Top 8 Reasons Why Startups Fail

Work-life imbalance

Businesses are started by entrepreneurs who are willing to take risks and invest their time, effort, and resources in their company. With that being said, and with so much more than just money being invested, it’s understandable why entrepreneurs are more at risk of suffering from several mental and physical health problems.?

Studies have shown that entrepreneurs are more likely to suffer from stress-related mental illnesses such as anxiety and depression. In addition to sleeping disorders and exhaustion, many entrepreneurs often work more hours than a traditional 9 to 5. Because of this, it's easy to understand how the work-life balance of many entrepreneurs can get thrown out of whack and start to take a real toll on their health. For this reason, a poor work-life balance can be the leading cause for a startup to fail.

Poor timing

Timing is everything in business. For example, a great product can be released too soon or during a time when the market may not be suitable, and as a result, sales will be low. Advertisements can be run at the wrong times or for the wrong audiences, affecting profits.?

Not only are the various aspects of a startup seriously affected by timing and execution, but the startup itself can also be affected. A particular startup needs to start when the market conditions are advantageous and conducive to its growth and sustainability, e.g., starting a swimsuit company might not be the best idea at the beginning of Fall when people are preparing for the cold of Winter.???

Discord among team members, partners, or investors

It’s essential to try and build cooperation and mutual respect within the company, especially between team members, partners, and investors. Everyone needs to be on the same page and have the same vision in mind for the company to strive for a common goal and reach success. If team members or a board of directors are not seeing eye-to-eye with the investors, one can almost be sure that the startup itself will fail. This is because discord within a company causes more than just hurt feelings and uncomfortable conversations (or worse, confrontations), discord causes disunity and results in a lack of unified momentum toward success for the company. Startups that succeed are generally composed of team members who work together, not against each other.

Lack of qualified personnel

Pinpointing which types of people and particular skill sets are needed for a startup to thrive is key to building a successful startup. A promising startup will have identified precisely what sorts of personnel need to be put in place to maximize output and quality work. That said, several failed startups often lack qualified personnel in key positions.

Regulatory factors

The government, whether at the federal or state level, can sometimes interfere with the success of a startup. It’s essential for any entrepreneur to have researched which codes, policies, and legal regulations will affect their startup to be in compliance and free of any legal hindrances to advancing their company’s progress. Running into problems at the level of regulations can severely impact (or even wholly tank) a startup before it even has a chance to grow. This is why employing someone with a background in business law can be such a significant factor in determining the initial success of a startup.?

Getting product pricing wrong

While several entrepreneurs have ideas for great business models and products to sell, a great deal of overall success rests on whether or not one gets their pricing model correct. A great product can be underpriced, causing sustainability to decrease due to a failure to raise capital quickly. Likewise, pricing a product too high can also affect sales.???

Unviable Business plan

For a startup to have a fighting chance for success in an ever-changing market that is full of competition, having a viable business plan is an absolute must. A viable business plan considers financials, personnel requirements, overhead, current market trends, demographics, and virtually every facet of the business to prepare to launch a company with the most incredible odds for success.?

Unfortunately, if a business model has not considered any factors that play a critical role in determining company trajectory, the results could be dire. Be sure to come at your business plan from all angles; if your numbers, projections, and analytics are theoretically correct, they should prove viable in the real world. However, if your business plan is based on faulty calculations, misinformation, or a lack of vital data, you may have a failing startup.?

Failure to raise capital at the right time

Taking into account the above-mentioned reasons why most startups fail brings us to our last point: Failure to raise capital. This last reason can actually be the result of any of the above-mentioned points. Truth be told, if your startup is raising capital too slowly or not raising capital at all, you need to explore some of the reasons above, go back to the drawing board, and come up with a plan to put your startup on the right course.?

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