Reasons Startups Fail

Top 4 Reasons Startups Fail

Starting a new business is an exciting prospect, but it’s important to remember that a large number of startups fail, either due to mistakes made on the part of the entrepreneur or general issues that the proper market research could have perhaps prevented. According to both experts and business owners themselves, there are a number of things that can kill a startup. The following are four such reasons:

1. Creating an Answer for an Non-Existent Question

Most entrepreneurs are looking to provide products and services that serve as solutions to problems that consumers and other business owners experience on a regular basis. Unfortunately, it’s estimated that around forty percent of business failures are as a result of providing a solution to a problem that simply doesn’t exist, or one for which there is already a more efficient, better solution.

2. Assembling a Lackluster or Divided Team

In order for a startup to succeed, you need more than a great idea; you need a team with a lot of passion, drive, and ambition to bring your goals to fruition. While the idea of having your own business can be attractive, many entrepreneurs don’t take all of the responsibilities, risks, and commitment that is required into consideration. After the initial buzz and excitement has worn off, many people start to lose focus and interest. This has caused the failure of many a business. Additionally, when you’re talking about multiple people working together, it’s only natural for conflicts and creative differences to arise. Many startups fail to handle these conflicts well, resulting in the parting of ways and the dissolution of the business, sometimes even before any real progress can be made.

3. Cash Flow Issues and Poor Pricing

Sometimes it’s hard to determine what came first. Is the business short on money because of poor planning and mismanagement or is a lack of funds the reason for poor development? Either way, a plain and simple lack of money is another commonly reported issue with startups. Poor pricing can also contribute to the problem. Pricing your products and services is a delicate balance, with over-charging and under-charging both significant issues that have resulted in businesses having to shut their doors.

4. A Lack of Aggressive, Dedicated Marketing

Marketing is where it’s at, and that includes websites, local advertising, and the ever-growing social media. You can have the best product out there, but without proper marketing, no one will ever know. Not only will advertising well get your business out there, it will also allow you to get feedback from your client base. While not every suggestion will have merit, listening to your clients will help you to make tweaks here and there in your business that could ultimately pay both short- and long-term dividends.

Failure is not the end-all, be-all. It was Winston Churchill that said, “Success is the ability to go from one failure to another with no loss of enthusiasm.” In business, proper planning and foresight goes a long way to ensuring the success of your endeavors. Make sure that you cover all your bases – one thing I like to do is try to write down a list of all the possible risks and then next to my risks, write down on how I am going to mitigate them.

I must forewarn though that it is easy to let ego get in the way of this process. Let me explain: a lack of marketing is one of the most common risks a business can face. However, many business owners think that their product has enough merit on its own to spread through word of mouth. Marketing then becomes an afterthought in the grand scheme of the business. In writing risks, one has to see how they themselves can get in their own way of properly assessing the situation. You must let go of ego – it is alright to realize that one possibly cannot know or do it all. It is then that you will see all the possible avenues to success.

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Jonah Engler

Former Stock Broker and Financial Expert, Jonah Engler is a New York City based entrepreneur who writes about entrepreneurship, investing, public relations, and other topics that fascinate him. Engler explores Entrepreneurship through his Mobile Phone Franchises in the NYC area.