THE MILLION DOLLAR QUESTION: WHY DO MAJORITY OF STARTUPS FAIL?
Starting a business is easy, starting the right business can be hard but staying in business (market) is challenging. This is relatable to the grim reality of having one successful business out of every ten startups.
The following are a few common reasons why startups fail and their mitigation measures;
Lack of required skill sets
Often, startups spend less on acquiring skills and hiring experts in a bid to minimize overhead cost. This leads to the inability to carry out the day-to-day operations of the business effectively. This is a threat to success, as it affects the quality of the product/service offered as well as the running of the business. Of course, nobody will patronize a business that offers no value.
Take expertise as a compulsory part of your business. Do not execute a business idea until you have excellently learned the skill and understood the business.
Generally, inadequate funding is a common cause of startups’ early grave. The fund is required in every business to deepen market base. Unfortunately, startups always deal with insufficiency due to limited capital and the inability to borrow money from financial institutions. Meanwhile, operational issue ensues, which leads to ultimate failure.
A priority list and proper monetization plan in your business would help in fund management.
Scaling in a business is a point of positive growth, which is a good thing but the most overlooked cause of startup failure. Research has shown that 70% of startups scaled prematurely, which go a long way towards explaining the 90% failure rate of startups. No startup wants to remain small; unfortunately, they lose focus in the process of scaling. The eagerness to grow faster leads to overspending on more employees, larger working/production space, and increased production at least required stage of the business.
Avoid adding vanity features to your growing business, focus on customer satisfaction and product development rather than scaling is essential and healthier for your business. Meanwhile, scaling should be a step at a time.
Failure to bridge a gap
Many startups are sourced from ideas chosen out of any available hat; the goal is to have a business. However, people aren’t naturally willing to try new products, unless it solves their pressing problem. This is the reason why no business will succeed unless it can bridge an existing gap. There is no market for a product or service that is not meeting an essential need of people.
Do not start a business until you have figured out the problem your product or services would solve and how it would solve it differently. Set out your business unique value proposition and communicate it.
Weak branding and marketing strategy.
There is no way to overstate how effective marketing strategy can turn a startup to a worldwide empire. But, unfortunately, most startups do not leverage it. They do not focus on how their products will be rightly presented to the target audience, ignoring the fact people can’t patronize a brand they do not know about even if it has the best product worldwide.
Capitalize on branding and marketing strategy whose components are business model, pricing, product offering, promotional communications and distribution to ensure an increase in customer base, sales, financial performance and most importantly success of the business.
Lack of specialization
The operation of many startups lacks specialization areas. They believe they can be the jack of all, even as a new entrant thereby making them master of none. However, quality delivery is farfetched in the absence of specialization.In essence, they find it difficult to gain the trust of people which leads to their downfall.
Find your niche and focus of a limited range of products that fall within your expertise. Specialization is a strategy to prove competence as it enables maximum productivity and customers’ satisfaction.
To cut down overhead cost, startups founders prefer to do it all alone. Pitifully, they end up burning out and leaving a lot of important things undone. More so, not having the right people working as a team makes it challenging to identify pitfalls early enough until it almost eats up the business.
As much as it is essential to avoid overspending on an employee as a startup, it is as well advisable to have all hands on deck. Build a team as required by your business; more hands can achieve more. As rightly affirmed by Ken Blanchard quote,” None of us is as smart as all of us.”
Failure is part of every business. However, there is value in failure; it is a path to success for great entrepreneurs. Take note of how each of these affects your business and take control measures.