masses. When planning your startup promotional strategy, focus on making your brand visible rather than just trying every other branding hack available. By doing so, believe us, you will reap some effective results.

6. Lack of Research

You must have heard a stitch in time saves nine.

Well, in a startup’s context, research in time saves business makers from the risk of a failed startup. Let’s understand it in a detailed manner now- Assume you are going to have a sweatshirt startup. To organize your startup, you go to the market and purchase wholesale sweatshirts. After that, you start selling your sweatshirts on digital or conventional market platforms. Will this way get you, customers? No, and even if you get them, there will be few. The competition and rapid-paced marketing growth will kill your efforts. Now, what’s the solution? Well, comprehensive research and planning will be your savior to map a way to an interesting and impactful startup. Research the sweatshirts’ stakeholders, competitors, demographic divisions, customers, and every possible parameter.

A thorough research before beginning any endeavor will help you identify potential partners, suppliers, and other important stakeholders you will need to work with to launch your business. It will help you have the right team to help you achieve your business goals. Overall, research is a critical part of the startup process. With it, it is easier to launch a successful business.

7. Not Thinking from the Customer’s Perspective

Not understanding the customer’s perspective, demands, likings, or dislikings is the major blow you can give to your startup. Thus, before even thinking about your startup, plan and strategize how you will adapt to your customer’s needs. Money, knowledge, or promotion can never boost a startup the way planning according to customers’ needs can.

You may now ask how you will know what customers think about your products or services without an established business. To do that, you don’t need any fancy business outlet; you only need a curious mind and a smart approach. Just pick some of the well-doing businesses in the market to analyze the perspective of your potential customers. What are their needs and wants? What are their buying habits? What motivates them to make a purchase? By understanding your customer’s perspectives, you can develop a marketing and sales strategy that will appeal to them and increase your chances of success.

8. Ineffective Strategy

Startup companies receive appreciation for their innovation and creativity. However, many people need to realize that before any great startup can take off, a significant amount of?strategic planning ?goes into executing and launching the business. If you have a proper strategy, then your startup will land somewhere.

Sit back, do enough analysis, and then prepare a strategy to execute your dream startup. The strategy helps you to validate your business idea. It will ensure a stable market for your product or service. It is undoubtedly very important in the early stages of planning a startup, as it can help you to avoid wasting time and resources on a business that is not likely to be successful. The strategy also supports you in developing a better understanding of your target market and what they are looking for. This understanding is critical to creating a product or service that meets your customers’ needs.

The Bottomline

Organizing a startup may be a zig-zag ride, but it is definitely a fulfilling one. Despite the challenges, startups offer a unique opportunity to create something new and potentially world-changing. With the right team and some luck, a startup can take off and achieve incredible success. If you want to roll on a prosperous startup journey, platforms such as?Exitfund ?may greatly help you. Without further ado, buckle up and embrace a journey toward an established startup but remember not to make the mistakes we mentioned above.