Why do 90 percent of startups fail? Start-up ventures are quite hard to start and once it gets to start, 90 percent of them do work within the initial three years. There are several factors that influence the start-up business.
Moreover, entrepreneurs also neglect some serious and crucial elements that lead to the failure of their start-up venture.
Why do 90 percent of startups fail?
However, smart and intelligent entrepreneurs learn from their mistakes and avoid them to repeat in the future. Related: 10 Unique Business Ideas to Inspire You in 2019
Hundreds of entrepreneurs pitch their visionary and innovative ideas through engaging presentations and sleek slide decks.
They experience a lack of market knowledge, lack of market and product fit, wrong selection of the team, poor management committee, failure of business strategies and business models and many more!
Here is the list of some reasons that are considered responsible for the failure of a startup business. Scroll down to read more…Related: What Is The Difference Between A Startup and a Small Business?]
Reasons responsible for the failure of a start-up venture
Reason 1 Market issue
Almost everyone starts up venture is driven by the market. The marketing factor is the major reason for the failure of such ventures.
Startup ventures usually face the problem of little or almost no market for their products which they have manufactured.
However, the market size of the people and a large amount of funding also affect such a business venture. Reasons responsible Why do 90 percent of startups fail.
Solution: Before starting up any venture, go out and talk to people about the product. Moreover, also make proper research of your industry, analyze them and make changes in the initial stage; as it is quite easier and cheaper to make changes in the beginning. Related: How to Start a Business in a Competitive Industry
Reason 2 Failure of business model or business plan
A business model is like the skeleton of every venture. It dictates the economic and commercial viability o your startup venture for generating value and money.
The incompetent and weak business strategies, plan and business model are directly responsible for the failure of such ventures.
Inefficient and ineffective business models are featured by the low or unknown lifetime value of the customer, high cost to attract customers, and no measurable ways to gain a customer. Reasons responsible Why do 90 percent of startups fail.
Solution: Try to analyze customer acquisition strategies properly and make them scalable. The cost involved in the acquisition of a customer should be recovered within twelve months from the customer. Moreover, make the actual estimation of your return on investment and sales cycle as well. Related: Make Sustainability Part of Your Business Model
Reason 3 Poor or inefficient management team
Management is the brain and heart of a company. All the important and influential decisions are taken by managerial persons.
Poor and weak management team exemplifies ineffective and incapable strategic decisions, no or very little work on product-market fit, the communication gap between team members and management committee and inefficient recruitment system. Reasons responsible Why do 90 percent of startups fail.
Solution: There is a solution to overcome this problem. Try to make people answerable to each other’s decisions by facts and data; not by biased experience.
The management team should own its decisions and maintain healthy communication with its team members; because over communication is always better than under communication. Related: How to find the perfect business name
Reason 4 Running out of cash
A proper and continuous flow of cash helps in keeping business alive; irrespective of the number of users, how great your own innovative idea, paid dues, clearing bills and marketing agencies.
However, some entrepreneurs fail in maintaining a proper record of accounts. This results in the failure of their startup venture. Reasons responsible Why do 90 percent of startups fail.
Solution: Maintain a proper track of accounting records and should work to explore all funding options and security of funds. Related: Make Sustainability Part of Your Business Model
Reason 5 Product-related problems
In this competitive market, customers make a comparison of your product with other competitive products available in the market. Developed and high tech products had taken the market to the new level and had ruined the customers for eternity.
If the products had a bad interface then you need to take a bit of time for processing and gathering more information to uplift the quality of the product.
It is also important that customers should differentiate your product from other available competitive products, not just for its value but also experiences. Reasons responsible Why do 90 percent of startups fail.
Solution: Try to understand the crucial factors of product development such as engineering and designing. Related: Top 10 Business Ideas for College Students]
Reason 6 Poor marketing
Marketing is not about making people aware more and more about the features of the product, but it also creates a marketing element within the product and allows exploring unexplored venues such as retargeting and influencer marketing. Reasons responsible Why do 90 percent of startups fail.
Solution: Marketing should not begin with the completion of the product; instead it should start much before manufacturing the product. It should also involve customer experience and product development as well. Related: 10 Steps to Start a Small Business
Reason 7 Loose focus
Losing focus may lead to distraction and a waste of resources as well. Moreover, micromanagement is also responsible for losing focus from the business venture. Reasons responsible Why do 90 percent of startups fail.
Solution: Solve the issues first and maintain focus on the right track. Do not get away with new and innovative ideas and features. Along with a to-do list, make a not-to-do list. Related: Top 10 Business Ideas for College Students]
Reason 8 Legal challenges
The most important thing about a venture is to realize the value of data security and customer privacy. Once a venture grows, they get exposed to several legal challenges.
It is mandatory for a start-up venture to be aware of every rule, regulation, and legal laws; as every field has different governing rules and laws. Reasons responsible Why do 90 percent of startups fail.
Solution: You can have a consultation with an experienced lawyer. It will not only save your time but also save your money in the later period. Moreover, you should also keep the venture and employees compliant with rules and regulations. Related: How to Start a Business in a Competitive Industry.
Reason 9 Bad debts
Most of the start-up ventures agree to work on a credit basis in the initial days. This often makes the condition more critical or even worst for the new venture.
It is quite difficult to avoid credit requests for showing initial traction. In such situations, if you face financial crunches or your client gets mischievous then surely your start-up venture will suffer. Reasons responsible Why do 90 percent of startups fail.
Solution: To avoid the issue of bad debts in startups, before issuing credit make sure to analyze client reputation and credit profile.
You should take cheques of post dates and if they get bounced, then follow the procedure of recovering the amount through cheque bounce. Related: What Is The Difference Between A Startup and a Small Business?
Most of the founders of start-up ventures could not take burnouts and ultimately quit! Sometimes, it took two or more years for the product to get fit in the market which makes the financial situation and work-life balance suffers at its extreme. Reasons responsible Why do 90 percent of startups fail.
Solution: Startup is the dream of the founder. Try to understand the target and maintain a work-life balance. Related: 15 Great Home-Based Business Ideas]
Hopefully, you will surely avoid such problems and will have a good and flourish start-up venture.