Last updated on August 29th, 2016
An article published at Fortune.com reveals that nine out of ten startups fail to survive in the market. Shocking isn’t it! But it’s the brutal truth. You’ll agree that it’s often exciting to own your own hours and be your own boss. Levelling the playing field in the ever-so-competitive market, though, might not be.
You might be wondering:
“Why do most startups fail despite having the perfect product, perfect team and the perfect team in place?”
A report issued by CB Insights reveals that 42% startups fail because they fail to analyze the needs and demands of target customers beforehand, and 29% startups fail as they end up burning all their cash and collapse financial.
Okay, so now you know the cracks that may lead to the failure of a promising startup.
But here’s the big question:
How would you identify such cracks, avoid making mistakes and save your business aspirations from falling flat?
Well today I’m going to make it easy for you.
All you need to do is spare a few minutes of your valuable time.
Check out these 5 reasons why most startups fail to survive and how to avoid making these 5 mistakes:-
Reason #1: Not Analysing the Needs & Demands of Target Customers Beforehand
Not analysing the needs & demands of target customers is yet another reason why 42% startups fail to succeed. Remember, you need enough customers to buy your products or service, for your business to succeed. And that’s why it makes sense to evaluate your potential customer base before launching your new business. You’ll need to present yourself attractive option to lure in customers to your business. The best way to understand the needs and demands of your potential customers is to put yourself in their shoes and look at your products and services with their point of view. Then tailor your products, services and your marketing efforts to those customers. There are manifold rewards of understanding your customers: you get to strengthen the brand loyalty and trigger positive word-of-mouth recommendation for your products and services.
Reason #2: Not Effectively Managing Company Cash Flow
Besides inadequate understanding of customer preferences, 29% startups often struggle to keep their finances uptight. Addressing this issue is perhaps the first step in helping startups achieve success. Unfortunately, even the most promising of entrepreneurs fail to set up a stable flow of cash. In order to succeed, startups must try to keep their costs low and try to ensure a smooth inflow and outflow of the company cash. It makes sense to utilize the vast ocean of free and easily available resources to keep the operating costs low.
Reason #3: Not Having the Right Team
Yet another reason why 23% startups fail is not having the right team. An article published at Entrepreneur.com reveals that forming the right team is perhaps the first critical step to building a sustainable company. No matter you’ve spent through your nose for a creative logo design, a fancy website and an extra-luxe office space, nothing can save your startup company from falling flat if you don’t have a great team. Remember, only an effective team can quickly make adjustments and quickly pivot to the ever-changing market conditions. A right team can bring large rewards to startup founders. Therefore, it makes sense invest in a good team to steer your startup towards success.
Reason #4: Not Being Prepared to Beat the Competition Hands Down
Despite the fact that most experts and industry veterans suggest startups to not be careful of the competition, the reality is that around 19% of the startups fail as they aren’t really prepared to combat their competition. It makes sense to do a thorough competitor analysis to understand what your competitors are doing and why. You must be well aware of the strengths and weaknesses of your competition in order to make well-informed decisions and strategically plan your marketing activities.
Reason #5: Not Being Careful of the Product Pricing & Cost
One of the most critical reasons why startups fail is the pricing and cost issue. Remember, pricing remains a critical component that defines the fine line between startup success and failure. You’ll need to find the perfect balance for the price of your products. Neither should your product price be too high nor should it be too low. It makes sense to carefully analyse the market conditions and the total manufacturing, packaging and distribution cost to name a selling price for your products.
Over to You!
So there you have it – 5 reasons why most online business startups fail. We are hopeful that these 5 reasons will help you avoid a pitfall.
Here’s an important piece of advice: if your startup collapses, it makes sense to carefully analyse and understand what went wrong. It is the only way of beating the odds when you plan to make it big the next time.