Top 7 Reasons Why Startups Fail

A successful startup seems mesmerizing for people: a person began from scratch and turned the idea into a multi-billion dollar business. But there is also a flip side of the coin: for one successful entrepreneur, there are nine who failed miserably. Nevertheless, some reasons for failure are quite common. Let’s have a look at those. Remember that even giant companies like Google and Twitter were startups years ago. The only thing that differentiates them from those startups that failed is the great organization and dedication of creators.

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Why do Startups fail?

About 90% of startups fail. The reasons for failure may be quite different. Usually, everything depends on the specific project or market situation.

Product Irrelevance

If you release the product too early, users may consider it not good enough, and enticing them again may not be so easy due to a negative first impression. And if you release your product too late, you miss the chance to successfully enter the market. So, it’s of huge importance to analyze the market to understand when it’s high time to release your product. It’s better not to move faster than your customers can.

Read more: What is MVP and Why Your Startup Needs It

Ignoring Client

If you want your product to be successful, your clients are what you have to think about first of all. Ignoring the client is the right way to fail the startup. In most startups, a fatal mistake is the lack of communication with users. Don’t spend too much time adjusting the company to yourself. Analyze the feedback and rely on customers’ opinions; they are usually really objective. It’s easy to get lost thinking your product is very cool. You need to pay attention to users and adapt to their needs.

Poor Marketing

One of the most important elements in business is to understand the target audience and know how to attract attention. Poor marketing is another common mistake, as a lack of good advertising can make even a great product fail.

The number of users is extremely important for every startup. At first, it can grow systematically. And then, startups reach the maximum limit they can reach without any effort. And this is the point when it’s high time to start marketing. A properly selected marketing strategy can do miracles to your popularity, so pay attention to it.

The Main Motivation is Profit

People who start a new business by saying “This startup will bring me plenty of money immediately” may not count on success. Profit from the first day of the company’s work is rather an exception, an illusion that close-minded entrepreneurs persuade themselves in. Before the business begins to bring some money, it may be a year or even a couple of years of hard work. During this time, you need to invest a lot of energy, effort, and money in it. And where to get the inspiration if the main motivation is profit? That’s how most startups die: lack of motivation and focus on money. Their founders lack the energy to continue the work that has begun because nothing fuels their motivation.

Wrong Focus

Many beginner entrepreneurs, who eventually fail, make the same typical mistake – they focus on wrong things. They focus not on the question of “why” it is necessary to produce a particular product or service but on the product itself. What if the product turns out to be unneeded? For this reason, the main question should be “why do people need it” then “who will create it” (team of professionals), “what we are creating” (the product, its positioning in the market, key characteristics, advantages over competitors), and finally – “how” and “when.”

Unrealistic Business Plan

An unclear and inaccurate business plan that was created in a rush is one of the main reasons for the failure of startups. High expectations of the creators of the startup, unforeseen expenses, and an acute shortage of money – all this lead to the insolvency of the company. As a result, the project has to be prematurely curtailed.

A business plan is an essential element of any startup. There, all the important details and elements should be indicated, for creators to fully understand what they are doing and what they can rely on.

Read more: How to Get Money for a Startup Business?

Lack of Proper Financial Control

The weak point of any startup is a shortage of funds. An illiterate credit policy leads to a decrease in cash inflows, and the company loses mobility. Therefore, it is extremely important at the initial stages of the organization’s growth to continuously monitor the financial flows of the company, as well as key financial indicators of business performance.

All in all, the success of any startup depends on numerous factors: understanding the needs of a target audience, finances, motivation of creators, and many others. The main advice for you if you want your startup to be successful is to analyze everything and prepare for startup creation and launch thoroughly.