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10 Common Reasons Why Startups Fail

Meghraj Dhabale Jun 23, 2019
An idea or a thought can grow into a business by following the tried-and-tested mantra of Aim-Action-Attitude. Going slow and keeping the risk factors low are some basics to be taken care of to ensure a successful startup.
A startup is an establishing enterprise whose success cannot be guaranteed. Any startup owner needs to have fair knowledge of consumer behavior, fool-proof planning, systematic execution and delivery of the right product/service.
But in spite of doing all these things correctly, some ventures hit the dirt before they take off. Here, we shall try to understand the common pitfalls faced by startups, which may help some of you who may have been bitten by the entrepreneurial bug.

Inappropriate Market Study

In today's technology-driven socio-cultural environment, an idea can revolutionize the world. A new innovative idea or a product/service sometimes may seem like a game-changer, and to an extent it is, but failure to read or understand the targeted customer proves to be the downfall of many a budding entrepreneur.
Under- or over-estimating the market occurs far too often and should be avoided diligently.

Failure to Choose the Right Business Model

An entrepreneur should be able to predict and inculcate a business model that should be scalable. Scalable means flexible enough to expand and keep operational cost in control with a growth in revenue.
A scalable model should be utilized to achieve short-term goals and as a stepping stone towards sustainable growth with minimal risk.

Failure to Focus on the Right customer

As with any nascent project or venture, the inability to understand, target, and reach the right customer segment or niche by optimum marketing strategy leads to failure.
Initially, it would be wise to focus on a large market segment to assure a return, and thereby, guarantee sustainability.

Failure in Calibration of Product or Service

If your product or service is not able to satisfy the customer's needs completely, then failure is obvious. You need to rethink the need of the consumer, and then revise the features of your product/service.
At times, you need to come up with a completely new idea or even change the complete concept of product/service needs to be changed. Sell what the customer requires, or if it's a new idea, then create the need or customer.

Failure to Focus on CAC and LTV

Now, this is about having a macro perspective, yet extremely vital, most newcomers fail to focus on the CAC (cost of acquiring a customer) and LTV (Lifetime value of customer). Attracting a customer to buy your product/service should be less expensive than the profit you are going to earn from them.

Lack of Investments

Failure to appropriately pitch your business plan to a venture capitalist will translate to a lack of funds, and a financial crunch can spell doom for any business, let alone a startup.
Try to keep the investors happy enough to earn their trust, be optimum and assertive with investors.

Failure to Understand the Market Dynamic

Failure to read the fluctuations in the economy can blow the wind out of your sails. For a startup to grow, it is vital, nee essential, that it does not catch the wave at the wrong time.
The state of the market and economy can be decisive in the success or failure of a startup.

Lack of Teamwork

Nothing worthwhile can be achieved without support, it isn't different in the business world too. An able and competent team is absolutely vital to succeed in any business venture.
For a startup, you definitely need a mix of experience and youth. You need trustworthy eager beavers to work with the same determination as you have for your company.

Expanding Your Company Too Early

You may be passionate and ambitious about your startup, and hence, feel like taking a big leap by expanding your company rapidly. Growing too fast without consolidating your base is a recipe made for disaster.
Remember, reducing risk at every step that you go forward will help your company in the long run.

Failure to Read the Competition

Failure to anticipate or react to the competition by adjusting your strategy and approach accordingly, is sure to send you down the wrong path.
Flexibility in thinking and operations play a key role in sustaining against tough competition. Hence, as a startup, adaptability is key to survival.
A good startup is primarily about choosing the right business at the right time. The moment you get going, there is a need for maintaining the creativity of your product or service (i.e., proper management). Even if you make mistakes, learn from them and perceive things positively.