Though it is a common assumption that startups have the power to alter the face of business and technology, in recent years however, the tradition of founding new companies has enjoyed a lot of hypes. Even though some business startups have interesting and inspiring success stories, a lot of startups have crashed over the years.
What is the reason for the failure of startups? The truth is that, there are a lot of possible reasons why a startup might fail. Entrepreneurs are human beings who are fallible like everyone else, and there are times when ideas that look good on paper might not be so profitable when it gets to the public, which is usually the origin of the problem.
Below are some of the causes of startup failure:
1. The right team
One major problem I’ve discovered with today’s startups is an inability to select the right team. A survey on startup cultures and failures revealed that thirty seven percent of founders reported that their biggest challenge involved locating the right team. Startups need to have diversity.
It is necessary to have the right resources and labor that encompasses an array of skills to build a startup that is successful. Also, finding the right set of people is just the first step, as there’s need to ensure that they can work together. Sharing each other’s strengths and weaknesses is a big part of building a perfect team. You can also help to build a perfect team by using organizational chats to maintain details of employees and the office hierarchy.
Before going into any business, it is important to do a comprehensive analysis of the market because, ideas are the bedrock of any startup. A survey of twenty percent of entrepreneurs revealed that most startup failures are caused by the inability of the product to fit the market. It is important for entrepreneurs to understand that it takes more than just starting a company, doing some marketing, and spending a lot of money for a business to work, which is why they should not just go into a business without a proper survey of the market forces because sooner or later, it will backfire.
Also, markets today are made up of different interest and are highly phosphorous. Demands are not always constant, which is why all the successful mainstream startups work with a vision that takes into account the realities of the present and the future. Therefore, it is very important for a startup to analyze and envisage the future before executing a business idea.
Majority of the founders of startups have revealed that one of their biggest challenge is money. Even though money is not necessarily the biggest problem when starting a business, but running out of it makes it a problem. Attracting investors is not always an easy feat. A lot of startups have no idea of how to go about finding the right investors who might be interested in investing their money in their business. Something as simple as a nice cover letter can open doors for your business.
Going into reckless spending is another major mistake that startups make. It is important to keep track of your finance and investments, manage it properly, and utilize it using a sustainable business model.
According to several entrepreneurs, lack of investor network and connections is a major challenge for startups. The reason why they face this challenge is because, they have been unable to recognize and utilize their own network. They also need to use their existing connections to link with new connections, which is not such a difficult thing to do.
Working with SEO agencies and PR, is another great way of making online connections. This is because they already have a relationship with lots of media outlets, and a lot of top blogs who can give voice to your startup.
Building a startup involves more than just concentrating on a person’s sole business. Although it is true that a startup needs to avoid distractions if it wants to thrive in the future, however, it is important to always put the competition in mind. A lot of startups have the erroneous believe that they have the best ideas and that it will lead them to success as soon as the product is launched.
Startups are formed every day, and a lot of ideas are similar. It is therefore important to do a comprehensive analysis of the market, the competition, and the existing businesses in other to be able to come up with different approaches on how to do things in a unique way to conquer the market.
6. Overlooking potential customers
Making the decision to either work to perfect their products, or have it tested in the market, has always being difficult. Although it is good to discuss with customers about ideas and ways to improve, the downside to this is that at the end of the day, the startups might end up not having profit.
The basic foundation of success for a startup is built on validating the market, so if you cannot provide a good product, there’s no way your startup is going to survive. Which is why, the best way to ensure that everything turns out the way it should is by tracking, measuring, validating, and enhancing all the data you gathered from your clients.