98% of startups fail! These figures raise the question, why? We live in the era of emerging startups. And despite this startup failure rate, most individuals dream of quitting their 9-5 to embark upon an entrepreneurial journey. Governments too favour startups. So where does the reason for these shocking numbers lie? Why Startups Fail?
Startup is a company in the first stages of operations. Lately, building a startup is quite the hype, but many people forget that starting a business is a lot harder than they think. By the time people realize where they have faltered, it is usually too late to save the sinking ship. After tragedy strikes, they contemplate the whys and hows. Has your Startup failed too? And you wonder what might be the cause? Well, here is a list of some common mistakes of a startup that lead to their downfall:
Reasons for startup failure –
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Monetary Misassumption
One of the leading reasons provided by people when asked- “Why your startup failed” is running out of money. Often startups go through high expenses, poorly managed costs, overestimated profit coming in terms with underperforming sales, improper budgeting, and bad planning, leading to money running out. Some startups even fail to obtain the financing needed to sustain their business. It is extremely important that the budget is planned out in the starting days of the company to make sure the expenses don’t go overboard to a point where the only way to recover is by making astronomical profits, which is too much to ask from an unstable startup. Monetary Misassumption is a common cause for startup failure.
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Failure to recognize the target market
Your target market is what keeps you afloat. If you define your niche carefully, you’ll easily be able to find your target audience and market your product to them. Often entrepreneurs get too caught up in their ambitions regarding the product and fail to consider their target market during the planning stages. If you want your business to grow its customer retention, instead of targeting everyone, your marketing should be targeted toward your product niche demographic.
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Failure to engage the target market
Even after some entrepreneurs recognized their target market, their Startup failed. The reason for this is, that identifying your target market is not enough. You must also know how to engage them. Know the needs and wants of your target audience that your product can fulfill. Provide useful, engaging, and relevant content to them. Make sure your content is targeted and relevant to your product, your audience, and your environment.
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Lackluster Research
Startup failure is often caused by a lack of research. You must know what your customers want. No matter how great your product or service is, it will not sell if nobody wants it. Entrepreneurs often try to escape the effort of homework and researching their market, leading to their inability to decode how to meet their potential customers’ needs.
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Partnership Problems
This one is an issue that can impact even profit-making startups. A partnership can be great when starting a business. One person might compensate for the other person’s shortcomings in a specific field and vice versa. But sometimes, when conflict arises, companies fall apart. In cases like these startups that didn’t clearly define their roles, responsibilities, profit sharing, and capital investment and failed to create clear legal distinctions early on, suffer due to this fallout.
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Marketing Missteps
This could be the most important reason Why your startup failed. Marketing is an essential step when trying to establish a business and yet this is where most startups fail. Marketing is a skill you must learn if you want to keep your startup afloat. It is the skill of creating a desire to purchase your product. Unfortunately, most entrepreneurs are experts at their products but not at marketing. They think their product being good should be enough to compel the audience to make the purchase, but this is far from the truth. Marketing is essential to convincingly convey the benefits of your product while pointing to the need it could fulfill. Marketing is also expensive, so it is best to hire experts who ensure success after your investment. Marketing when done right, can bring in tenfold of what you invested. So make sure to invest in trusted experts to avoid loss.
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Missing Expertise
Often, people decide to build a startup not because they are passionate about solving an issue but simply because they want out of their mundane jobs. As compelling as this reason is, your chances of succeeding are only when you rely on your expertise and interest rather than what you think is working for everyone else. If you are an artist with a passion for artwork but decide to start a digital marketing company, because of high demand, there is a strong chance you will fail. This is because you will hardly know the intricacies of your own business. You will only have a vague idea about what you do and why you do it. You will face difficulties in hiring team members, as you might not know what skills and soft skills to look for. Not to say that you don’t consider market trends. But don’t get into something if don’t have any idea about it. Either learn and polish your expertise in a niche that you think is in demand or find a problem or absence in your field of expertise and work towards solving it.
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Hiring Blunder
This is one of the leading results of another one of the common mistakes of a startup, which is Missing Expertise. To ensure the success of any startup you need a strong and reliable team of skilled and experienced individuals. Many startups fail to prioritize hiring talented individuals with diverse skill sets and experience, due to the investment it demands.
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Inability to Adapt
Another one of the common mistakes of a startup is the inability to adapt to change. The business world is dynamic, with the only constant being change. If a startup wants to survive in the competitive market it needs to constantly adapt to the changing environment around it. Startups fail to stay informed about market trends and are unwilling to change course if their current strategy isn’t working, leading to their ultimate failure.
Conclusion
If you are an ex-business owner wondering Why your startup failed, it must be one or more of the above reasons. Despite past failures, you can start again. This time by learning from these pitfalls and leveraging the insights provided by research and statistics, you can increase your chances of running a successful startup. Stay focused on your target, be open to feedback, and keep learning. Study your failures to prepare for success and make your startup dream a reality!
Also Read:
Your Startup Launch Checklist: From Idea to Execution
Physics Wallah: The Success Story of Alakh Pandey
