Why your start up business will fail…

There are plenty of reasons why the start up you think deserves all of your attention and as much of your, and likely many other peoples, hard earned cash will fail. And as much as there is generally no single reason for any start up to fall at one of its first hurdles, you can generally bring it back to three main culprits.

Business model. It might be a great idea but unless you can build a good business on the back of it – all of that investment, no matter how cool, how current or technologically advanced, if you cant make it profitable or scalable, you wont have a successful business.

Fact: A quarter of start ups blamed a weak business model as the reason for failure.

Money.  Many business start ups blame running out of money for their failure, many struggled to get finance. Clearly cash is king for early phase businesses and the big bomb is that even a successful business model will fail without proper cash flow.

Fact: A quarter of start ups said that running out of money resulted in its failure.

Market. Irrespective of the quality of product or service, the price, the technology, usability, your understanding of stickiness (I could go on) if there is no market need for your business – it will fail. To be successful you need to build something that enough people want!

Fact: 18% of businesses claimed that there was not enough traction to build their business, 12% found that there was no market for their product. Brutal!

Takeaway

Building a suitable business model requires skills beyond just the technical development and ability of a product. Its never too late to get your commercial ducks lined up and as these common failures prove, each of these relate to lack of preparation in commercial considerations.

Money is crucial – sourcing investment is great, but also ensure that your MVP is out in the market and results in feedback. Some of the great businesses are successful doing something different to what they originally anticipated. Earning money is great – but make sure you also spend it on the right thing. Never ever overlook commercial (sales, distribution) and marketing – and certainly not at the expense of pure technical development before you understand the market fully.

Make sure your product has ample consumer research and that you have identified a need or a gap that people are prepared to spend their money on. Ensure you involved commercial teams early on to develop distribution channels, consumer feedback and valuable relationships that will build your brand.

“Commercialist” is a consultancy, advisory and hands-on project company who work with early phase and growth focused businesses to ensure their success.

https://www.cbinsights.com/research/startup-failure-post-mortem/