56 reasons startups fail

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Published: 24 April 2016


56 reasons startups fail

There are many different reasons startups fail, and many companies suffer from a combination of reasons. There is no guaranteed path to success for a startup, but this article maps out the many pitfalls to look out for. The reasons for startup failure are broken down into a few key categories that cover everything from finance to management.

Startups fails because their key idea

You need a good idea for your startup to be successful, but not all good ideas lead to successful startups. Most people think about the what, how, and why of their idea. While this may seem perfectly reasonable successful startups approach it in the reverse order. They first decide why, what greater purpose will their business serve. One they have their higher purpose they look at how they can use their talents and resources, which gives them their what.

Startups fail through lack of or poor planning

If you don’t have a plan you don’t have any way of tracking your progress or knowing if you’re heading in the right direction. A business plan is crucial to a successful startup. It doesn’t need to be long, but it should be well thought out.   However, there are always too many factors to be able to guarantee a plan’s success, so you need to build in some flexibility. Have a plan b at the ready incase events don’t go to plan, and a plan c if you can.

Startups fail because of a lack of leadership

If you want your startup to be successful you’ll need to pull your staff together and get the best from them. There are lots of reasons that companies fail through a lack of effective leadership. Some of them are personal such as arrogance or egotism on the part of the founder(s). Other more common reasons include a lack of a mentor, choosing the wrong partner, and simply following bad advice.

Finance is a common reason that startups fail

It is essential to get a good grip on the finances for any business, not just a startup. If you don’t know your numbers you are in danger of running out of cash, failing to raise enough money to develop the business, or going to the wrong places to finance the business. There really is no justification for sloppy financial management so don’t make this mistake!

Human resource management

Listen to your staff, they are at the sharp end of your business are in a better position to spot problems are opportunities than most senior management. Make sure you hire people with the right attitude and personality to fit your company culture. You can easily teach people skills, teaching attitude is much harder.

Product launch

Getting the product launch wrong can be a disaster. Make sure you time your launch right, too late and you may miss your window of opportunity to penetrate into the market. Also think about location, it should fit well with your business and where your customers are.

Marketing

To be successful you need to standout, so getting the best marketing is important. As a startup any opportunity to get your product in front of your target consumers is a marketing opportunity. Failing to research your market and target consumers is often a factor in startup failure. You also need to look at existing competitors in your marketplace. If they’re well entrenched you may find it a lot harder to penetrate the market than you planned for.

Sales

Sales is the lifeblood for your business, without sales there is no way your business can endure. Many entrepreneurs fall into the trap of thinking everyone will see the benefits of their new product or service, that it will sell itself. The reality is sales takes time and effort, but get it right and it will be a solid foundation for your startup. Keep an eye on the cost of sales, as this can sometimes lead to failure.

Operations Management

As your business grows you’ll need to formalise your operations, and automate where possible. You need all your staff working to the same system, and communicating effectively. Focus on your users, for a startup it’s often more important to get the user experience right than to turn a profit. You should listen to customer feedback and constantly improve your product.

What do you need to do to make sure your startup doesn’t fail?

The infographic below by Technorian runs through the full 56 reasons for startup failure. The graphic summaries their research and matches is up with some quotes by successful business leaders.

56 reasons startups fail infographic

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