Why Do Startups Fail?

Starting any business is an exciting affair that brings satisfaction to the entrepreneur. It can also turn into a nightmare once something goes wrong. Statistically, many startups skyrocket only to crush within a short period of takeoff. If any business experiences a rapid growth rate, problems arise, and it faces the risk of failing. Below are a few tips on how fast growth isn't entirely remarkable for new ventures.

How Rapid Growth Affects Startups

Growth is tremendous for business, but rapid growth is morbid to the sustainability of that business. New ventures meet the unmet needs of customers, creating a wave of excitement. The entrepreneur feels confident of the positive growth, mainly because marketing is by word-of-mouth.

The rapid sales attract investors who commit their capital. They expect the business to continue expanding and receive huge profits. However, the big hype about the new product attracts rivals and counterfeits, making it harder for the authentic product to sell.

The initial excitement eventually dies down, and the entrepreneur has to devise ways to market the product to new clients. Since the first wave didn't need marketing, the second wave starts costing unplanned business expenses for advertising fees.

As the business expands, more workforce comes on board to handle the overflowing workload. Since qualified talent is limited, the unqualified staff handles the business's affairs. Low productivity affects the company, further frustrating the entrepreneur's initial high hopes.

A large workforce demands a system and specialization be in place. Management teams, human resources teams, IT and finance departments help any business to run smoothly. An unstructured company may crumble due to disorganized and abandoned responsibilities that are crucial.

Without a work culture, disputes tend to happen. The staff may start pointing fingers and shifting the blame on each other, causing the establishment's collapse. An entrepreneur cannot run a large company alone, so creating a chain of command and clear responsibilities for everyone can be beneficial.

The pressure of running a startup can lead to ethical errors that become costly to the business. Legal issues and other ethical mistakes can lead to investors pulling out. Any entrepreneur with a business idea should plan to avoid dealing with numerous problems at once.