Know your market, Love your customers, and have plenty of Cash!

To recap the top 11 reasons startups fail, they are consolidated below from my previous posts. In simple terms, know your market, love your customers, and have plenty of CASH.  

The number ONE reason most startups fail is - NO MARKET NEED FOR THEIR PRODUCT OR SERVICES. A whopping 42% of companies fail due to not validating a market need before starting their business. This is a critical mistake and is the reason why all BullSnot! products were first introduced on Amazon and test marketed for over a year at the Davy Crockett TA Travel Center before launching broadly. The numbers don’t lie! If you have no sales then there is no market need. 

The number TWO reason most startups fail is they - RAN OUT OF CASH. Roughly 29% of startups fail because they either under-estimated the time it took to get to market or did not adequately budget for their startup costs. CASH FLOW is king! Too many startups focus solely on margins and high margins are great. However, if market penetration is too slow and you are not generating enough revenue to cover the daily costs of the business, you will quickly fail. This is even true for businesses with sky-rocketing growth. If your customers' terms are too generous and your suppliers' terms are not, you can find yourself bankrupt in short order. The key is to manage your cash flow like it is the most precious asset of the business. Because it is!  

The number THREE reason most startups fail is they - DIDN’T HAVE THE RIGHT TEAM. Twenty-three percent of startups fail because they put together the wrong team or failed to recognize the talent required. Bringing on friends who may or may not be qualified to do what is needed is just crazy and can lead to workplace animosity. You must outline what the business needs to be successful before any hiring takes place and hire for talent, not friendship. Further, all successful teams and companies share a common vision. What is your company’s Vision Statement and does everyone know it? Just food for thought.  

The number FOUR reason most startups fail is they - GET OUTCOMPETED. Nineteen percent of startups fail because they get outcompeted or as I like to say OUT WORKED. Startups require extraordinary commitment from their founders. Not only should you expect to work your butt off, but your dedication to the company will set the example and tone of the workplace. Have you ever worked for an owner who treated it like a part time position? Did you feel motivated to work hard? Did you feel that your work was important? There is no excuse for being out worked, except lack of drive. If you get outcompeted and you gave it 110% of your best effort, you can still hold your head high and know your failure wasn’t from absence of initiative.   

The number FIVE reason most startups fail is - PRICING / COST ISSUES. Eighteen percent of startups fail because of pricing or cost issues. Most of the time this is due to bad assumptions by the company’s founders who failed to put together a complete business model before beginning operations. You must know 4 things before you start a company. First, what are you going to PRODUCE and what is it going to COST? How did you arrive at the cost estimate? Did you include freight? Did you get price quotes? Second, what is the COMPETITIVE LANDSCAPE? Who are your competitors? What are they selling? What are their price points? All products have a competitor even if it is just water. A competitor of water would be apple juice, coke, beer, etc… Third, what market NEED does your product fill? Can it be filled by your competitors? Is your product novel? Can you price it higher than your competitors, the same, or must it be discounted? Lastly, what are going to be your OPERATING COSTS? Do you need a large office? Company cars? Loading docks? Rent or buy? And don’t forget your insurance costs! Operational costs are real and should be very carefully scrutinized before you start operations. Remember the key to longevity is DON’T BURN THROUGH MONEY NEEDLESSLY! I would suggest you find a mentor who has already navigated a successful startup business to guide you along your journey.   

The number SIX reason most startups fail is they make a - USER UNFRIENDLY PRODUCT. If you have to be a jet airplane pilot to use or understand your product, you might have a problem! Seventeen percent of startups fail because they make products that are over complicated. Know your market and make sure your products are designed to meet your customers’ needs, without being overly cumbersome to use. The old KISS (keep it simple stupid) principle couldn’t be more appropriate.

The number SEVEN reason most startups fail is they make a - PRODUCT WITHOUT A BUSINESS MODEL. How many of you remember the Polaroid camera? How many of you have one in your closet? Do you think a new improved Polaroid would have a market and a business model? Seventeen percent of startups fail because they produce products that the startup founders fell in love with and didn’t actually fill a market need. Never make the mistake of falling in love with a technology and believing it will just naturally evolve into a business. Validate your idea first and prove that it fills an unmet market need. When bringing a new product to market, there are countless things that can go wrong in either development or promotion, whether it's a flawed concept, an inflated price tag, or just a product no one needs. 

The number EIGHT reason most startups fail is - POOR MARKETING! I really thought this would be higher in the list. Fourteen percent of startups fail because of ineffective marketing or simply poor judgement. The old saying, “You think hiring professionals is expensive? Try amateurs!” However, even big corporations make poor marketing decisions sometimes. You know Colgate makes toothpaste. Right? Back in 1982 they tried their hand at making frozen foods. They might have succeeded if they weren’t good at their main product, toothpaste. People didn’t associate tasty food with a brand that is known for cleaning your teeth after you eat. It was a major failure to say the least. The biggest mistake that most startups make is assuming the product will sell itself. This never happens without a good marketing strategy because people never hear about it. Make sure that you have a robust marketing strategy and budget for your new business. If you don’t you will certainly regret it! Thank you to H2B Creative for all their help for making the BullSnot! herd of products such a success.

The number NINE reason most startups fail is they - IGNORE CUSTOMERS. It is just stupid to ignore your customers! Plain and simple. Fourteen percent of startups fail because they neglect to listen to their customers. You not only need to listen to your customers but need to find out how they are using your products. Case in point, VizABull Glass Cleaner was developed for cleaning glass. Obviously. However, our customers use it for cleaning chrome, stainless steel, motorcycles, and even fiberglass bass boats. You learn a lot by listening to your customers and can find new markets for your existing products. 

The number TEN reason most startups fail is - PRODUCT MISTIMED. Would you open a newspaper today? Market timing is everything. The only excuse for a mistimed product is lack of due diligence. Thirteen percent of startups fail because they were too lazy to do a full market analysis and clearly define their market. If you don’t know the market well enough to do an accurate analysis yourself, hire a professional marketing firm to do it for you. You must get this right or the consequences can be catastrophic.  

Last, the number ELEVEN and final reason in this series that most startups fail is when they - LOSE FOCUS. Thirteen percent of startups fail because they do not eat, sleep, and breathe the company! There simply is no excuse for this. What I have found helpful in staying focused is to make a ‘To Do’ list at the end of each day. Then the next morning I never miss a beat in getting to work. If you have a focus problem, try a to-do list. I promise it will help. Always be focused on the success that is just around the corner because if you lose focus it will never happen.

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