It is not very easy to make a startup successful. People have to go through a lot of hardship to make it successful or higher chances for your startups failure.
Accel Partners invested $14.8 million in a website called facebook.com and they made a return of $5.6 million. According to studies, most startups failed with the first 20 months of starting because of financial situations.
There are many reasons why most startup fails. Here you can see some popular reasons for start-up failures. One can handle things carefully to avoid the failure of their business if they have a clear idea about how to manage everything well. This data is based on 150 businesses that failed.
Here are top 30 Reasons for Startup Failure.
Now the business world is very competitive and 19% of business failed due to strong competition in the market. It is very hard to stand out of the competition without good strategies and quality products. Businesses should know what their audience wants before designing their business. Try to give a better solution to the customers through the business. Don’t try to ignore the competition that exists in the market because it is something that can take you a long way. Try to outperform your competitors with proper strategies to make your startup notable among all other popular businesses on your niche.
Poor Business Model
Without a proper business model, the most startup fails nowadays. While planning to start a business you should make a clear plan of executing your business well. Make sure to have a clear plan while starting your business. When business meets with the high cost and low-profit margin is the main hardship while running a business. A poor business model indicates that you don’t have any clear commercial idea about running your business. Without a goal, no business can survive the competition. 19% of businesses fail because of the poor business model as per the survey. So, be sure to have a clear goal and a detailed business plan that can work well in the market.
No Product Market Fit
Another reason for startup failure could be the problem in fitting products. When someone decides to create a product, they should have to do thorough research on the possibility of growth in the market. Sometimes products won’t be fit into the market and it can cause a huge loss of money. Make sure to have a clear report on the future of your product and how you are going to market it among the customers. All of these factors will depend on your start-up’s success. 17% of businesses fail mainly because of this reason as per research.
Lack of Funds
Businesses start with a lot of funds and planning. But after a certain point, there could be a scarcity of funds and it can lead to the failure of a business. The reasons could be many like the lack of proper money distribution, good financial planning, and many more. Start-ups should deal with the money very carefully because there is a chance of spending money on unnecessary things when you don’t have enough experience. So, it is better to handle your budget well so that your business would not get fail due to a lack of funds. 15% of startup failures are a result of a lack of funds.
Lack of Focus
Another reason for startup failure is a lack of focus. When you start a business there should be a proper goal. A business without a goal cannot reach anywhere. You can go over your business goal again and again and expand it as your business grows. It is very hard to drive without knowing the proper direction. Startups are like that only. When people start to achieve initial goals, they will leave their planning and working for goals and it will start to fail soon. 9% of start-up business failure is due to a lack of focus.
No Market Validation
Without proper market validation, no product can be successful. The first thing a business entrepreneur should do is to evaluate the producing current market and see the competency of it with other similar products. This is more than enough to make a business successful. So, as per research, 7% of start-ups failed due to a lack of market validation. Without knowing the market and customers no business can be successful. If you are planning to start a business this is one of the most important things you should keep in your mind.
Failed fundraising can be another reason for business failure. You should be extra careful in finding reliable sources that can help you at the time of hardships financially. Sometimes the resources cannot be trusted, and you will fail to raise money whenever needed. Financial stability is very important for a business. It’s something you should be extra vigilant about while running a business. This mainly happens with starters in the business field. Someone who wants to start their own business should know this fact that there could be a failure of your business due to the inability of raising funds whenever business demands.
Lack of Experience
If you consider the experience needed for running a business, it is a very important factor. Experiences can help you to learn about surviving in difficult times. Many start-up entrepreneurs start their business after their studies directly without taking any industrial work experience. This can lead to a lot of difficulties in handling problems while running a business. It is always best to have some initial experience to be successful in startups. It can help you to learn about handling various business issues and about running your business more smoothly.
Strong management is the backbone of every business. More than 7% of start-ups failed because of poor business management. If you are running your business with strong management of all areas of it then you can see some good outcomes. Businesses should have a strong leading team who can take timely decisions that can help the business from sinking. When a business has a strong management team to support it can last longer and be successful in the competition.
Poor Product Market Fit
A product has to do two things such as create value and capture value. A business must concentrate on creating a good product value among its customers. It may take some time. But placing a product in the correct place is a very tedious task. There is no use in monetizing products without proving the real value of the product. You will get success after the correct product market as per market researchers. More than 7% of startups failed because of their inability to create the right product value among the customers. The first one should focus on creating the right product value among the customers and then start to monetize it.
Strategy issues are nothing but the proper way to handle business in the market. There should be a proper strategy to make a business successful. It can only be possible to create a proper marketing strategy by analyzing the market well. If you can research your targeted customers and know what they are expecting from your business, it could be helpful in creating strategies. These strategies can vary as per the acceptance they get from the customers. Good monitoring skills and planning needed to make a startup successful. As per research, more than 7% of businesses failed because of the inability to create proper business strategies.
Marketing is an essential element behind the success of every business. No one will know about your business without marketing it. It is very important to use good resources to market the product in the right way. Know where your targeted customers are more active and try to present your product in front of them. You should always project some unique values of your products compared to all others while marketing them. 6% of businesses failed due to poor marketing. So be careful while choosing a marketing option for your startup.
Pivot is a very popular term in the business world which refers to change from mild to dramatic. When businesses are passing through hard times pivot can help to save them from sinking. But the worst side of pivot is that it actually fails the original business model. Startup pivots are known as one of the last attempts to save a sinking business and some of them will be successful too. But there are cases where these pivots got failed because of various reasons. The best example of a failed pivot is the Flow tab app which enabled bar patrons to order and pay for drinks using their smartphones. But it didn’t work out. 5% of start-up failure is due to failed pivots.
Financial difficulty can happen to anyone while running a business. Business is about rolling money whenever needed. If one doesn’t have the cash to roll whenever needed it can cause several problems. You should manage your cash flow to avoid financial issues in the future. Plan well on how to channelize your money and micromanage your spending. Keep some reserved money to use whenever needed. As per statistics, more than 5% of businesses failed due to financial difficulty.
Sometimes it is very hard to make the existing resources and customers stay back with a business without good marketing strategies. Retention issue is a very important hardship faced by most start-up businesses. The best thing to make it happen is through proper planning and research. Know how your customers like to be treated and offer them the best from your business. It can make them like your business and also can help them to support your business always. More than 5% of businesses fail due to retention issues as per the latest researches.
Sometimes founders of a start-up lack a sense of self-awareness and can lead to startup failure. When they dream about a business it will be excellent, but the actual case lacks that guarantee. Founders are so adamant about their original idea and won’t even get ready to change anything for the product’s success. It can sometimes lead to the failure of the business. We can say that the ego of the founder can also be a reason for a start-up failure in some cases. Just a vague idea and dream to run a business is not enough to make it successful. You need to have a strong ability to run a business with good leadership qualities.
High Cash Burn Rate
Cash burn rate or negative cash flow is the pace in which a company spends money on various things before it reaches profitability. Businesses that need good money to make internal team run can have this cash flow issue. Also, there are some areas of a business that needs to be controlled to save some cash. If you have proper planning and control over the budget this can be avoided. More than 5% of business fails because of the high cash burn rate.
High Operational Cost
Operational cost is something every business can control to avoid failure. This is an area where we cannot do many compromises because spending money on the business operation it will not get succeed. But when you spend money on internal operational costs try to avoid unnecessary expenses that can lead you to huge spending of money. To avoid such a situation, you can control your business operational cost and spend money with control. Money is something that is essential for a business. So, you can spend it with extreme care to avoid future problems.
Businesses should concentrate on keeping sustainability to a certain level. It can help start-ups to last longer and be successful. This is also one of the most challenging tasks for a business without proper planning and execution. If you are looking for successful business sustainability is very important. You can adhere to a certain standard to keep up the level of your business. Most startup fails to have the initial sustainability after a certain point of time and can lead to its failure. Economic growth can vary from time to time. Businesses that can manage to keep it on a certain level can be more successful in the long run.
Bad Business Model
A bad business model is another reason for business failure. there should be a standard business model for every business. It should follow the path as per the design sometimes and some other times it cannot do that. There will be many ups and downs for a business and a business model can act as a reference to run a business.
If you are planning, it well and create a good business model before starting your start-up it can be helpful in your long business run. Don’t try to reinvent a model in order to generate the cash flow that wasn’t done before. Many startups failed due to their experiment on business models too.
Lack of Passion
One of the most important things that need to make a business successful is to be passionate. If people who run business is not passionate about what they are doing it may lead to failure. Many businesses became successful due to this single reason. We as human beings love to do what we are passionate about. Running a business is also like that. You can make it successful by working hard and implementing new strategies.
The market issue is a general term when it comes to business failure. It is very important to hold a good name in the market to be successful. Start-ups sometimes fail to handle the marketing part and can lead to failure also. If you are looking for a successful business, then give more preference to marketing and implement new strategies that can make your product stand out in the competition.
Many start-ups give more importance to marketing which leads to its success. Don’t try to ignore marketing if you want to be successful. Find various issues that can face in the market and get solutions for it.
Product quality is also a factor that leads to the success of a business. If the quality of the products is not up to the mark no marketing can save your business. Poor quality products are the worst thing a business can do to their customers. If a start-up can provide a good quality product as per their customer expectation it can be successful. There will be more buyers to the quality product with a good price than poor quality products with low price. Try to keep up your product quality to get a good place among the customers.
The legal dispute is something many businesses faces and can also lead to failure of it. When a business start one should make sure to check all law points and make sure to make everything clear. The chances of legal issues are high when a business starts to get popular.
If one customer complains about your product it can be a huge issue nowadays because of social media and all other internet platforms. If you are about to start a business have good research about every loophole you can find and have a clear solution for all of it to avoid future problems.
Scalability is the ability to handle increased marketing demands using enough resources. Start-ups are always small and start with a small group of people. But as a business expands this small group will not be enough to meet the business requirement. In that case, the startup has to expand and hire more people with a special skill that the job demands.
It may cause a huge expense and can lead to a financial crisis sometimes. You can control your expense while expanding the business and meet the business demands. If you cannot do it on time it can lead to further issues like failure of your business.
Technological problem is something which every business face in their long run. It is very hard to avoid technological problems sometimes. It is best to have a handy solution for every problem. It can help you to withstand such hardship in your business. Many start-ups failed due to technical issues. As far as customers were concerned, they are expecting better service from a business, and if a business cannot offer that nothing can save it. You cannot complain about technology after something happened. It is better to have prevention which can avoid something from happening
Acquisition (Business struggle)
Business struggle or acquisition can be a reason for many start-up failures. management change due to financial issues can also be a reason for failure. these are some common things every business face when they have any financial problems. But sudden change cannot be accepted, and the vision of each management can be different. It can lead to the failure of a business easily. We cannot say that because of acquisition a business can be successful. Success needs more hard work and willingness to do that.
Monetization is something that can lead to start-up failure. Some start-up begins as free service and later on, they will start to monetize their website to earn income. For example, there are many websites which initially starts as a service-based platform and later on they try to bring more advertisement which can be very irritating to their customers.
Such type of monetization can be dangerous to a business. When it comes to business monetization will only work if you are providing something valuable to your customers. Otherwise, no one will want to visit your website because of unwanted monetization elements.
Customers are the king of every business. To be successful businesses should be capable of handling their customers well. It can be using their own resources or by outsourcing to companies. They should feel good about your business and will support it always if you can provide good treatment to them.
Customer service is considered one of the most important parts of a business to be successful. Many start-ups failed because of their inability to give better support to their customers. Be aware of their needs and try to solve their issues related to your business through a better customer support department.
Poor leadership is a very popular factor that can lead to business failure. A business without good leadership is of no use. If you are trying to figure out the reason for the failure of start-ups this is one of the most popular reasons. Without a good leader, a business cannot last long. There are many important decisions to be made while running a business and a good leader can take them on the required time. If you are looking for a better outcome for startups leadership is something that you should consider. Your leadership quality matters when it comes to the success of your business.
There are more reasons for the failure of start-ups. But the above reasons are the most popular ones for startups failure. It is very crucial to track the growth of a start-up for the first few years to know the strategies that can be used to make it more popular among the audience.
The above reasons are after researching the failure of 150 start-ups. You can also tell your opinion about the reasons for start-up failures in the comment box below.