Why Do Startups Fail

Startups have been the talk of the business news for a decade now, and it shall continue to be for another. Worldwide we’ve seen startups with disruptive business models and innovative solutions to business and consumer problems. But do all startup businesses succeed?

In 2019, the failure rate of a startup was around 90% , that means 1 out of 10 Startup businesses are usually successful out of which some of them become Unicorns (A Company with a value of over $1Bn) some startups try to break-even and survive, some burn investor money and get acquired or close their business. Now if you look at the statistics there’s a huge amount of money burned to just keep the business running under the pretext of company valuation. There could be a lot of reasons for a startup to fail such as lack of market research, ran out of money, ineffective marketing, no clear vision & strategy, bad partnerships and lack of expertise. Talking and discussing business failure is very critical to evolve and amend changes for the future. Enough with the failure talks though! Let’s discuss how we can avoid failing?

When you see a successful business, it's just a tip of the iceberg. Beneath that iceberg is a lot of hard work, tactical changes, strategic decisions with trial & errors. Find below 5 Critical Factors if followed rigorously will help build a successful startup business.

Business Objective

Having a clear vision is very important for any business. People, whether they are your employees or investors or even your customers, don't like to work along with a business who isn't clear about their objective.

• Why do you exist?
• What are you solving?
• Who is looking for your services??
• How can you make things better?

Founders should ask these questions to themselves every now and then to get a better sense of clarity whenever they are stuck in a situation or when they’ve forgotten why they established a business initially? Successful business is driven by great objectives and bigger visions. A startup without any vision and mission is a lone driver on an endless road burning fuel in a low mileage vehicle. A company vision unifies its employees and customers, builds trust among its investors and partners, and even inspires other businesses in its segment to do greater things. Imagine the hard work and dedication your employees will put-in when they clearly understand your long-term goals and how they are helping in building something bigger.

Balanced Team

A balanced team of like-minded individuals who understand your vision is critical. A founder who is surrounded by resources that are working towards a single focal point is helpful as it drives the entire organization to achieve its goals. Whenever there’s a gap of understanding between the Founders or the Top Management, it is usually the beginning of a downfall. A balanced team with key individuals who understand the vision of the organization and can deliver a perfect roadmap to drive the strategy is necessary for a strong foundation of the startup.

Time & Demand

Many startups have failed only because they were not launched when the market situation demanded. Timing is very crucial as most businesses have been successful because they were perfectly timed considering the consumer needs and demands. For Example look at the COVID-19 situation, many startups have established during this period only because there was a demand for the product/service in the market. There are many startups that were forced out of business or even changed their execution strategy and business plan due to COVID. Startups also need to understand that consumer & market demands fluctuate and are ever-changing. Even if you've launched in time, there might arise a situation where the market need is diminishing, in such circumstances it's very necessary for startups to evolve and address the market needs. I believe startups need to be quite flexible in changing gears as per the consumer demands. Frequent market research and evaluation will help succeed and clear pathways for a long term vision.

Clear Strategy

You’ve built the product, you have a vision to take this product worldwide, but how do you do it? A well established business follows a clear business strategy with long term milestones and short term goals. A clear strategic business plan is very essential as it gives direction to your business activities. I am not just talking about Marketing & Sales Strategy - A Business Strategy should consist all the major components related to execution of the business such as Process Strategy, Operational Strategy, Product Development Strategy, Brand Strategy, Growth Strategy - When all these components of business strategies align together and work towards attaining one company vision - you can say you’ve built a strong startup business.

Implementation

Every Idea, Every Business is a huge success in the Founders mind but one can only know when it is implemented. Startup cannot achieve its vision if things are not implemented on time, startups cannot deliver results even with a well balanced team if the strategy is not implemented. Implementation doesn’t mean it always has to be right. Trial & Error is part and parcel of a startup ecosystem, but you only come to know what’s right and wrong only when things are implemented. Once you are clear with your vision and strategy, a set of steps to implement the plan is very important. Business Implementation can be done through a long term plan with short term outcomes that help you drive further and clearer.?

To conclude, the above mentioned pointers is usually a standard practice but many startups fail to follow or lose their way after initial assessment. I believe any startup or a small business who frequently go back to brain-storming involving the 5 factors mentioned, can succeed in this competitive market as it gives flexibility and a better understanding to move forward.