According to an article appeared in Forbes Entrepreneur, approximately 543,000 new businesses get started each month. But the interesting fact is that the number of businesses shutting down, is way higher than the startups each month. Why does it happen? Is it the lack of experience or the lack of opportunity? The reasons being many, this blog brings to you 3 major reasons causing startup failure, read on.
Reason # 1
Lack of proper market analysis
Your business may be offering an innovative product or service, and you believe it is going to be a great success in the market. But, what if there is no market need for the product or services you are offering. You should give the target audience strong reasons, as in why they have to use your product or service. If not, there is a possibility of your startup to fail and clutter among other businesses.
Before starting up any business, there is an utmost need to conduct an intensive market research. It will help you in having a detailed understanding on the market competitors, about the key players, on annual revenue flow in the specific industry or vertical you have targeted, on potential customers etc.
A detailed market research will figure out answers for the below questions;
- Is there a market for the type of product or service you are offering?
- Does the product or service appeal to your potential customers?
- Are there any competitors providing similar kind of product and services?
- What is the desirable price range for your product and how much does the customers willing to pay for your product or service?
- Where would the target customers be likely to purchase your product or avail your service?
In one of the most read article in Business Insider titled, ‘33 Startups That Died Reveal Why They Failed’, CEO of a failure startup company SMSnoodle (an SMS based entertainment channel) quoted, “Discuss your startup idea with not only friends, but also other people who are quite strangers to you. I promise you will definitely learn a lot here. The concept of your idea getting stolen is 99.99% impossible. Visit barcamps, hackerspace, geek terminals and bounce your ideas to different people. We failed to do this step and hence overestimated the Singapore market.”
Reason # 2
Failing to have the right team
Your company is having an excellent mission and a clear cut vision, but do you have the right people to convert your ideas to action? Many new businesses fail due to poor hiring and leadership practices. Tasks like onboarding and training of employees is to be carefully executed. Employees should feel the drive to go an extra mile through motivation. Employees always love to get constructive criticism and balanced feedback. The businesses that have a dictatorship management style often fail to grow beyond a certain saturation point. Attrition rate will also be high in such organizations. Always remember; when trust fails, the team fails.
To have the right team, keep in mind the below few points;
- Focus on your employee’s potential
- Encourage them to have their individuality at work
- Appreciate team work and follow participatory management strategies
- Give consistent training and feedback
- Create a free work environment that promotes open communication
- Build trust among the team
“I don’t know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great.”- James C. Collins
Reason # 3
Lost Marketing Focus
Start-ups that fail to pay attention to the organization specific sales and marketing needs tend to fail at a faster rate.
Few of the common marketing mistakes a startup makes are;
- Not having proper digital footprint
- Not giving sales and marketing equal preference
- Not pursuing obtainable goals
- Not having a means to measure success; lack of analytics
- Relying completely on technology
- Not giving value to marketing content
- Relying on wrong medium to market the product or service
- Marketing focus distracted from the USP of the product or service
The infographic below showcases other common reasons behind the failure of startups;
In fact, despite taking precautionary measures and careful steps towards building a strong business environment, things can go wrong. Every startup should have a backup plan, should set aside contingency funds and if possible should have a crisis team to brainstorm ideas at critical situations.
