Why do startups fail? The question is mind-boggling, scary, and thought-provoking, I am pretty sure that’s one question most entrepreneurs are scared to ask because of the harsh realities of most startups. Neil Patel even made it scarier with his article – that can be viewed via Forbes – where he aggressively headed it with 90% of startups will fail, I am pretty sure every reader that gets to see that post might have twitched their nose initially but will end up understanding his point as they read further. In actuality, most startups fail, but do you want to be a statistic?
My best guess is No. Like every similar problematic situation, until you can appropriately provide answers to the “why” you will never know how to manage the situation. In this article, I will be providing you with the Why’s and also solutions on how to manage the situation.
Why Most Startups Fail?
- Nonexistent Market Need
Virtually all professionals that talk on the reasons why startups fail, almost always give this point a mention. It is a no-brainer; it is even taught in basic economics classes. When there is no need, there will be no reason to purchase such a product and in the end, the business will take an overdrive down to the pit of failure. While some entrepreneurs get too motivated by the idea of being a pioneer, a pacesetter; sooner or later, they get to understand that it is more difficult to provoke a need for a product where it is nonexistent than to introduce a product to a market where there is already an existing need.
- Poor Product
Sometimes, when you look closely into why startups fail, you will discover that a common faux pas most of the startup share is, poor product. There is no how you will expect a large number of people to buy a product that doesn’t sufficiently satisfy the customer’s need, one reason why customers buy a product is to attain satisfaction, but with a bad product, that becomes a long catch. Eventually, the business ends up running on the deficit because they seem to be spending more on production, with little or no profit to show for it; over time, the company will end up accruing so many debts, they will be forced to wrap up.
- Poor Team
Of course for a startup to thrive, it requires relentless efforts from team members to make it grow. The progress of a startup mirrors the efforts made by the team. In cases where the members of the team are either inexperienced or lack expertise, the startup is destined for doom; because the startup is being handled by the wrong set of personnel’s. Also, lack of drive of passion and drive by the team member could also be detrimental to the startup; because the team members are unmotivated to yearn for success and to put in the work required.
Naturally, you will expect that competition is what makes a business grow; since the “players” in the competition are expected to outcompete each other by mapping out strategies. Like in every competition, there will always be winners and losers and the loss is often times attributed to a poor management team that lacked the foresight to see things coming and themselves with enough tools to help them scale through. Other factors like pricing is one means the winning players in the competition exploit to kick others to the cub. So it is safe to say competition is as beneficial as it could be detrimental: you decide your fate.
- Poor Marketing
This is also a common problem that is often attributed to giving explanations to why a startup end up failing. What’s the point of producing a product and you end up making a lackadaisical effort towards getting the product out there. Marketing gives the product the visibility the product deserves, it brings the products to the fore of the customers and when the marketing of the product is poor, the startup is expected to make an unimpressive profit every year as compared to when the marketing is commendable.
While there are more reasons you could highlight to explain why startups fail, the aforementioned reasons cover a large percent of what you should know.
How You Can Succeed
The above paragraphs have sufficiently exhausted the problems, now it is time I give solutions to those problems so I don’t appear like a prophet of doom.
- Market Research
Market research as defined in an article, that can be located on Shopify consists of systematically gathering data about people or companies – a market – to understand what the people need. You will end up discovering that once you know what the people needs, you will produce a product that satisfies those needs and also is guided to produce a better product; that way, your daily sales is booming to the roof.
- Developing Of a Good Business Model
A business model as defined in an article that can be located on Investopedia is a company’s plan for how it will generate revenues and make a profit. It explains what products or services the business plans to manufacture and market, and how it plans to do so, including what expenses it will incur. This is very important to a startup because it serves as a blueprint to what you intend to achieve as a startup; helps you keep track of your finance, and sell you out properly to investors when in cases where there is a need for expansion and contributions from investors will go a long way.
- Good Management Team
This is key to every Startup that intends to succeed. You want to hire the best minds in your management team because they will prove useful in every decision-making as the startup grows. You will also agree with me that once your startup is equipped with skilled, enthusiastic and experienced team members, you will find it hard to be a victim of most of the problems discussed above.
This is also highly recommended; you are a start-up, most times, you will need the advice of an experienced entrepreneur – especially those in your line of business – to guide you through sensitive areas of the business that is like the rate determining step. They have once been in your position, they have probably made the mistake you would have made if you hadn’t consulted them, why not consult them to tell you the what-to and what-not. A little guidance from the pros wouldn’t hurt one bit.
There you go, I hope with the points mentioned above, you don’t end up being a negative statistic.