Top reasons that startups fail (and how not to)

If you are a founder, co-founder, investor, or anyone who works in a start-up, watch out for these top reasons that startups fail.

1. Ran out of cash/failed to raise new capital

This one is a no-brainer.?

Having a poor cash flow can signal an impending death of a company, not preparing how to deal with it means certain failure

A wise entrepreneur will only spend on necessities and save wherever possible.?

A well-formulated plan, such as a development roadmap, can help you and your team focus on your goals and avoid wasting money.

The ability of your company to take on risk can determine whether or not a costly pivot is a right thing to do.?

So, what exactly should it be? Take the risky opportunity and hope it pays off, or keep grinding the same ax in the hope of reaching profitability?

1. No Market need

Having the right PMF is the play here.

How to get PMF?

Do this:

• Determine target audience?
• What is the undelivered customer need - find it
• Define value proposition
• Build MVP feature set
• Create MVP prototype and test

3. Get outcompeted

How to not get outcompeted as a startup?

It is all about differentiation.?

Networking and collaborating, I believe is one of the best ways, can help you to develop your brand story, company culture, value proposition, and vision to give you an edge over competitors.

4. Flawed business model

Most technical entrepreneurs work hard to create an innovative product, but they overlook the fact that an elegant solution does not always translate into a successful business.?

To keep the dream alive and growing, businesses need an equally elegant business model with the right price, messaging, and delivery channel to the right target customers.

The same diligence is required to define the right business model as it is to design the right product, but the approach and skills required are different.

So, here are 7 steps to establish the right business model

1. Size the value of your solution in the target segment.
2. Confirm that your product or service solves the problem.
3. Test your channel and support strategy.
4. Talk to industry experts and investors.
5. Plan and execute a pilot or local rollout.
6. Focus on collecting customer references.
7. Target national trade shows and industry association groups.

5. Legal Challenges?

Failure to meet all legal requirements can lead to trouble for a startup.?

Startups in India face numerous challenges; it is not feasible to pool resources to the same extent as a well-established corporate house.?

Given the arduous nature of the Indian legal system, it is in the best interests of startups to avoid running afoul of the law.?

This risk can be avoided or reduced by raising awareness.?

These are the legal issues that startups in India face.

• Business structure?
• Taxation??
• Labour Laws???
• Listing Requirements?
• Business licenses?
• Protection of Intellectual Property?
• Corporate Governance

We will cover the rest in the next class, I mean “post”...

What do you think about the legal challenges, I feel…

6) Pricing/cost issues

Going in too low and constantly undercutting

For some businesses, this isn't a mistake; it's an entire strategy, and it's a bad one. Going in too low all the time may be good for your top-line revenue, but it wreaks havoc on your bottom-line profit number—the one you'll need to survive.

Using the same margin for all products?

No rule, law, or commandment requires the same margin for all products. Slower moving items, on the other hand, necessitate higher profit margins.

Ignorance of the distinction between margin and markup?

Margin is always based on the sales price. The markup is always based on the cost. I once had a client who didn't understand the distinction and offered a product line with a 100 percent markup.

7) Not the right team

Be open and honest about your business goals and expectations.?

Apart from salary, offer them equity with a lock-in period.?

To stay afloat for a few quarters, get your initial funding right.?

Do not be afraid to choose people who have previously failed.

8) Product mistimed

A well-timed product launch can make or break your company, whereas a poorly timed one can destroy it. Even if your product is fantastic to begin with.

Ask yourself these questions before launching the product?

• Is Your Startup Launch-Ready?
• Have You Done Enough Research?
• Is Your Product Quality Up To the Mark?
• ?Is the Marketplace Receptive?
• ?Do You Have the Necessary Funding?
• ?Is Your Schedule Accommodating?
• Have You Set the Right Launch Conditions?
• Are You Marketing Your Brand the Right Way?
• Are There Innovations You Overlooked?
• Are All Your Stakeholders Satisfied??

9) Poor product?

Should I say more?

10) Disharmony among team/investors?

How to have harmony among your team members?

Team leaders can maintain harmony in an organization by understanding the company’s needs/expectations and the same from a team member’s viewpoint.

The mere task of the team leader is to keep these points of view aligned and in harmony.

To do so, team leaders can:

• Engage in employee-employer relationship-building activities.
• Make sure there is clear-cut communication and each team member’s issue is heard and met on priority.
• Set KPIs for team members so they can become self-reliant and self-serving. This will help team leaders let go of the micromanagement.
• Ensure and keep a check on team members’ happiness meter and efficiency. That can be by talking to team members once or twice a week collectively.?

11) Pivot gone bad

A pivot is not easy to execute.

And that's why many startups fail. If more startups did pivot, then more startups would survive. Pivoting is the secret to survival. It's the closest you'll come to failing without actually failing.

So, here are 12 steps to do it

1. Realize when your plan isn't working.
2. Come up with a list of possible reasons why it's not working.
3. Gain a fresh perspective on your long-term goals and vision for the business.
4. Revise those goals and visions as necessary.
5. Come up with a list of ideas that will help you to accomplish those goals.
6. Develop a clearly defined plan.
7. Define the numbers or signs that will gauge the success of your new plan.
8. Forget the previous plan.
9. Explain the plan to the team.
10. Embrace the new plan.
11. Watch the metrics.
12. Rinse and repeat.

12) Burned out/lack of passion

Entrepreneurship requires sacrifice and commitment, and even if you enter with a positive attitude and a strong support system, the daily rigors and stresses of business ownership will wear you down.

1. Establish reasonable expectations.
2. Define your boundaries.
3. Change your daily routine.
4. Remind yourself why you began.