12 of the most common reasons why startups and young businesses fail

12 of the most common reasons why startups and young businesses fail

05 Dec

90% of startups fail in the first three years after their founding, according to the Startup Genome 2019 report. Nevertheless, startups are becoming more and more popular, as is the idea of ​​quitting a job to create your own business. However, before you make such a serious decision and open a business – which is very simple these days, because you only need to have access to the Internet – you should be well-prepared for it. Find out what are the biggest reasons for the collapse of startups and young companies.

1: Failing to match founders or investors

Not in tune with the co-founder is a terrible problem for startup companies. Of course, this can happen in any business and the ground is to develop a shared vision despite disagreements. It is similar in the case of cooperation with an investor – without taking into account his requirements or vice versa – by giving too much free space – you can harm the company.

2: Loss of concentration and lack of persistence

No success would come into existence without some setback or going through the first difficulty.

One of the main reasons for the collapse of startups is a distraction from mainstream business directions and a lack of persistence. Founders often undertake other distracting projects and combine work with personal problems. When setting up a company, you should focus on its development and fine-tuning the business first, instead of implementing new ideas – they may be just as great, but if you don’t focus on one direction, you can fail.

Each setback you experience will help you build your even stronger muscle of endurance, exercise your willpower and aim for your goals. And this is the competence of every good leader and entrepreneur.

3: Inappropriate time for product or service

By releasing a product or service too early, it may be perceived as not good enough – simply not suitable for the audience at a given time. Due to the first negative impression, it may be difficult for you to regain the sympathy of potential customers at a later time. On the other hand – by releasing the product too late – you may have trouble breaking into the market, and the competition may turn out to be too big to have a chance to compete for the customer.

4: Ignoring customer needs

The big disadvantage of most startups is the lack of openness to customer needs and not collecting customer feedback. Poor definition of their needs, or worse, not knowing your target group. The client is the most important pillar of any company and ignoring his needs will certainly not contribute to the growth of your company, and may only cause the collapse of the startup.

5: Poor Marketing and Sales

“A good product, the service will find buyers by itself”, “I do not start a business to be a seller” – these are two of the biggest myths and limiting beliefs of novice entrepreneurs!

Every good entrepreneur of the 21st century must be a good salesperson, marketer and businessman!

If you think that a good product or your service will advertise itself – unfortunately, you are wrong!

In order to fight competition and good sales results, you need appropriate marketing and well-chosen channels on which you want to sell it. Test ideas, analyze, and if necessary, get help from marketing specialists.

6: No business model

Do you want to avoid a situation where your company’s money runs out and you still won’t see revenues? Build a solid business model from the very beginning of your startup. Proceed to appropriate market research – find out what your future, potential customers will be able to pay for.

7: Unfriendly product and ignoring audience

Failure to listen to your customers and too little focus on a product or service will almost always result in lows and eventual collapse. This is a very important point. At every moment of the company’s operation it is a good quality product and service, reliability and customer satisfaction should be the most important. Remember to make the necessary changes on an ongoing basis and constantly analyze how your product or service is perceived on the market.

8: Inappropriate price

Too high prices are often the consequence of a poorly structured business plan and failure to research the market. You can have the best product among the competition – but when it is too expensive, you will not achieve good sales results. If the prices are too low, you will never achieve a satisfactory income, and running a business will be unprofitable.

9: Competition

Despite the opinion that startups should not pay attention to competition, ignoring it is actually the perfect recipe for failure. Do your job, but always be alert to competing companies.

10: Incorrectly chosen team

If you want to develop a startup and prevent its collapse, select the appropriate and experienced employees. Make sure that they are always properly motivated and act consistently with the vision of the entire business. You also need to learn the difficult art of slowing down – perhaps you will need this skill at some point in your business development.

11: No money

It doesn’t matter if you will have an investor or not. This problem can affect any startup, even the one with a large sum at the very beginning. Control and plan finances – do not spend excess money thoughtlessly, but invest wisely in the company’s development.

12: Not solving a real market problem

What is a good business? The fact that it solves a specific, real customer problem. In fact, the key to success is to build a business based on market needs – otherwise, you won’t have someone to sell your product or services to. Before you set up your desired startup – think carefully if anyone needs it.

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